Conrad Black

by A Matter of Principle

  THE BENEFIT OF THE JUDGMENT was that International’s stock now rose sharply on Strine’s enthusiastic endorsement of the Lazard process and his belief that I had undervalued the company in my prospective sale to the Barclays. Jack Boultbee and I worked with Canadian counsel on a plan to capitalize on this. We would package up almost all of Hollinger Inc.’s Hollinger International single-voting shares and sell them as Series II exchangeable preferred shares of Hollinger Inc. This would fulfill certain indenture conditions and eliminate all the arrears and outstanding unhonoured retractions (which had started the rockslide on our company in April 2003), leaving us with a reasonable cash balance. It was the old trick of turning adversity to advantage: the Strine-created balloon in the stock price.

  After taking some time to recover my balance from the Delaware disaster, I retreated to our house in Palm Beach, which I had not seen in eleven months. To the great delight of the international press, the house was for sale. But our rising stock price enabled me to sell my own Series II preferred shares, thus repaying Hollinger Inc.’s loans to me, which had been a bugbear to Maureen Sabia and to Strine (or “Swine,” as Eddie Greenspan now generally called him). I withdrew the house from sale. I had one conversation with David Barclay, who was now so paranoid about the United States that he insisted that we both speak on cellphones (for all the good that would have done us, as mobile phones are even easier to intercept than land lines, as even royal victims of media intercepts in London would know). It was cordial, but they were the last words we would exchange.

  The weeks in Palm Beach flowed agreeably past. I had a reasonably active social life, and rejuvenated my tattered strategic plan. First, I needed new counsel. I arranged a teleconference with Brendan Sullivan, who had been recommended by Brian Mulroney, Alan Dershowitz (who was very generous with his advice and time), and Eddie Greenspan. Sullivan was the chairman of Williams & Connolly and the successor to that firm’s founder, the legendary Edward Bennett Williams. He came to Palm Beach on his way to visit his mother for her eighty-ninth birthday. Eddie Greenspan, who was in Miami, joined us, and Sullivan brought his partner, David Aufhauser, a former Treasury chief counsel and specialist in money-laundering cases. (Aufhauser was latterly general counsel of UBS Investment Bank when he was accused by the SEC in 2007 of insider trading. Aufhauser settled for $6.5 million. On my acquaintance with him, I don’t believe he would have done anything unethical.)

  Both Sullivan and Aufhauser knew Breeden slightly and despised him almost as much as I now did. Sullivan, whom I had seen in action in the Iran-Contra hearings, where he represented Colonel Oliver North, was very impressive. He has a slight trace of a New England blue-collar accent and speaks in a spare, efficient way. He makes no effort to impress with volubility or his legendary legal experience. He is a nuclear-tipped missile of a man; wiry, not a pound overweight, no vices, very direct, fanatically partisan for his client. I had the sense that we were finally reaching for the best. He would be busy on a trial for several months, probably until the end of August, but we would not need him until then, if at all, and in the meantime his firm would take over my legal position.

  Williams & Connolly familiarized themselves with the complicated case but remained in the background as strategic and potential criminal counsel. We agreed on a search for “fresh eyes and fresh minds,” as Eddie Greenspan put it, on both the securities and the civil side.

  Strine had written that Breeden’s fear that I “might transfer assets to jusidictions from which recoupment is practically impossible is not irrational,” and it soon became clear that Breeden had excited at least some of the SEC staff to believe that I might just seize the proceeds of my sale of Hollinger Inc. preferreds and flee. Hollinger Inc.’s Chicago counsel, Nate Eimer, was told by the Chicago SEC office chief that the Breeden demonization of me was taken seriously in Washington. John Warden called upon the SEC’S director of enforcement and had a very civilized exchange. But the SEC was stirring up the Ontario Securities Commission (OSC), which kept layering in more and more onerous conditions for getting the Hollinger Inc. sale of the preferred shares, a reasonably routine transaction, approved. In other circumstances, it would have gone through like an express train. Finally, after a long session with officials of both regulators at 11:57 p.m. on April 2 three minutes before the deadline (revealing more clearly than ever that the OSC is a branch-plant operation of the SEC), the deal was approved for offering.

