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Conrad's tale serves as a warning to corporate executives

One chapter in Conrad Black’s battle with American authorities came to a close last week. Lord Black came out on the losing end but perhaps he can rationalize the result on the basis that it could have been a whole lot worse.

Black was found guilty by a Chicago jury on 4 counts (3 of mail fraud and 1 of obstruction of justice). He was acquitted on 9 other charges against him (various mail fraud, wire fraud, tax fraud, and racketeering charges).

Although he was found not guilty on many of the more serious and central charges, he still faces the prospect of as much as 35 years in prison and some sizeable fines. The potential jail sentence is only theoretical because it seems that Illinois courts wouldn’t normally impose such a stiff penalty for crimes of this sort (especially since the convictions relate to less than $3 million rather than the total of $60 million he and the other defendants were charged with misappropriating).

Lord Black’s legal battle, of course, is a long way from over. His legal team will launch an appeal aimed at keeping him out of jail altogether. Given the time the appeal will consume, it is unlikely that Black will see the inside of a jail cell anytime soon.

Some, me among them, will question whether jail time is really a fitting penalty for so-called white collar crimes. One might wonder whether financial restitution, fines, and enduring restrictions on his ability to be involved with publicly owned companies would be more appropriate.

After all, this isn’t a man who poses a danger to anyone (with the possible exception of his former partner turned informant, David Radler). But, the U.S. justice system (like ours here in Canada) has a rather narrow menu of options when it comes to penalties for crimes.

The real moral of this tale is one to which all corporate executives should take heed. The “keep your hand out of the cookie jar” lesson is obvious. The more important lesson for would-be Blacks lies in recognizing the lengths to which shareholders and public prosecutors will go to root out corporate wrongdoing.

We live in an era in which corporate excess is no longer tolerated and, in fact, is rooted out by pro-active shareholders and regulators. That, of course, is a good thing. But to officers and directors of public companies, it means that the good old days of self-indulgence may truly be a thing of the past.

The thing which seems to have sunk the good ship Black was his failure to recognize (or accept) that, to many, his actions were objectionable. He seemed to possess a willful blindness towards the concerns of his shareholders and an inability to recognize that, viewed objectively, there was something wrong with the way he was doing business.

In Black’s case, the sheer doggedness of the shareholders and (later) the prosecutors is notable. It is no simple (or inexpensive) matter to piece together the trail of witnesses and documents to successfully prosecute charges such as these. But it appears that the effort, cost, and risk involved is perceived as worthwhile by the people who brought this saga into court.

That will certainly have other executives looking over their shoulder to see who might be pursuing them. It reminds me of a western movie – might have been Butch Cassidy and the Sundance Kid – in which the fleeing outlaws keep looking over their shoulder and asking, “Who are those guys?”.

The impact of Conrad Black’s tale should be that executives will think twice before engaging in self-dealing. Shareholders can sleep a little better knowing their interests are being keenly protected - executives, on the other hand, may need some assistance in that regard.