Conrad Black

by A Matter of Principle

  As the public relations debacle unfolded in the second half of November, I engaged Linda Robinson, whom I had known socially, as my public relations adviser. She recommended Sullivan & Cromwell as counsel because she had worked closely with them before. Three of their senior lawyers, John Warden, Ben Stapleton, and David Braff, visited me on November 20, and I engaged them. Warden and Stapleton had excellent reputations, and as the firm had been led by John Foster Dulles and had negotiated the initial acquisition of the Panama Canal zone, I was biased in their favour to the considerable exasperation of Barbara, who felt that my affection for historical antecedents occasionally marred my vision. They recommended that I retire two days early as chief executive of International and leave it to Paris to sign the 10Q if he chose to do so. I followed their advice.

  I finally had serious lawyers, supplemented by David Boies’s firm in specific matters (Boies himself was too busy to act for me, but was available for advice at times) and by Jesse Finkelstein in specialist Delaware questions. I relied heavily on my friend Eddie Greenspan, Canada’s most famous defence lawyer, to advise me on criminal matters, which were so universally touted as being of imminent importance. At this time, Greenspan was invaluable. He early expressed reservations that whatever Sullivan & Cromwell’s talents in commercial and civil matters, they had little sensitivity to the potential implications of dealing with so dangerous an enemy as Breeden. For a long time, Sullivan & Cromwell showed no recognition of the seriousness of Breeden’s intent. When they eventually did recognize it, they were not the best-suited firm to reply to so sinister an opponent. Even had he been well intentioned, the powers available to Breeden as counsel to the Special Committee and as the man who had given Paris his job as nominal chairman of that committee were practically unlimited. He was in charge of any aspect of the investigation that had legal implications and he determined its entire scope. He had the power to identify derelictions and to critique directors’ and officers’ performances, not just in cozy office sessions but in published reports. He was responsible for the Special Committee report and had a power of moral suasion, if not intimidation, before which everyone buckled except Barbara, Dan Colson, Jack Boultbee, and me. No substantive move could take place at Hollinger International without his prior approval.

  Evidence of Breeden’s real intentions continued to accumulate. In late November, I had received a gratingly obnoxious letter from Gordon Paris, cutting off credit cards, expense accounts, car leases, and telephone arrangements and relegating the continuing chairman of the board and chief stockholder to the status of a junior employee. Back in early December in our New York City apartment I had shown Greenspan a letter from Paris. He read it and looked at me quizzically: “You think you can make a deal with these people? This is war.”

  As important elements of the agreement were in the ambiance of the settlement, and the ambiance had been poisoned, all sense of goodwill and cooperation was vaporized. It is hard to give a sense of the relentless psychological pressure Breeden and his new lackeys asserted. They specialized in a sort of quiet terror – one never knew what new charge would be made or what old perquisite or aspect of your job would be taken away. Our apartment doorbell would ring. The private entrance outside it would be empty but for an envelope lying on the floor. Inside, on Hollinger International letterhead embossed with the name of my successor, would be a new list of personal divestments by fiat. I could no longer do this. I no longer had that. My car had been taken. Access to the company email server had been severed, although I was still the chairman of the company. Each item could be replaced or done without (though the email server presented rather more difficulties not eased by the irritation that International had managed to preempt virtually every combination of my name and Barbara’s that would make a recognizable domain), but as a campaign it was successful. I was living every moment with that terrible feeling of missing a step in your sleep, or losing a heartbeat. The psychological treatment almost instantly cracks weak people – of whom, unfortunately, we had no shortage. Many, with the right sticks and carrots, were prepared falsely to denounce others to spare themselves even slight inconvenience. (The best recent illustration of this was the Grasso affair, where many of Wall Street’s lions, most of whom have since hit the wall, deserted Dick Grasso, former head of the New York Stock Exchange – except for the magnificent Ken Langone, who then made a bid to buy the NYSE. Of course, Grasso and Langone were vindicated.)

