What's next for Ravelston? America's Most Wanted?
Conrad Black's holding company Ravelston Corp. Ltd., already in the limbo of receivership, has now been accused of acting like a "fugitive of justice" -- a designation usually reserved for individuals skipping across state borders in the dark of night.
United States Attorney Patrick Fitzgerald made the accusation in an Aug. 30 letter to a lawyer acting for Ravelston's court-appointed receiver, RSM Richter Inc. He said U.S. prosecutors would treat the company like a fugitive because it refused to accept the service of documents that allege it committed criminal fraud.
The spat is part of a cross-border war of words that is pitting U.S. prosecutors against those handling the Canadian legal affairs of the Hollinger empire.
When the U.S. Justice Department filed criminal indictments against Lord Black's former colleagues, David Radler and Mark Kipnis, on Aug. 18, it also included Ravelston, which is under court protection from creditors and being managed by Richter.
The three are alleged to have helped divert $32-million (U.S.) from Chicago-based Hollinger International Inc. into the pockets of executives.
Toronto-based Richter was taken aback by the U.S. indictment, sources said, and was not sure how it should proceed, particularly since it requires Canadian court approval for most actions it might contemplate.
In a report filed in the Ontario Superior Court yesterday, Richter says "the issues being considered by the receiver are unique, novel, and, perhaps, unprecedented in Canadian insolvency proceedings."
Letters filed with the report show a testy exchange between Richter's lawyers and the U.S. prosecutors.
In his Aug. 30 letter, Mr. Fitzgerald said the U.S. government would "treat Ravelston as it would any other fugitive of justice" if it did not appear at a Sept. 7 arraignment hearing to plead guilty or not guilty, and if it continued to avoid being served with the indictment.
Richter lawyer Robert Tarun wrote back to the prosecutors on Sept. 6, saying that since Ravelston is "a foreign corporation without an office in the United States" and has not been served a summons, "it is respectfully difficult to see how it is in any way a fugitive."
The next day Mr. Fitzgerald returned fire, saying "I hope and expect to see you or another Ravelston representative" at the arraignment, which has been rescheduled for Sept. 22, two days after Richter will appear in a Toronto court to get instructions from Mr. Justice James Farley.
"Ravelston's continued reluctance to appear in the criminal matter and the prolonged negotiation of its appearance are entirely inconsistent with either co-operation or acceptance of responsibility," Mr. Fitzgerald said.
Although a spokesman for Richter declined to comment, legal experts said the consequences of a guilty plea by Richter could be devastating for creditors of Hollinger Inc., Ravelston's main holding. A guilty plea could result in a multimillion-dollar fine against Ravelston and it could also weaken its ability to defend itself against a myriad of civil lawsuits.
Jim Dube, restructuring lawyer with Blake Cassels & Graydon LLP, who represents one of Ravelston's creditors, said he was surprised by the department's tough stand.
He said the warning raises a number of issues about U.S. jurisdiction and the legal obligations of corporate receivers such as Richter.
It is "bizarre" and unprecedented to see the U.S. Department of Justice threaten to treat a Canadian company as a fugitive, Mr. Dube said. "What do they propose to do, seize [Ravelston's] corporate seal and throw it behind bars?"
"It is very regrettable to see something like this happen. There is a long, long, history of the Canadian and U.S. courts co-operating. . . . You now have two court systems that are in conflict with each other."