  The acting management of Hollinger International dropped the next shoe by firing Dan Colson, managing director and co-chief executive of The Telegraph plc, and chief operating officer of the company, thus depriving the company of the last executive who knew anything about the business. This was at another meeting of Seitz’s lynch mob on the executive committee, and I was again in dissent. I asked what possible excuse there could be for this, and was told by Jim Thompson in his folksy, oafish voice, as if it were emanating from a prematurely enlarged teenager: “It’s time.” I said, “What do you mean, Jim, it’s time? He’s a brilliant manager. You have no one adequate to replace him. Dan has performed prodigies in terribly difficult circumstances. It’s time for what, more wrongful dismissals of the people who built the business, for capricious reasons?” Thompson replied, “For Gordon to put in his own team.” To which I retorted: “Jim, you’ve promised to sell the company for a lot more than the $18 per share we were going to get. Gordon has no team and has no capacity to assemble one.” Then Thompson fell mercifully silent, like the rest of Breeden’s spear-carriers. It was another disgrace, even though they all represented Dan Colson’s departure as a retirement. Consistent with their usual ethical standards, Seitz and Paris reduced Colson’s retirement package as much as they could, and then added him as a defendant in a civil suit a few weeks later, despite having given him an indemnity for his legal expenses as part of his “retirement.”

  BARBARA AND I LEFT PALM BEACH in mid-May. It had been a welcome stay after the horribly tempestuous late autumn and winter, right through to the mockery in Delaware. Liberated, after six years, from working on Roosevelt, I was able to return to traditional reading and rereading. There were two busy weeks in New York. Neal Kozodoy arranged for my Roosevelt book and me to receive a considerable ovation at the Commentary magazine annual dinner. There were reports in the press of my social ostracism, but in fact I was out most evenings. In New York, as in Palm Beach, Barbara was less inclined than I to mingle. I felt reasonably social anyway but was particularly determined to show that I was not afflicted by the slightest embarrassment.

  My poor Barbara was blameless but nevertheless buffeted by these events, and more vulnerable to them. One of the heaviest blows of all fell when International reformulated their lawsuit, claimed that the Racketeer Influenced and Corrupt Organizations Act (RICO) applied, and trebled the damages claimed to $1.25 billion. They included Barbara and Dan Colson in the lawsuit, though not in the RICO part of it, and then dismissed Barbara as a Telegraph columnist. (They could not have done that without removing Dan Colson first.)

  The disgraceful initiative of dismissing Barbara was taken by the editor that Dan Colson and I had installed, Martin Newland, previously deputy editor of the National Post. This brave act was made more odious by his endless prattling that he had agonized over it and that therefore it was somehow brave of him to have stabbed Barbara – an unoffending and much-appreciated columnist writing at the very top of her game – in the back. The saddest sight from this entire series of horrors was when I was walking up Fifth Avenue alone on the day of the outrage and saw Barbara ahead of me, ambling distractedly along, oblivious of the rain and, as I suspected, crying. It was a horribly humiliating injustice to inflict on someone against whom they had no possible grievance. Barbara had her own haters and they were out in force.

  Where were the previously chivalrous now when they should have helped Barbara? My contempt for almost all of them is almost, but not quite, beyond my powers of expression.

  I returned to Toronto on May 2
5 and chaired the Hollinger Inc. special shareholders meeting, which approved the refinancing of the company. There had been one very obstreperous objector, a Newton Glassman, who objected to everything, especially when he was excluded from the issue because he had failed to meet the deadline for filing the objection, a mistake a law articler would not make. The measure passed. Glassman then launched what amounted to an oppression action, which is, in theory, a claim by minority shareholders who believe their statutory or regulatory rights have been infringed. In practice, it is a fishing expedition for the complainants to go after anything they can find.

