We had to use faxes because employees of Richard C. Breeden and company (known to us as Breeden’s thought police) were scanning all our emails and I did not want to arouse suspicions at this point by changing to another email channel. I occasionally took advantage of this by planting completely false messages in them.
One of the many depressing episodes in the steady erosion of my position was my visit to the SEC in Chicago in response to a subpoena, on December 22, 2003. I assumed that Breeden had generated the subpoena, which, at least for a long time, was not accompanied by any parallel action to gain testimony from other Hollinger officials, past or present. I also thought it likely the Special Committee staff were acting in Breeden’s name and with the benefit of his connections, to generate the concurrent rumour of a Department of Justice criminal investigation, which was eagerly taken up and publicized by the New York Post, though Murdoch’s flunkies were certainly capable of hatching this brain-child themselves, with no more encouragement than a wink from their boss.
Since we could achieve no confirmation of the existence of a criminal investigation and the SEC refused a brief deferral or informal questioning, there was no possibility that I could testify. The prosecutor’s greatest specialty in current U.S. practice is to put anyone under investigation into a position where he or she gives sworn or even unsworn testimony to several authorities. The slightest discrepancy can then be seized on to allege obstruction of justice and perjury. John Warden and David Braff of Sullivan & Cromwell as well as Eddie Greenspan (out of solidarity and at great inconvenience to himself) accompanied me to Chicago. It was a tedious but civil process as I endlessly invoked the Fifth Amendment formula against self-incrimination, which, like most people, I had long unjustly associated with gangsters.
I correctly judged that invoking the constitutional right not to testify would be used to undermine what was left of my position in Hollinger International. We were completely responsive to SEC subpoenas for documents and handed over more than one hundred thousand pages of material, withholding nothing except what benefited from a clear lawyer-client privilege, just as I had handed over all of my more than ten thousand emails to Breeden’s committee.
CHRISTMAS WAS EXTREMELY GLOOMY. My children were with their mother. Barbara’s former husband, George Jonas, a delightful and very cultured man, and his wife, Maya, came to lunch. It was the only day in the period from November 15, 2003, through to the end of 2004 that my press service reported no references to me at all. This was a Christmas present of sorts, as most days there were never less than a dozen and often more than fifty negative stories. Barbara and I vowed that we would emerge from under this horrible cloud in the ensuing year. I spent New Year’s Eve reading the Barclays’ latest proposal for the acquisition of Hollinger Inc. and, with it, control of Hollinger International and the Telegraph, apparently the long-standing citadel of their heart’s desire.
By the end of December, rumours of my social and financial activities had created such alarm among my enemies that they circulated a proposal for a poison pill. That would impose an inability for anyone to acquire a control block. In essence Hollinger Inc. would not be able either to vote or sell its shares in Hollinger International. Virtually all monies to me and my company had now been blocked and this would render our shares useless. When I received the twenty-four-hour directors’ notice of the suggestion that Hollinger Inc. would be handcuffed in this way, I concluded that it might be time to go to war.
I called Henry Kissinger and told him that I found this so outrageous that I was considering sacking some of the directors. He urged me to be cautious, and I suggested that if he could intervene with Breeden and arrange “substantive discussions toward a comprehensive settlement,” I would enter whole-heartedly into them. Henry had persevered in a state of friendliness through December. He and Nancy had most kindly invited me to Thanksgiving dinner at their home in Connecticut, which is always a warm occasion, with family, neighbours, and old friends, including in 2003 the recently widowed wives of Lane Kirkland and Isaac Stern. Barbara pleaded illness, preferring to stay home.
I had a conference call with Henry and his lawyer, Paul Saunders, and John Warden on Sunday, January 4. From it, discussion arose between Warden and Breeden that led to a two-week standstill and the promise of “substantive negotiations.” It was specifically understood that Hollinger Inc. could negotiate in that period if it chose to, but could not conclude an arrangement. Henry subsequently put it about that he had laboured mightily to bring these talks about and to persuade me not to have “another Saturday night massacre,” an invocation of Richard Nixon’s firing of Watergate special prosecutor Archibald Cox, which led to the resignations of Attorney General Elliot Richardson and the dismissal of his deputy, William Ruckelshaus. The comparison was completely spurious. I was being threatened with something I was advised and convinced was an illegality and breach of contract. And I wasn’t threatening to fire everybody, unless it was the only way to preserve the interests of the parent company, to which Breeden, Paris, and Thompson had paid ample lip service. Henry’s efforts consisted of one telephone call with Breeden, admittedly a taxing undertaking, but hardly a prodigy of diplomacy by his historic standards.
Our first meeting with Breeden and Paris in the Kissinger Substantive Round was on January 7, 2004, at the Sullivan & Cromwell conference centre in midtown Manhattan. The session, which now included Warden, began cordially enough. I gave a summary from memory of about forty minutes, touching upon the principal evidence of approval of the non-competition payments to executives that they claimed had not been authorized. I pointed out that the former director of enforcement of the Ontario Securities Commission, after his extensive investigation, had concluded that the buyers of the newspapers in question had requested that the non-competition agreements include Hollinger Inc. I also contended then, and again in a letter to the Hollinger International Board of Directors two weeks later, that Thompson had misled the directors about discussions he had had with the auditor about the non-competition payments. (Thompson’s versions of these events were rebutted at the eventual trial.)
