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Could it have been worse for Mark Kipnis? At first the question seems ironic. In August federal prosecutors indicted Kipnis, the former CLO of Hollinger International Inc., for aiding and abetting fraud at the Chicago-based media holding company. He’s accused of helping senior executives secretly skim money from the sales of six Hollinger properties. Kipnis, who has pled not guilty, faces up to five years in prison and a fine of $250,000 for each of the indictment’s seven counts. But the government only charged Kipnis for his role in deals that weren’t approved by Hollinger’s board. According to an internal investigation, Kipnis helped structure additional fraudulent deals that were okayed by the company’s directors. The probe � headed by former Securities and Exchange Commission chairman Richard Breeden � also found that though Kipnis didn’t directly profit from these transactions, he received a $100,000 bonus for his work on one deal and $50,000 for another. According to Breeden’s final report, issued in August 2004, the larger bonus “was intended as a reward for Kipnis’s assistance in taking funds out of Hollinger.” In its indictment, however, the government ignored both the board-approved deals and Kipnis’s bonuses. So why didn’t prosecutors go after Kipnis for all of the transgressions that Breeden identified? Officials in the Chicago U.S. attorney’s office, which issued the indictment, won’t say. But Dean Polales, who was a prosecutor in that office for 21 years, says a complicated fraud case works best if a prosecutor can “boil it down to a simple, repetitive pattern of fraud.” Polales, now a partner at Chicago’s Ungaretti & Harris, adds that if a prosecutor doesn’t focus the case, “the jurors are going to suffer sensory overload when they sit for a long time listening to evidence of seemingly unrelated transactions.” Hollinger, formerly controlled by Canadian businessman Conrad Black, publishes dozens of newspapers and trade publications around the world. Problems at the company first came to light in 2001, when an institutional investor raised questions about fees paid to executives. The board appointed a special committee, which in turn hired Breeden to conduct an investigation. The government’s charges focus on six media companies Hollinger sold between 1999 and 2001. According to prosecutors, Kipnis and other Hollinger officials structured the sales so that a portion of the proceeds was designated as “noncompetition fees.” (In theory, the buyers were paying Hollinger not to start a competing publication at a later date.) Rather than go to Hollinger shareholders, prosecutors say the fees were funneled to Black and other executives, though not Kipnis. Prosecutors claim that Kipnis breached his fiduciary duties because the noncompetition fees benefited Hollinger’s controlling partners at the expense of its other shareholders, weren’t approved by the company’s board, and weren’t accurately disclosed in its SEC filings. Prosecutors also maintain that some of the parties buying the Hollinger properties never even asked for noncompetition agreements. Kipnis’s lawyers, Ted Helwig at Katten Muchin Rosenman in Chicago and Michael Swartz at Schulte Roth & Zabel in New York, declined to comment on the charges. But it will be hard for them to argue that their client was baffled by the numbers in Hollinger’s contracts. Kipnis, now 58, worked for a time as a certified public accountant. After picking up a law degree, he became a partner at Holleb & Coff, a now defunct Chicago firm. Kipnis jumped to Hollinger in 1998. He resigned in 2003, after Breeden presented the board with evidence of the secret noncompetition agreements. In his last year at Hollinger, Kipnis earned a salary of $290,000 and a bonus of $87,000. He is currently practicing law in Northbrook, Illinois. Paul Fox, who worked with Kipnis at Holleb & Coff for “at least 15 years” and is now at Greenberg Traurig, says he was surprised when he heard Kipnis had been indicted. “I’ve always known Mark to be a good and decent person,” Fox says.

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