  After the resignation of the Hollinger Inc. directors, the next element of the Canadian establishment to desert with a minimum of decorum was the Canadian Imperial Bank of Commerce, of which I had been a director for twenty-seven years. As soon as the November events were announced, I heard from the non-executive chairman, Bill Etherington, that the bank would require my retirement as a director at the next annual meeting, a few months later. I replied that this was premature and that I would have expected a little more benefit of the doubt.

  As weeks went by and the enemy succeeded in steadily poisoning the wells in the press, it became obvious that all the public companies I was associated with were going to come under great pressure not to re-elect me. In the circumstances, I phoned John Hunkin, the chief executive of CIBC, and said that I did not want to embarrass the bank. I suggested that I might need a well-secured loan from CIBC. He didn’t commit himself but was encouraging.

  What happened then was predictable but disappointing. I was informed that the bank’s nominating committee had met and that while no vote or resolution was taken, it was their view that I should not stand for reelection, and that this view had been informally approved by the directors. I had had no notice that this was being discussed, and no ability to arrange a more dignified exit for myself from a bank for which I had generated many millions of dollars of profits over more than thirty years.

  Practically all other departing directors were thanked in resolutions and at the annual meeting and in the annual report. I received one parting email of good wishes from a fellow director, a person whom I did not know well, as well as a gracious word from my friend of nearly forty years, Galen Weston. My loan request was denied by Hunkin in an email beginning: “We would not normally make a loan to someone in your condition.” Perhaps because I was already becoming punch-drunk, I couldn’t help thinking of the cartoon from Punch more than a century ago, of the cardinal and the admiral on the railway platform, where the cardinal mistakes the admiral for a baggageman and the admiral replies: “I wouldn’t be travelling in your condition, Madame.” I was a director also of Brascan, CanWest, and Sotheby’s, though my association had been briefer than with CIBC. These three public companies also concluded that they did not want to brave the barrage of hostility from institutional investors. Even though all of them were more or less controlled companies, they were concerned about their stock price. They put their views very courteously and they profusely thanked me, in both the annual meetings and in the annual report, for my services to them.

  At a practical level, I had no credit facilities of any kind, although I had an apparent personal net worth of hundreds of millions of dollars. Tony Fell, Canada’s leading merchant banker and a friend and neighbour in Toronto of fifty years, had kindly visited me in New York in December. I asked him whether the Royal Bank might consider a loan, heavily secured. He phoned back promptly and in his opening sentence included the phrase “fraudulent preference.”* I interrupted and said he need not continue and that I would not be bothering the Royal Bank (of which I had been invited to become a director in 1976) again.

  It is hard for someone who has not been through it, as I had not, to grasp how inaccessible assets become. (I had several times lent money to financially distressed friends and asked no security, though the amounts were not negligible, and told them to pay me back when they could, if they could; sometimes they did, sometimes not.) I found that credit cards were all right, as long as there were no deferrals of settlement dates, which I never engaged in anyway. But apart from that, only ca
sh could be used. No loans or overdrafts were available, as no collateral was thought to be invulnerable. Prosecutors were apt to claim that anything was ill-gotten gains. These wells were poisoned immediately by Breeden’s allegations, as he had driven off the private equity firms in the summer of 2003, before he had a hint of any problems, as he isolated and started to starve his quarry.

  Now most lawyers would be more concerned to assure collectibility of their invoices to me than about doing what my burgeoning legal problems required. I was then overbilled for counsel’s unjustified belligerencies to collect their invoices – I was billed for superfluous extra-collection measures on myself. My income stopped almost at once, and all that could be used to replace it was cash on hand and asset sales. These were fine for a time (I was particularly pleased to sell my CIBC shares at a fine gain), but not the nature of most of my assets. American and Canadian lawyers lectured me on the need to sell my homes and other assets to have a pool of cash to pay them with, and presumed to lecture me on the limits of my means (about which none of them knew anything). I was to ensure that they, and not other claimants, took every cent I had. Fortunately, I had laid in enough over the years, and could rely on reserves with adequate agility, to avoid that fate, but there would be many tight corners and narrow passages. Brendan Sullivan said, “Money is the ammunition of this war.” It was, I suppose, but it often seemed to be all that the well-paid and not overly successful warriors were interested in.