  Later the same day, May 27, Hollinger International announced that it was rolling back the Strategic Process to just the British assets. Breeden either had had no real intention of seeking a bid for all the shares, contrary to everything he said as they attacked our transaction with the Barclays, or else had never taken on board my repeated advice to Wasserstein, Zachary, and the board that selling the Telegraph alone would make it very difficult to sell the remaining company. My own conclusion was that he wanted to continue billing International millions of dollars while using it as a platform from which to vanquish those who created the company he and his team were now dismantling.*

  We had a class of Hollinger Inc. shares that were convertible into Hollinger International shares. We sold them all (plus a chunk out of treasury) at more than $17 per single voting share on the very morning of the day that International threw in the towel and announced there would be no bid for all the shares. Nelson Peltz generously phoned to tell me that he had never seen such timing. The stock closed that day between $14 and $15 and went steadily down from there, taking the Hollinger Inc. stock price with it.

  In musings in teleconferences with lawyers, Strine rambled on, in his discursive, chipper manner, about subjects he was not called upon to adjudicate nor qualified to judge. Strine criticized Breeden for enjoying his position too much and staying too long. He warned them that eventually the company would revert to its shareholders and that Paris and the rest would not then be re-elected. Even he understood that we could not continue forever as a controlling shareholder that could neither exercise nor sell control, but he underestimated Breeden and Paris. It was only four months since, peering like Mr. Peepers from his provincial high chair, he had found “no improper motive” that Paris, Seitz, and Breeden may have had at any time to testify other than truthfully. It was still not too late to change sides (or optometrists). But it again revealed Strine’s naïve inability to grasp the nature of the war that he had aggressively declined to bring to a swift and happy end with his mad and unjust verdict. This was corporate Armageddon, Götterdämmerung, not another Delaware commercial law tiddly-winks match.

  He then said that if the Telegraph were sold, he thought that that would require a shareholders vote as the Telegraph comprised most of the company’s asset value. This was a small beam of light in the darkness: if a sale of the Telegraph required a vote of all the shareholders, we could defeat it.

  Meanwhile, Strine, in loco parentis as self-inserted co-managing director of International with Breeden, urged that the independent directors of both companies meet to try to reduce the gap between the companies because of the bad feelings between Breeden and me. He recommended arbitration for the financial elements of disagreement. We accepted this and Breeden rejected it without bothering to refer his decision to International’s board. His view of corporate governance did not extend so far as to allow anyone but himself to participate in such decisions.

  Indeed, when I mentioned these overtures to the directors at one of our farcical telephone board meetings, Thompson and Burt expressed surprise and pleasure, while their lawyer, Martin Flumenbaum of Paul, Weiss, hissed his usual claptrap about violating the Strategic Process clause of the Restructuring Agreement. For once, a sharp rejoinder (from me) shut him down. Brian Mulroney, who knew Rick Burt from the Archer Daniels Midland board, helpfully tried to generate settlement talks. Burt was willing, but he was shortly slapped into silence by his former protegé, Breeden.

  Next, I was informed that the Telegraph board of directors, now subjected to the crowning infamy of including Paul Healy, had removed me as chairman and accused me of bringing the newspaper into disrepute. That my career at the Telegraph would be ended in this tawdry manner was an appropriate bow to tie around this phase of the drama: a British national institution, which Dan Colson and I had made strong and influential, was now a football frolicked over by an American careerist and a self-inflating balloon of a Chancery judge in a state with fewer people than Nottingham. Sally Griffiths, the capable and very gracious Telegraph company secretary, followed this information with a most generous private note. (Shortly after, she left the Telegraph for another company.)

  There was a cascade of these shabby events. Barbara was let go by Maclean’s magazine after twenty-seven years as a columnist. Her dismissal was a particularly loathsome performance: not a word from the editor, only a simpering telephone call followed by an email from a senior section editor who had often asked me for a job but had never passed an interview.

  My next disembarkation was signalled in a note from Martin Taylor, the general secretary of the Bilderberg Group, asking me to “quietly drop off the Steering Committee” and not attend the 2004 meetings, though I had been invited, had accepted, and had even aided in organizing and financing the Canadian delegation. This was a man whom I had helped install as Secretary General. He had been dismissed from the chair of Barclays Bank, then from W.H. Smith, and had recently had a nervous breakdown because of the complexities of his corporate and romantic life, none of which detracted from his intellectual merit but may have played a role in his emotional responses. It was also deeply wounding, almost more so for the fact that it was apparently unintentional. Taylor wrote back regretting the “infelicities” of his previous letter.

