UPDATE 2-U.S. court denies Conrad Black bond during appeal

(Adds Black's lawyer, background)

By Andrew Stern

CHICAGO, Feb 28 (Reuters) - A federal appeals court denied on Thursday Conrad Black's request to remain free on bond during the appeal of his convictions for fraud and obstructing justice, though the judges indicated his appeal had at least a chance.

The three-judge panel of the U.S. Court of Appeals for the 7th Circuit extended the bond of two other former Hollinger International Inc executives convicted along with Black in July, but did not tip their hand on which way the court may ultimately rule on the appeal.

The ruling means in all likelihood the flamboyant former press baron and member of Britain's House of Lords must surrender on Monday to a Florida prison to begin serving his 6-1/2-year sentence.

"Defendant Black must report to prison on or before March 3, as required by the district court's order," the panel wrote.

In December, U.S. District Judge Amy St. Eve sentenced Black for obstructing justice and defrauding shareholders of Hollinger International, once the world's third-largest publisher of English-language newspapers where internal auditors once accused Black of operating the chain as a "corporate kleptocracy."

But two other former executives convicted with Black, John Boultbee and Peter Atkinson, were both permitted to remain free on bond during the appeal process. The court said a reversal on some counts where there was a "'substantial' question" would unfairly penalize them with longer prison terms than they should serve while the appeal is decided.

Atkinson was sentenced by St. Eve to 24 months and Boultbee to 27 months.

Black, however, was found guilty on the additional count of obstructing justice, which carried a more severe 78-month sentence, the court said. His sentence is "substantially longer than the normal course of an appeal," they reasoned.

NO DECISION YET

But the court assured both sides that it did not want to "foreordain the outcome of the appeal."

Until he surrenders, Black has been free on bond but confined to the areas around his Palm Beach, Florida, estate or near Chicago where he was convicted and where Hollinger was once based.

The down-sized company is now called the Sun-Times Media Group Inc and has put itself up for sale.

Prior to the ruling, Black's lawyer Andrew Frey said he did not anticipate taking the bond issue any further, and would focus on preparing written appeal arguments due March 6. Oral arguments are expected to be in early June before the court's summer recess, with a ruling sometime after that.

Black, who once owned London's Daily Telegraph and newspapers from the Jerusalem Post to Canada's National Post, relinquished his Canadian citizenship to become a member of Britain's House of Lords. If his conviction stands, he is likely to be deported after serving his U.S. sentence.