Conrad Black

by A Matter of Principle

  Beyond this, no one knew anything. Somewhere in this group, a serious oversight had occurred, but I encountered a pandemic of amnesia. It was like interviewing a group of children after some frightful accident had befallen a piece of furniture or precious ornament when no adult was present. No one knew anything – except that it had nothing to do with him. None of these highly compensated and generally competent executives could remember anything except their own complete, mystifying, oblivious non-involvement. They had failed, but the full force of the joyful malice of our enemies was about to fall like a pack of famished wolves on me.

  As has been recorded, non-competition agreements, in the case of small local newspapers in North America, are almost always part of any agreement of sale, not only because of the presumed expertise of the vendor but because of the competitive ease with which anyone, especially someone familiar with the market, can establish what are called “shoppers.” They are the free papers full of ads you see often at the supermarket cashiers or on the street corner. A vendor who knows the market can quickly come up with a “shopper” and undercut the economics of the business that has been sold. The reason the Thomson Corporation lost so much ground in local markets was that it put such cost-cutting pressures on its publishers that they squeezed the product to produce the required margins, making them vulnerable to shoppers published or supported by disgruntled local merchants. Thomson ignored these shoppers, and their franchises suffered.

  Whether the non-competition payments were made to individuals or corporations depended on whether the feared competition was corporate or personal. If the vendor was a large public company such as Gannett, without a controlling shareholder, the payment would be made to the selling corporation. Where the vendor was a personal or private corporation, or as in the case of Hollinger International, a public corporation with controlling shareholders who had built up the company and closely operated it, the payment was generally made either to the individuals or to the combination of corporation and individuals.

  As we unloaded newspapers in our build-down to a solid and relatively debt-free platform anchored in London and Chicago, the Audit Committee had routinely approved non-competition payments and had frequently expressed their satisfaction, echoed by the directors as a whole and many shareholders, with the immense capital gains that the company was racking up. The company’s debt was reduced by 80 per cent, and the normalized cash flow by only about 40 per cent. And by far the most promising growth assets were retained. These two lots of non-compete payments had gone through the usual chain of approvals several years earlier: they were discussed in SEC filings and company reports; the auditors and outside counsel were aware of them; the Audit Committee had signed off on documentation of them but had not, apparently, explicitly approved them by resolution.

  Dreadful as this was, I felt that while the process was incomplete, it was sufficiently open that human error was the most likely explanation. In my worst imagination, I could not foresee that five years on, these two incompletely authorized groups of payments and nothing else would have led to the bankruptcy of the two companies I had built that now had nearly $2 billion of shareholder equity and underlying value. Nor could I imagine that this was the spark for years of criminal and civil litigation with covens of lawyers, auditors, inspectors, monitors, regulators, judges all drawing fees and funds into the hundreds of millions in order to provide kindling for my career’s funeral pyre. What I did imagine was afoot was grim enough.

  At this point, the only American lawyer I had was a Delaware corporate law specialist, Jesse Finkelstein. I had often spoken to him on the telephone but had never laid eyes on him. He lived near Wilmington, travelled much of the time, and had no background in the sort of situation that now loomed. I was put onto him when Paul Saunders, a distinguished corporate litigator who had acted for me in the M.A. Hanna case in 1982,* recommended him. Paul himself could not act for me, because in the two hours between our July directors meeting, which included telephone attendance by Breeden, and when I called to retain him, Henry Kissinger had called Paul’s firm, Cravath, Swaine & Moore, and engaged him, claiming that I had urged all the directors to retain individual counsel. (I had not, but it didn’t much matter. In due course, we found out that Radler had hired criminal counsel the moment the Special Committee had been formed.)

  When I finally did meet Jesse Finkelstein, my assessment of him tilted in his favour on the slight grounds that he reminded me, in appearance and manner, of the late Igor Kaplan, who had been an invaluable counsel at the time I had taken over Argus Corporation in 1978. He proved to have all of Kaplan’s decency and elegance but not his worldliness. I had asked Finkelstein to recommend a tough, experienced corporate litigator whose knowledge would go up to the edge of criminal law matters, as our enemies would likely not downplay the felonious possibilities of the story that was about to break. He arranged for the famous barrister David Boies (most recently known for his unsuccessful championship of Vice President Al Gore’s claim to victory in the 2000 presidential election) to call on me. But this could not be done before November 14. This was two weeks on but it seemed manageable. While I had grave intuitive forebodings, they were somewhat cabined by an unworldly attachment to logical limits to possible damage. My historical observations told me this could quickly become a revolutionary climate, proceeding to upheavals and figurative executions. At this moment and for some days to come a delay in securing a heavy-duty legal team seemed less disturbing than it should have been.

