6/12/07 (IL):
Nice Work If You Can Get It Part 2: Black Expert Bills $800,000
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An expert witness called by the defense in the Conrad Black trial has billed approximately $800,000 to review documents and testify in the case, jurors heard yesterday.
Alan Funk is a certified accountant and fraud examiner who previously worked with the Federal Bureau of Investigation as a special agent on white-collar investigations. He told the jury he began his research in June, 2006, and spent nearly 800 hours reviewing 400,000 documents provided to KPMG. He charged the defence US$425 an hour for his time and also subcontracted his older brother, who is also an accountant, at US$325 or US$350 an hour.
Prosecutor Jeffrey Cramer appeared surprised as Mr. Funk continued to list of the different activities for which he billed, including reviewing transcripts, minutes, disclosures filed with the U.S. Securities and Exchange Commission, preparing exhibits, writing a 22-page report and discussing his findings with attorneys for Mark Kipnis, one of Lord Black's co-defendants.
Under cross-examination, Mr. Funk admitted that executives at the top rungs of corporate management are often in the best position to override auditing procedures and controls.
"Those are the best frauds," said Mr. Funk, who was called to testify by Michael Schwartz, a lawyer for Mr. Kipnis.
The witness insisted, however, that his extensive review of documents relating to Lord Black's case turned up no evidence of fraud and that using non-compete agreements to move money would be a "silly way" because of the paper trail they leave behind.
Mr. Cramer argued that while the documents may have been in order, the non-compete agreements were not requested by the buyers in newspaper transactions involving the co-defendants.
Mr. Funk stressed that the agreements were signed by both buyers and sellers in each case. Under direct examination on Monday, he testified that he found "significant evidence of disclosure that would be inconsistent with fraud" and told the jury KMPG had all the necessary information to understand the transactions that are at the heart of the trial.
"I agree with the pieces of your argument," Mr. Funk told Mr. Cramer at one point, "But the puzzle doesn't fit."
The running tally for Mr. Funk's testimony became a theme for the day; Mr. Cramer returned to question the witness about it on more than one occasion.
At one point, he asked Mr. Funk when he would reach his ballpark figure of US$800,000 for his services.
"As soon as you sit down, I suppose," Mr. Funk said, prompting laughter in the courtroom.
Mr. Cramer was seeking to emphasize to the jury that they should not trust Mr. Funk's testimony because the amount he was paid may have biased him toward the defence.
When Mr. Schwartz rose to ask his witness a few final questions, he quipped "OK, Mr. Funk, I'll keep the meter running."
The U.S. government alleges Lord Black, Jack Boultbee and Peter Atkinson misappropriated US$60-million in bonuses disguised as non-compete payments from Hollinger International during the sale of newspaper assets.
The prosecution alleges the buyers never requested non-compete agreements and that the money paid to company executives should have gone to Hollinger International's shareholders. Mr. Kipnis, Hollinger International's former general counsel, is accused of facilitating the alleged fraud.
All four co-defendants in the case have pleaded not guilty.
© X-Pro 2007
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