  After twenty years, I was tired of Bilderberg, tired of raising polite opposition to the endless smug togetherness of Euro-federalists and American liberal Democrats exchanging timetables as they proceeded on their wrong-headed policies. And I was tired of patronizing tribalism, the bright Young boys, the Winston Lords, Andrew Knights, Jim Wolfensohns, were patted on the head by the David Rockefeller–Eric Roll elder sages. In later years, especially when I was in prison, I was amused by stories of Bilderberg’s world influence, but the sense of entitlement that pervaded it, especially among the precocious, was often almost impenetrable. A few more or less amiable scoundrels like Vernon Jordan and Victor Halberstadt played the associations for all they were worth.

  The group-think was almost always wrong; George Will, Richard Pipes (and they never returned), and I were a voice in the wilderness about Reagan. Bilderberg missed the rise and then the fall of Japan, the end of the Cold War (except for my Hollinger colleague Dwayne Andreas), the problems of Euro-federalism, almost anything to do with Islam, and the current economic debacle. They all but waved the incense pot before Bob Rubin and Alan Greenspan.

  Yet the discussions and social conviviality were of high quality. And it was the closest I had had to a sort of fraternal association and it had been my initial window on the world, where I had made the contacts that had enabled me to buy the Telegraph. I would be happy to see many of the Bilderbergers again, including some of those just mentioned, but not, I think, at Bilderberg.

  I had gone from being a person of prominence in some circles to a negative ex-presence, someone it was desired and enjoyable to humiliate, if not deliberately, by cavalier demonstration of my new insignificance. So many aspects of my life crashed simultaneously. It was discouraging, hateful in fact, but, in the abstract, paradoxically, as a historian and someone who once considered pursuing psychoanalysis as a career, I found it interesting.

  There was no such problem at the Trilateral Commission. I was invited to remain by the European chairman, Peter Sutherland of Ireland, whom I had often debated on his Euro-federalist views. The Telegraph had often called him a “mellifluous Euro-f
anatic,” so it was generous of him to be so broadminded. As I had discovered in previous, lesser crises of my life, pretended friends are the most lethal dangers to a person’s security.

  It was eerie moving between our houses, which were now like mausoleums. Most of my telephone calls were with lawyers and merchant bankers, and I had learned not to believe much of what was said. I would not allow myself to become self-conscious about my shattered status, though obviously I was constantly aware of it. But I countered my rejections eventually with the knowledge that at least I knew how unjust all this was and that most of my critics could not have endured such a strain themselves for a month.

  STRINE FLIPPANTLY DECIDED, without even being asked, to make me jointly responsible for Hollinger Inc.’s repayment to Hollinger International of the $21 million non-compete fees and accumulated interest Inc. had received, and also required me to pay back to Hollinger International for the contested non-compete payments I received, with interest, a total of $8 million. I paid personally $23 million as a result of this; Hollinger Inc. paid the rest. This precipitated another financial crisis. Obviously a legal default would be a disastrous state of affairs. Eventually the U.S. government would claim in criminal charges that these non-compete payments were illegal. A jury would decide otherwise, and the trial judge would determine that they were not even improper by the civil law standard of proof of balance of probabilities. But by then Hollinger Inc. would be in receivership and unable to pay me back the millions that Strine extorted from me. This provides a piercing glimpse into Strine’s grasp both of law and of equity.

  In the meantime, Inc. needed money to meet its obligations. Inc.’s income had been severely reduced when International stopped the management payments to Ravelston in favour of “managing” the newspapers themselves. This made payment of the Wachovia notes Inc. had issued too onerous. Cerberus, a robust fund that ranged from the vulture level up to reasonable quality private equity, came forward to offer to refinance Hollinger Inc. They had been to see me before, on Richard Perle’s and former vice-president Dan Quayle’s invitation, in December. Their proposal then had consisted of such a dilution of our interest in Hollinger International (to about 7 per cent) that I did not respond and closed with the Barclays instead. (Barbara particularly disliked the Cerberus visitors. She had hopped out of her workroom at my request to make coffee for them and was wearing one of her writing outfits of a T-shirt and leggings when she brought the tray in and left. Within days of the meeting, a nasty squib appeared in the press about how she pranced in front of the prospective financiers in a tight leotard.)