  What ensued was a prolonged, intricate, and ultimately very successful series of asset sales, often through interposed vendors so as not to rouse the bottom feeders, who were more numerous, devious, and passionately convinced of whatever they wanted to believe about the prostration of the vendor, than I had ever imagined. In these respects, I had spent all my career in the cozy cocoon of the establishment, a bank director since I was thirty-two, and able, fairly effortlessly, to get whatever money I needed, when I needed it. I had an absolutely perfect credit record (and still do), and over forty-five years as an autonomous businessman, sometimes including corporate loans of billions of dollars. It was no use to me now.

  I don’t think personal bankruptcy was ever in prospect, but a disorderly retreat, a rout in which I peddled fine assets at knockdown prices, was. And ghoulish publicity, alleging or implying extreme financial discomfort, was a hardy journalistic favourite for a long time, even up to the Globe and Mail’s fanciful account of the virtual forced sale at a knock-down price of my Palm Beach house in early 2010. The story was republished all over the world, having been lifted without verification from the Palm Beach Daily News, a seasonal photo paper that is probably the most inane newspaper in the English-(more-or-less)-speaking world. In fact, the sale was conditionally revocable and at a price still to be finalized.

  By 2010, I had no trouble returning fire with stinging accuracy, where it was worth doing so, in this case, at the end of a National Post column. But for several years I was pasted by the press at almost every opportunity. It was very unpleasant, but, I suppose, character-broadening.

  –

  THE REAL PROBLEMS, now about to unfold, were harrowing enough.

  The screws were tightening everywhere. David Boies’s law partner told me that David’s son had a high-risk, high-yield, money-lending operation. He had read that I might sell my Palm Beach house and suggested a mortgage could be arranged (at double the normal rates). When we got to Palm Beach, our housekeeper was informed that we had to pay cash for the newspapers at the local newsagent despite my having been a customer for more than twenty-five years. Apparently there was concern about whether I was good for the cost of newspapers. There were also irritating stories of arrears on charitable pledges, and the charities in question, especially those headed up by the more exalted figures of New York society, showed indecently little discretion. Every pledge was fulfilled to the last cent, and would have been even if I had had to sell my own possessions and wash dishes for a living to accomplish it. It was very discouraging, or would have been, had I permitted it to become so.

  Although it was never acknowledged that this was his intention, the Breeden strategy to bankrupt Hollinger Inc. was now being pressed relentlessly. The only solution I could see was to begin serious negotiations to generate money at the Hollinger Inc. level, while remaining well within the terms of the Restructuring Agreement and the requirement not to impair the Strategic Process with Lazard. I felt this could be done so long as I made sure that any agreement I reached contained the express proviso that the contracting party work with Lazard in the future disposition of the company. But I was equally sure that I could not, in advance, inform Breeden via Gordon Paris of whom I was dealing with while they were busy trying to bankrupt Inc.

  Sir David and Sir Frederick Barclay, wealthy and somewhat reclusive, almost identical twin brothers in the United Kingdom, had periodically expressed an interest in buying the Telegraph whenever our competitors managed to generate a negative story about our financial condition. David Barclay was back, so I initiated discussion with him, in parallel to talks with Jonathan Rothermere at Associated Newspapers and Mathias Döpfner of Axel Springer, a most charming and intelligent man whom I had known for some years. I would have been happy to deal with any one of them, and pursued discussion with each.

