Conrad Black

by A Matter of Principle

  As I prayed in my chapel that night, I thought that this must be for the best. When current emotionalism subsided, no one would be able to dispute that I had been a positive and successful proprietor of the Telegraph and the Spectator. Because of the war conducted by News Corporation, our profit was effectively capped. No one knew how long the newspaper advertising revenue recession in the United Kingdom would last. (It proved to be permanent and the Barclays’ investment was a disaster.) Newspapers were not a growth industry, there were the problems of tabloidization (Murdoch had even turned the Times into a tabloid), and the journalists had rejoined the National Union of Journalists. And dealing with Desmond as co-owner of the London printing facility was not something I envied the Barclays.

  I had often said to Barbara that owning the Telegraph was an addiction that could be dangerous, though not for the fatuous social reasons Strine envisioned. The economics of the newspaper industry were deteriorating, and the pleasures of owning the Telegraph could interfere, if allowed to, with best business judgment. It brought me deference, preferments, and a peerage, but I had loathed almost every minute of my job during the five years before the disaster of November 2003. If the asset were not cashed in, we seemed doomed to an endless sequence of crises and would run some risk of being spent to the mat by Murdoch, even after we had repulsed him in the price war.

  It was shabby, and would have been humiliating if I were not now almost beyond humiliation, but it was not the worst fate commercially. As with the February judgment, he who seemed to lose could still win. Perhaps I could now do a better deal than I did with the Barclays. Strine wanted all the shares of Hollinger International sold, parting company with Breeden, for whom he obviously had a low regard but whose animosity toward me he shared, though apparently for socio-ideological reasons.

  I put my house in Britain up for sale at once. My life in that country as I had known it was over. I had hugely enjoyed it, but I no longer had an occupation there, and the avalanche of hatred against me in the media, contradicted by only four or five pieces from supporters, showed that although I had some good and reliable British friends, my eighteen-year effort in that country, other than professionally and financially, had not been successful. Even then, the first was widely contested and the second would have to be retrieved from Breeden’s deviltry.

  But if Jimmy Goldsmith could claim to have forced a referendum on the issue of Monetary Union, I had certainly played a role in keeping the Conservative Party out of the hands of Michael Heseltine in 1990 and of Kenneth Clarke in 1997 and 2001 – both of whom I liked and admired but who would have plunged headlong into Europe, mouthing anti-American shibboleths as they did – and delivering it to Michael Howard in 2003. (By now, I thought the anti-American shibboleths might have more merit than I had suspected, but Euro-immersion still wasn’t the answer.)

  Strine claimed not to seek an offer for all the Hollinger International shares, and not just the super-voting shares owned by Hollinger Inc. (although he did nothing to enable the putative Barclay offer for all the shares in February 2004, to go forward). Now the Telegraph sale would facilitate that, as Hollinger International now had the resources to buy in and cancel its own shares. This would be the best antidote to the endless legal battles. The litigation would depart with the sale of the shares. A sale would, I believed, please the SEC and the Department of Justice with the sight of shareholders happy and prosperous. A double privatization, with practically no debt and the Chicago assets to build on, would make me stronger than ever before. I could then end the legal stigma and work toward becoming at least a modest figure in American finance, and make my peace, quietly, eventually, and on my own terms, with Britain and Canada.

  Britain, where Barbara had been born, where she had lived for the past twenty-two years, and where almost all her much-missed friends were, was now my country too. I was proud of the nationality, whatever my lack of rapport with the more vocal of my new countrymen’s journalists. I would return to it some day quietly. Time would heal the wounds, and I would not miss Fleet Street. And so, with a sigh, at midnight on July 30, in my moonlit chapel at my parents’ home in Canada, from which I had gone forth to make my way in Fleet Street eighteen years before, the Telegraph era of my life ended.

  * Needless to say, there was still not a peep from the little Grotius of Wilmington, who had claimed to be salvaging half a billion dollars of added value for the shareholders when he killed my deal with the Barclays.