  Much would now depend on the directors. I assumed I would receive a reasonable degree of benevolence from them, as some were close personal friends and would know that I could not conceivably have done anything unethical. I thought that if I started to advise and lobby them now, especially before I was in a position to shed much light on these developments, it could be misunderstood. I pieced together what I could from endlessly repeating the same questions to my amnesiac colleagues. It did not require a clairvoyant to deduce that the shadowy Richard Breeden was about to show his hand, and that the fairness and judgment of the directors, a distinguished group, was about to be tested, in very improvident circumstances.

  Social life in New York continued at its usual hectic autumn pace. In the first weeks of November, the usual brittleness in the endless gatherings of more or less the same people in the apartments of Fifth Avenue and Park Avenue possessed a greater air of unreality than ever. I had seen the lightning. I would not have long to wait for the thunder.

  The directors were a varied group of apparently competent and independent-minded but thoroughly well-disposed people. Two of the most capable directors apart from Marie-Josée Kravis had retired in the last year. The talented investor Ray Chambers, former partner of, but a less mercurial and abrasive personality than, the Nixon-era treasury secretary Bill Simon, had retired at the end of 2002 in order to pursue a life of travel and philanthropy. Leslie Wexner, one of the world’s greatest and wealthiest retailers and founder and controlling shareholder of The Limited, had retired before the 2003 annual meeting because he disliked the risks inherent in public companies and found no countervailing interest here to retain his adherence. In 2002, I had retired the directors aged eighty or older: Dwayne Andreas, Bob Strauss, and George (Lord) Weidenfeld. Robert Strauss, former Democratic Party chairman, U.S. trade representative, Middle East peace negotiator, and ambassador to the Soviet Union and the Russian Federation, a delightful man of immense astuteness, felt uncomfortable serving on a board beyond his eightieth birthday. George Weidenfeld, though not particularly well versed in commercial matters, was a remarkably well-connected and imperishably energetic man whose loyalty would have been entirely reliable through the crisis that was about to break. I did not feel that I could retire some octogenarians but not all, and I parted with him with reluctance. A social and political force of surpassing acuity, he would have been invaluable. He came to London from Vienna in 1938, just after the Anschluss, was in the German monitoring service of the B
BC during the war, and became one of the world’s best-known and most successful book publishers with Weidenfeld & Nicolson.

  Alfred Taubman also retired. I had re-elected him in 2002 after he had been convicted of a felony, a restraint of trade in his capacity as controlling shareholder of Sotheby’s, of which I was a director. I did not believe that his conduct had been unethical, and felt he had been convicted on the denunciation of the company president as part of the plea bargain system and after what he believed was an inept legal defence. He had been a conscientious, diligent, and useful director of ours and gave us invaluable assistance in negotiating arrangements with Donald Trump for the redevelopment of the Sun-Times building in Chicago. He, too, would be missed.

  Apart from Barbara and my associates Dan Colson, David Radler, and Peter Atkinson, there were the members of the Audit Committee, the Special Committee, and Henry Kissinger, Richard Perle, and our Israeli director, Shmuel Meitar. Meitar had been our partner in the publication of the Israel Yellow Pages, known locally as Golden Pages. The contract to print these pages had been given to the Jerusalem Post and then unexpectedly withdrawn from our company in favour of a firm with which Meitar was closely associated. He did not inform us of this connection. When I found out, Radler, who had effectively concealed the fact, said that Meitar claimed he was powerless to restrain his own associates. It was a mystery to me why Radler wanted him to continue as a director, other than to avoid embarrassment, to which he was always pathetically sensitive. As events unfolded, Meitar became progressively more difficult to reach, vanishing on frequent and prolonged alleged holidays in the bowels of the Orient.

  In Gordon Paris’s first week as a director, he joined the Audit Committee and the Special Committee when it was set up. From the beginning he made references to upcoming lunches and meetings with Laura Jereski and others. I couldn’t blame him for informing himself, but when he made it clear that he did not necessarily believe the version of our discussions with Southeastern Asset Management that I had written for the quarterly report in the summer of 2003, he arrayed himself as an antagonist. This was a role to which he quickly warmed and for which he was handsomely paid.

  Because Chicago is such an impressive city, I had always assumed that someone who held the governorship of Illinois for fourteen years as Audit Committee chairman Jim Thompson had would be as impressive as a comparably successful officeholder in New York. I was disappointed. His Audit Committee colleague Richard Burt was a man who was, and certainly held himself out as, a friend. He had been often to our home, had confided some of his marital difficulties, and had latterly spent a good deal of effort trying to entice me into investing in a sequence of hare-brained ideas prompted by his Saudi employers.

  The other member of the Audit Committee had been economist Marie-Josée Kravis. Because I had known her longer and more favourably than the others and she had departed the company, as I described earlier, discreetly and without having to take a stance in the early skirmishing that ensued, I did my best to leave her out of the controversy. I had known her fairly casually for twenty-five years. She parlayed the Hudson Institute’s two-person office in Canada into a position of some apparent importance and capitalized on her connections to the Trudeau government to enhance her social status and money-earning capacities as a royal commission member and recipient of other official preferments. She lived for some years with Jean-Pierre Goyer, one of Trudeau’s cabinet ministers. I admired her candid and contemporary approach to her private life, her staunch federalism, which was not popular in the Quebec intellectual milieu that she often frequented, and her cool, alluring manner.