  Also in the frame was the inimitable chairman of Triarc, Nelson Peltz, a swashbuckling buccaneer of colourful phrase and manner, a financially well-travelled sidekick of Michael Milken, Carl Icahn, and even Kerry Packer. (At one point in December, my financial condition was so strapped I had to borrow $100,000 from Nelson to pay our public relations firm, a fact that shortly made its way into the press. I repaid the loan after one month at the agreed, very fair, interest.)

  Peltz is in most respects a delightful man. He is a brilliant raconteur and has had a rich business and, in a general sense, social history. Since he spends his time scrutinizing the business press and attempting to take advantage of distressed situations, he has encountered an astonishing range of people and businesses. If it is possible to align one’s interests with his, a powerful and ingenious champion is acquired. But Peltz could never resist the temptation to believe what he wanted to believe: that I had no practical choice but to accept his offer, no matter how one-sided.

  Because our personal relations were (and remain) so congenial, we generally reached a provisional agreement on whatever we were talking about, which moved trapezoidally into a cave-in to Peltz when committed to paper by his amanuenses. As a result, we never agreed on anything material, except that loan to pay my public relations agency.

  The great advantage of associating with Nelson Peltz, apart from the fact that he was a rewarding dinner companion and a pure capitalist who was not overly preoccupied with the excesses of corporate governance, was that he frightened the living Jehovah out of my enemies. The report that he and I had dinner together (in a restaurant that Peltz owned) was enough to set my enemies thinking that they should adopt a poison pill. This is a restriction on acquisition of control of a company. In this case, the restriction would be imposed by a subsidiary, the acting management of Hollinger International, on its parent, Hollinger Inc., an unheard-of concept.

  Despite a reasonably active business and social life in New York in December, I found my days very lonely and difficult. For the first time in my life, I had night sweats. I was awakened by my racing heart, stirred to acute fear by unremembered dreams. People were taking their distance as the press virtually throughout the world pounded me daily as a “disgraced” and greedy executive quite possibly on my way to prison. My faith and determination were assaulted but not seriously shaken. But it was horribly nerve-wracking and hard on Barbara, who was losing weight and colour. Her remedy was to work even more frantically. She continued and even increased the frequency of her writing, and the quality of it was better than ever.

  As money evaporated, Breeden closed in on his objective of breaking Hollinger Inc. and dictating terms of eliminating the tangible fruit of my m
ore than thirty-five years in the newspaper business. Of the groups that had already surfaced, the Barclays, as owners of a private company little disposed to excessive dalliance with financial advisers, were the most promising. Peltz was unshakably convinced that no one would bid for Hollinger Inc. because it would not be able to complete its year-end audit due to non-cooperation from Hollinger International. He was skeptical that any of my future deals to extract myself from the problems would be successful. He never offered more than to take an option to buy our shares. He would then pad around to meet Breeden and Christopher Browne. The film rights to such meetings would have been valuable, but his offers were not.

  The auditors, KPMG, turned in one of the most shameful performances of all in these awful days. Having endlessly attested to the full approval of the non-competition payments to individual executives, they now claimed to have been misinformed. Breeden and I had agreed that their turn as litigation respondents would come and that it would be painful. (Sadly this was not to be. Breeden became Special Monitor of KPMG, which had its own legal problems, and was conflicted. Even before he became Special Monitor for Hollinger International he had determined not to sue them. My informed intuition is that he believed this would make it easier to prove the case against us.)

  Throughout December I continued to narrow my differences with David Barclay, with the capable technical assistance of Ben Stapleton, an experienced high-level corporate negotiator, who met with the Barclays’ emissaries in New York. I sat in my cluttered little library in New York and sent my own faxes to the Barclays, who live in a castle they built in the Channel Islands. I once asked David Barclay how far he was from one of the main islands if he wished to go out to dinner. He replied that there was no need for that because he had built a replica of the main dining room of London’s famous restaurant Mark’s Club in their castle.