I went over the threats Paris had made to me on November 15, when he had asserted that any hesitation on my part or of our management to resign would lead to litigation. I reminded them of their pledge to put the best possible public relations face on my departure as chief executive and the Restructuring Agreement and their assurance that the flow of cash to Hollinger Inc. would be front-loaded to continue as closely as possible the former rate of cash flow until June 2004. Six clauses out of eight, including my status as joint director of the Strategic Process with Lazard and the arrangements for the aircraft, had been violated. This, I pointed out, was a worse record of breach of agreement than Stalin’s violations of the Yalta Accords. I had been grossly defamed, and Savage and Seitz especially, since they had property in Canada and the United Kingdom, could be vulnerable to libel action when the legality of my conduct was no longer in question. I said that I had been wrongfully deprived of my position and my reputation and that I intended to regain both.
There was a break in proceedings, and when we reconvened they gave us a very lame reply. We agreed to meet again in a few days. The next meeting was January 13, in the same place. I said I would not pay back the so-called unauthorized payments because they had been authorized, but that I was happy to defer that discussion until the end of their proceedings and try to negotiate a final settlement. I told them candidly that there were a number of negotiations underway at Hollinger Inc. and offered to sell them Hollinger Inc. for preferred shares, and to give them a first refusal on any bona fide offer we received for Hollinger Inc. Paris gave me a sanctimonious lecture on how they did not value the stock at above $15, which was well below what Lazard professed to be seeking and was even a couple of dollars below the current market price and below the imputable value of the impending Barclay offer. This was the first control block discount I have ever heard of. He said that they would have to c
anvass our noteholders, and that it would require months for them to consider this. (I had never had any difficulty getting consents from the same noteholders within a couple of weeks.) They had no proposals except that Hollinger Inc. should pledge to do nothing for at least four months, in which time it would, they obviously hoped, go into default. We agreed to meet again by telephone on Thursday, January 15.
By this time, most of the personnel were showing great wear and tear. Poor Rosemary Millar, my brilliant and devoted London assistant, was in hospital. Although her lung cancer was inoperable, there were various chemotherapies for her, which she paid for by selling her options at the current higher prices. Peter Atkinson, who had been monosyllabic and almost catatonic for some time, had finally reached the breaking point and abruptly resigned on January 9. As the war for survival steadily intensified, he was not a fit combatant. He was opposed to any initiative that might keep the company functioning, had lost faith in what we were trying to do, was concerned for his own health and that of his wife, and presumably bore some burden of guilt for his own failure – as legal vice-president – to correct the documentary incompleteness of the now notorious payments.
He thanked me for what I had done for him; I returned the sentiment and wished him well. It was a sad end to what had at times been a distinguished association. Like so many other things in my life, a valued and trusted relationship had crumbled under the pressure of unforeseeable events and the frailties of formerly trusted comrades.
ON JANUARY 8, I HAD GONE to find Barbara for dinner, and she was not in the house. There was an agitated and ambiguous note from her on my desk. Her cellphone was not with her. Her car was in the garage. There were footprints in the snow to the chapel and then out onto the driveway, but it was impossible to follow them into the road. I called George Jonas, who came to our house. The night was bitterly cold. I called the police and drove around the neighbourhood looking for her. The police called for the canine unit, but because they were careful not to put it over the police radio, there was a delay in the arrival of the dogs. I was on the phone with Eddie Greenspan, when Barbara, almost frost-bitten, entered through the front door. She had walked three miles to the Don Mills shopping centre and back and bought me two combs, items that I did not need but have used fetishistically ever since. She appeared to have spent a number of hours outside in the snow, but I didn’t want to badger her with questions. She was upset and had dealt with it her own way. It was a harrowing time and the police were magnificently efficient, solicitous, and discreet. This was the only time that Barbara allowed the strain of events to get the better of her briefly and she overcame that herself.
The controller of the Hollinger companies, Fred Creasey, was full of good intentions but was so nervous he started grinding his teeth at night. He ended up having to go to the dentist for it. He fainted when his lawyer told him that the SEC wanted to interview him, and eventually vanished for three months’ rest, which stretched to several years. Peter White, unflappable and indefectibly loyal, rushed in to be a daily presence in the office.
We needed independent directors to represent the shareholders after the resignations of the previous year. Peter White recruited Gordon Walker, a former justice minister of Ontario (a resonant-sounding position that was in fact only the chairmanship of a committee of justice-related ministers in the Ontario cabinet) who had represented the city of London, Ontario, in the provincial legislature, and I persuaded Richard Rohmer, a much decorated general of the Canadian Reserves, a lawyer, author, and old friend, also to become an independent director.
