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CHICAGO (Reuters) - Former media mogul Conrad Black may be headed back to prison in light of a U.S. Appeals Court ruling on Friday that upheld his convictions on one of three fraud counts and obstruction of justice.
Judge Richard Posner of the 7th U.S. Circuit Court of Appeals sent the case back to the trial judge to resentence Black on the affirmed counts, but took what legal experts said was an extraordinary step by urging prosecutors to "wind up this protracted litigation" and not retry him.
"We are pleased that the Court of Appeals affirmed the convictions on fraud and obstruction counts and we will make our further intentions known to the District Court at the appropriate time after we have studied the opinion carefully," the U.S. Attorney's office in Chicago said in a statement.
The Canadian-born Black, 66, was freed on bail in July after spending nearly 2-1/2 years in a Florida prison, pending the outcome of his appeal. He was originally sentenced to 6-1/2 years in federal prison.
In considering what the new sentence should be, Posner suggested trial judge Amy St. Eve of the U.S. District court in Chicago consider the fraud evidence even in the dismissed counts -- which legal experts interpreted as meaning she could resentence Black to the same term as before and that he will be returned to prison.
"You can't really unscramble the egg," as far as unraveling what the new sentence will be now that two fraud convictions have been dismissed, said Ron Safer, an attorney who represented Hollinger attorney Mark Kipnis.
"She may decide to lessen the sentence," Safer added.
The appeal was granted after the U.S. Supreme Court issued a ruling restricting the use of the "honest services" law in three cases, including Black's, saying the law was too vague. The law has been frequently applied in corruption prosecutions of executives or politicians, with juries instructed to consider the rights of corporate shareholders or constituents to their leaders' "honest services."
Black and three colleagues at Hollinger International Inc were convicted by a jury in July 2007 of defrauding the Chicago-based newspaper publisher when they paid themselves non-compete fees as they sold off parts of the conglomerate.
Black was also convicted of obstructing justice when he was videotaped by security cameras carting 13 boxes of documents out of his Toronto offices while under investigation.
The appeals court affirmed the jury's guilty finding that Black and his cohorts secured $600,000 in non-compete fees as part of newspaper sales to Forum Communications and Paxton Communications.
The court said these non-compete agreements were "plain-vanilla pecuniary fraud" as the covenants were never asked for by the buyers, never revealed to Hollinger's board of directors, and were never actually drawn up.
Posner wrote that the defense contention that this was an innocent oversight was "implausible."
The convictions thrown out by the appeals court involved $5.5 million in non-compete fees paid to the executives from the sale of newspapers to a Hollinger subsidiary, APC.
In this instance, a single 7,000-circulation paper in Mammoth Lake, California, was the last remaining property of APC, and the defendants said they were owed compensation anyway and the payment was designed to avoid Canadian taxes.
Posner found this conduct egregious, but said the jury may have convicted on the basis of the failure to notify Hollinger's board, or a failure to provide "honest services."
Black's conviction of obstruction of justice was still valid, Posner wrote, dismissing the defense's argument the fraud convictions tainted the rest of the case.
Editing by Jerry Norton