The fallen media mogul Conrad Black came face to face yesterday with his lifelong business partner, David Radler, who admitted fraud to a hushed Chicago court - and claimed the two of them made all significant business decisions together.

In a potentially pivotal moment in Lord Black's racketeering trial, Radler told jurors he enjoyed a close relationship with the former Telegraph owner for 35 years. The pair went on holiday together, attended each others' weddings and phoned each other to chat weekly - if not daily.

Under an agreement with the US government, Radler is the star prosecution witness in return for a relatively light sentence of 29 months in jail, to be served in Canada's less harsh prison system.

"I pleaded guilty to fraud and to taking money from Hollinger International in circumstances that were ... not allowed," Radler testified. He told the court that he was required to tell the truth in order for his light sentence to stand. "My obligation is to tell the truth. If I don't, the agreement will become null and void."

Radler was chief operating officer of Hollinger, the media empire chaired by Lord Black which included the Daily Telegraph, Jerusalem Post and Chicago Sun-Times. They are accused of cooking up a scheme to loot $60m from shareholders through fraudulent "non-compete" agreements and abuses of expenses.

Explaining the motive behind his thefts, Radler said he became alarmed in the late 1990s when Hollinger began disposing of local newspapers. The pair's management company, Ravelston, became heavily indebted, and they were facing a cut in salary.

"We were both concerned with the fact that there was a debt problem at Ravelston," he said, and he discussed the issue privately with Lord Black. "We had bank commitments and salary commitments, and we had to have enough income to take care of both of them."

He explained that he first met the future peer at a Montreal restaurant in 1969. The pair went into business together by buying a local Quebec paper, the Sherbrooke Record. They quickly added other titles, but all major decisions were taken collectively.

Lord Black faces 17 counts of fraud, tax evasion, money laundering and obstruction of justice. Three fellow executives are with him in the dock: Mark Kipnis, Jack Boultbee and Peter Atkinson.

Among the charges against Black is misuse of company funds to pay for a surprise 60th birthday party for his wife, Barbara Amiel-Black, in 2000. Jurors were yesterday shown menus, bills and memos relating to the $62,870 event, of which two-thirds was billed as a "business expense".

Guests feasted on Beluga caviar and drank more than $13,000 of vintage wine as they listened to a promising young soprano perform opera arias.

A calligrapher was paid $569 to inscribe name plates and invitations for the event at La Grenouille, a French restaurant in New York.

Giving evidence for the prosecution, Lord Black's former executive assistant Jan Akerhielm told the court that she organised the event, but told hardly anyone at Hollinger's New York office about the party. "He [Black] had told me he wanted it to be purely a surprise party. I assumed that meant keeping it secret from everybody else in the office."

According to the restaurant bill, the 94-strong party got through 18 bottles of 1993 Dom Pérignon champagne at $320 each. They enjoyed 26 bottles of Chassagne-Montrachet, 23 bottles of Clos de Vougeot and two bottles of Sancerre.

Guests included New York's future mayor Michael Bloomberg, the property magnate Donald Trump, the former Telegraph boss Dan Colson and the Spectator's society columnist Taki.

Lord Black's defence lawyer Ed Genson stressed that many of those present were "media people". They included the editors of magazines Vanity Fair, Time and Vogue. The American news anchor Peter Jennings and television presenter Charlie Rose were there, plus the daughter of the late Mirror owner Robert Maxwell.

Mr Genson asked: "These are all media people - is that right?" Ms Akerhielm: "Yes - the ones you've listed."

Pointing out that Ms Akerhielm had not been invited to the event, Mr Genson asked: "You don't know whether any business was conducted there?"

The trial continues.