I faxed David Barclay that I had offered Hollinger International a first refusal on any sale of Hollinger Inc., although the authors of what Barclay called the “vendetta” against me had not shown much interest. I wrote that if they took up the offer I would have to abide by that. Our telephone meeting with Breeden and Paris on January 15 was a failure. They showed no interest in my proposals. We agreed on a further telephone conference the following day, January 16. I pushed the Barclay deal forward to close immediately after the expiry of the agreed stand-still period, at midnight on Saturday, January 17.
All my legal advice from Sullivan & Cromwell and Jesse Finkelstein was that the Barclay deal, fortified by their promise to support the Strategic (Lazard) Process, was legally bullet-proof. I thought of papering our exchanges off with special-purpose faxes to reinforce the record but was assured that that was not necessary.
Breeden peremptorily cancelled the meeting on January 16, and we learned at the end of the day, after the opposition had leaked it to the press, that the ex-officers of Hollinger International and I had been sued by Hollinger International for $200 million, including a demand for the disgorgement of all dividends Hollinger Inc. had received from Hollinger International in the last six years. The news report said that Hollinger International had acknowledged to the SEC that it had filed some false statements and had alleged to the SEC that the Special Committee was under threat. This was completely false, but the company had “consented” to the imposition of Breeden as “special monitor” if we altered the composition of the board of directors. A special monitor has tremendous power made even greater by the fact that those powers are unspecified.
This was a disgraceful stitch-up; the SEC had simply taken Breeden’s word for it (a terrible mistake I had already discovered), that his committee was under threat from me, which it wasn’t – I had only asked for adherence to the Restructuring Agreement and threatened eventual defamation actions where appropriate, and in the first of several acts of ex parte pseudo-legal gangsterism, had installed Breeden in another impregnable sinecure riveted on the neck of our company on his own assurances of a non-existent threat by a party not invited or permitted to respond. Bernard Madoff went on pillaging his investors. Wall Street and its rating agencies went on shoveling out worthless mortgages and consolidated debt obligations, and the SEC cheerfully turned our company into a trussed-up partridge for Breeden.
It subsequently came to light that Louis Zachary had told Wasserstein that the effect of the SEC consent decree was to assure that “no one would invest in” Hollinger Inc. Breeden had now become the humanoid equivalent of a poison pill.
Saturday, January 17, 2004, was an eventful day. The Argus Corporation, Ravelston Corporation, and Hollinger Inc. directors met and approved the sale after ample but constructive discussion.
In the midst of this intense day, Nelson Peltz called to say that Packer had withdrawn their joint offer (which, in any event, was so stingy I had not replied to it) and to predict that the Barclays would not go ahead with a deal. Then my ex-wife phoned to say that she thought it timely for me to settle a large amount of cash on our two sons and daughter. With considerable patience, I explained that her request was quite impractical at the moment. I did not tell her that I was down to barely $100,000 in cash. My financial condition was critical.
I had called Alfred Taubman, a former director of Hollinger International and a former controlling shareholder of Sotheby’s International, and asked whether, in an emergency, I could borrow something from him. I said that I could pledge one of my houses to him. He said that he would certainly lend me money, that he didn’t need a pledge, that all he needed to know was the amount required and the place to which it should be sent. Alfred, at least, did not forget favours, at least not for a time, and his promise, though I never acted upon it, was a great comfort. (Unfortunately, when I later did seek his assistance, he was not forthcoming.)
The Hollinger International executive committee met at 7 p.m. As usual, they had given us just twenty-four hours’ notice and no indication of the purpose of the meeting. I feared that they might be trying to institute a poison pill, so I made sure the Barclays’ New York lawyer and one of ours were in an office in New York with all the sale documents in front of them. Barbara was on the phone to them from the other telephone in my library. That way I could signal to her if a poison pill was in contemplation and she could ensure the deal was co
nsummated before the pill was installed.
This proved not to be necessary. There were three issues for the executive committee. First, the previous day’s consent arrangement with the SEC was approved, with me in dissent. It had been approved by the Audit and Special Committees after five minutes of discussion. No one was able to tell me the justification for the claim that the Special Committee was under threat. I expressed shock that Burt and Thompson would have been a party to a bogus concession of guilt implicating themselves and that all of them would subscribe to such a false bogeyman as a threat to the Special Committee, and further to such a rape of the rights of shareholders as the special monitor provisions. I was speaking to myself, but I hoped it would be on record. Next was approval of their lawsuit of the previous day. Again I dissented and received no coherent response. There was no real defence of either measure. They were merely executing Breeden’s instructions.
The third item was announced by Seitz as being a consideration of my position. I was assured that this was the last item, so I was able to signal digitally to Barbara to stand easy in her hookup with New York. Given the treachery of my interlocutors, it was not appropriate to end the telephone connection, so the lawyers at the other end of her call remained on standby. Seitz moved that I be fired as chairman, as casually as he might ask for some small capital expenditure. I asked for a reason. Answer came there none. Finally, poor, plodding Jim Thompson said that it was “in the power of the board to take this action.” I replied that this committee was not the board and that that was not my question. I added that they would all have the opportunity to answer my question in due course, when silence would not be an option. (At time of writing, that moment impends.) A pristine silence continued. Eventually, after I was again outvoted four to one, termination of the meeting was proposed. I said that I would be delighted to make that motion unanimous.
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