CHICAGO — A U.S. newspaper company balked at paying "non-compete'' fees to Hollinger International executives, including Conrad Black, when the matter was brought up during sale negotiations, the firm's former chief executive said Monday at Black's fraud trial.

Mike Reed, the former CEO of Community Newspaper Holdings Inc., acknowledged Monday that his company had requested a non-compete agreement with Hollinger International when it negotiated to buy small U.S. community newspapers from Black's former company.

But Reed said it never requested any such agreement with Hollinger Inc. -- a Toronto company controlled by Black and at the time 35 per cent owner of Hollinger International -- or any of Black's co-accused in the case.

"We did not view them, individually, as potential competitors in these small towns in the United States,'' Reed told court.

The issue of non-compete payments is central to prosecution allegations that Black and executives David Radler, John Boultbee, Peter Atkinson and Mark Kipnis swindled shareholders out of about US$60 million.

Separately, Black is also accused of misusing Hollinger International funds on personal expenses, which takes the total claims to about US$80 million.

U.S. government lawyers allege that some of the defendants benefited personally from the non-compete payments, accepting money that should have flowed to Hollinger International.

Reed was involved in two deals with Hollinger International in 1999 and 2000. In both cases, he said, non-compete payments were agreed upon for the Chicago newspaper company, but those for Hollinger Inc. and for Black, Radler, Atkinson and Boultbee were added after the initial agreement and before the closing of the deal by lawyer Mark Kipnis.

In the first deal, a $50-million fee was paid to both Hollinger Inc. and Hollinger International.

The second deal, also included the addition of Hollinger Inc., as well as a request for payments of $4.5 million to each of Black and Radler, and $250,000 to each of Boultbee and Atkinson to be wired to specific accounts at closing, Reed said.

CNHI refused, he added, saying that "it just didn't seem like the right thing to do.''

"The asset purchase agreement in this transaction was with Hollinger International,'' he said. "We felt that's where the assets from this transaction should be going.''

Community Newspaper Holdings, formed in 1997 and based in Birmingham, Ala., publishes more than 200 dailies, weeklies and other publications in the U.S. southern, Midwest and eastern states.

In cross-examination, Black lawyer Ed Genson suggested that there was no mention in contracts surrounding documents surrounding the deals that the non-competes should only have been paid to Hollinger International.

"Tell me where it says in that agreement that it wasn't really a condition of closing and you guys were only playing?'' he asked, also noting that it was Radler, and not Black, with whom Reed had made the deals.

Black is charged with wire and mail fraud, tax evasion, money laundering, racketeering and obstruction of justice. In addition to his alleged involvement in the redirection of non-compete payments, he is also accused of misusing about $20 million in corporate funds on personal expenses.

Radler has pleaded guilty to fraud and has agreed to testify against his former associate in return for a lenient jail sentence of 29 months and a US$250,000 fine.

Reed was expected to be followed by witnesses Thomas Henson, David Paxton, CEO of Paxton Media Group and Angela Way, Kipnis' former assistant.

Black appeared more relaxed on entering the Chicago courthouse Monday, a crush of media covering the trial having dissipated to a handful.

Asked if the trial -- a showy affair in its opening week -- was progressing as he expected, Black replied "even better.''

The trial has been overshadowed at times by the personalities in play. Black's wife Barbara Amiel Black lashed out at reporters who hung on the couple's every move, later apologizing on the courthouse steps and in a Maclean's magazine column. Black wrote a wry letter to the London Times objecting to a friend's characterization of him as a latter-day "Great Gatsby.''

So far, no great bombshells have been dropped in court.

Last week saw opening statements from both sides and testimony from Gordon Paris, the man who replaced Black as CEO of Hollinger International and was instrumental in his ouster following a special committee review of the company's finances.

Court had begun on Friday to hear witness Craig Holick, who worked at Hollinger International from 1997 and 2000 as a manager of corporate finance. He was unavailable Monday.