  Ms. Kravis has never, in my observation of her, misspoken, embarrassed herself, said too much or too little, or been anything other than elegant and detachedly self-possessed. After her marriage to the conductor of the Montreal Symphony Orchestra, Charles Dutoit, failed, I invited her to Bilderberg. Thus I could claim a slight role in bringing her together with the prominent financier Henry Kravis. From all outward appearances, it has been a splendid marriage and she handled her entry into New York society with consummate skill. Never too eager for acceptance nor too standoffish, she quickly overcame the barrage of skepticism and envy that greeted her originally, and after a few months, even a few of the more sulphurous doyennes were comparing her to Jackie Kennedy Onassis for her French graciousness and worldliness and good taste. Her coolness can be chilling and haughty at times, but she had always been pleasant to me and has greeted the ups and downs of her life with outward reserve and imperturbable dignity. She is an able and attractive woman, but will re-enter this narrative less benignly after an absence of several years.

  After Rick Burt had brought in his government and post-government acquaintance Richard Breeden as Special Committee counsel, we needed additional members for the Special Committee. Graham Savage was Peter Atkinson’s suggestion. Savage had served many years as the chief financial officer of Ted Rogers’s formidable Canadian cable and media group. This furnished him invaluable experience in many areas that could be of use to the Special Committee. Savage is the allegorization of the colourless Canadian accountant: soft-spoken, slight, earnest, and to me instantly forgettable. A cipher.

  I had recruited Ray Seitz, former assistant secretary of state for Europe and Canada (a successor of Burt’s), well-regarded ambassador to the United Kingdom, and chairman of Lehman Brothers International. He seemed urbane, intelligent, and gracious, a fine diplomat who seduced the British as elegant, understated foreigners sometimes can, and who, like David Bruce (ambassador in the Kennedy and Johnson years), received the supreme accolade of the London salon: “He is one of us.”

  I importuned him to take this position, confident that he would be a judicious counterweight to Breeden, about whose character and intentions warnings flooded in after the initial concern from Marie-Josée, and also to Gordon Paris, who I doubted possessed the gravitas or intellect to lead or even make a very useful contribution, although he was a competent salesman. I expected Savage to be plodding but sensible and counted on Seitz to steer the whole effort justly, applying diplomatic talents where necessary to prevent Breeden from transmuting his supposedly impartial inquiry into a lynch mob. I sized up Breeden (sight unseen), and even Savage fairly accurately, though I underestimated Paris. I misjudged Seitz.

  The board’s two most eminent participants, Richard Perle and Henry Kissinger, were men I counted as close personal friends, as they frequently proclaimed themselves to be even as the coming nightmare unfolded. Their extremely high intelligence, affective personalities, and remarkable careers are well known. I admired them from a distance long before I met them. I largely owed my relations with them to the Bilderberg conferences, where, as at some other meetings, we often spoke on the same platform and almost always on the same side, against the appeasers in the latter days of the Cold War, against the hydra-headed forces of anti-Americanism, and against those in the world who wished to collegialize American strength through the assumption of moral exaltation for themselves without any practical effort.

  This was enjoyable work in agreeable surroundings for all of us. And although I make no claim to speak from the same background of public service as these statesmen, I was no less vehement for that. The high-level international conference circuit breeds a fine spirit of camaraderie, and with Henry Kissinger it was greatly elevated by our frequent encounters in New York when Barbara and I became part-time residents there.

  Richard Perle is unpretentious, unaffected, gregarious, rather disorganized, and thoroughly endearing. He is relatively undiscriminating in his thoughts about matters outside the strategic world and in people. He is a constant source of dubious commercial ideas from his “smart newspaper box” to all manner of dot-com and bio-novelty ventures. His genius does not translate well into fields other than official national security policy, an area of which he tired before the Reagan administration ended. His subsequent career has been an anticlimax.

  I recruited him to our Ameri
can board soon after I got to know him, and he became the chairman of the independent directors, in which capacity he performed exemplary work. With the help of his astute if gratuitously bombastic lawyer, Dennis Block, Perle put through the transfer of the Telegraph and the Canadian assets to American Publishing, which then became Hollinger International, with great skill and complete fairness.

  When new technologies became so influential they overshadowed the traditional media, and any company wishing to retain any currency in the securities markets had to make some gesture to it, Perle, with his absorbing interest and contacts in the new media, seemed the natural person to head this effort on our behalf. My brother’s stepson, Matthew Doull, an authentic techie who had worked for us at the Telegraph, became the president of Hollinger Digital, as this new division was called, and Perle became the chairman.