  * It will be remembered that Strine urged that Thompson and Paris try to work something out with Rohmer and Walker (though he did not at that point know their names). He was still unaware of the nature of the Breeden Monster he had wrought and empowered, but was already expressing misgivings about Breeden’s love of his well-paid position and ever-lengthening notion of the duration of his mandate. And Glassman had long been claiming that the independent directors were patsies of ours (a total misconception) and that he must replace them.

  [CHAPTER SEVEN]

  NOW WE FACED AUTUMN WITH the release of Breeden’s Special Committee report. I was about to be drawn and quartered with any remains burned at the stake and ashes dumped into the sewage system. The report would be a murderous assault, that would destroy any little credibility left after the depredations of the last nine months. I braced myself.

  After fourteen months of labour, the $60 million operation gave birth. Breeden’s Special Committee report titled “A Corporate Kleptocracy” was released on August 30. It was more brazen than I had expected and created a firestorm. My associates and I were labelled as racketeers. We had fraudulently looted $400 million. The company had been used as a piggy bank for “our sole benefit and in a manner that violated every concept of fiduciary duty.” We had taken 95.2 per cent of Hollinger’s entire adjusted net income from 1997 to 2003 and lined our pockets “almost every day, in every way” we could devise. This was always what Breeden was going to do and the appeasers, like Atkinson and the Audit Committee, were shown no mercy.

  My counsel and I were relieved, though not surprised, that there was nothing new in it: old, stale wine in a new Nebuchadnezzar bottle. It fetched up at 513 repetitive pages of bombast and polemics, but impressed the media as an unanswerable indictment of our “kleptocracy.” I thought at once that Breeden had finally opened the kimono to reveal the modesty of what it had concealed.

  My relief was genuine in the sense that by now confidence in some of my associates was challenged and I knew Breeden would not hold back. So no newly discovered or alleged skulduggery was something of a tonic. But I was under no illusions. I was having difficulty enough functioning in the poisoned climate already and the report would make my life even rougher. This was a bombshell of misinformation and error with the appearance of being fully researched and notated. What journalists or commentators, after all, would or could carefully analyze more than five hundred pages and meet their deadlines? And to be fair, how indeed were journalists to evaluate the report? How were they to establish that in fact the Audit Committee had been told of payments when the report said they hadn’t? How were they to distinguish truth from error? Most of the media wanted to believe what was in the report, it was so damning and so colourful (the authors knew their market’s tastes well). It was beyond belief that a report could be so sure of itself, so apparently detailed in its revelations of wrongdoing and yet untrue. Apart from the Murdoch media, which would have retailed a snow-white report as a nightmare of rapine and felony, or our old foes on the left like the Guardian, most journalists are not inclined to outright falsification.

  In his assault, Breeden and his amanuenses improvised mightily. I had no right to have the company support charities sponsored by directors. This was such an unheard of concept, it didn’t resonate. Little more successful was the foray into Rooseveltiana. The fact that I wrote the book meant that I was not “a full-time chairman,” and the fact that there were six footnotes out of over 2,000 total that mentioned Roosevelt memorabilia I had had Hollinge
r buy, impugned my right to my royalties. But the pièce de résistance came with the allegation that I had had the company pay over $7 million for Roosevelt material Breeden claimed (the auction house) Christies had found was worth only $2.4 million. They squeezed what they could out of this absurd allegation, and did not correct the record when the U.S. government intervened to stop the sale, and by act of Congress the material was deeded to the National Archives for a tax receipt (not that the company had any taxable operating income after Breeden and his claque took it over), of undisclosed size, but vastly exceeding Christies’ piffling stitched-up pseudo-valuation.

  The day after the report was released, I was sent one hundred pages of negative newspaper stories about myself. This was only a partial selection of English-language reports and didn’t take into account newspapers across the world, especially in Europe and Australia. This media lambasting continued apace for nearly eighteen months. I had not been featured in a New York Times editorial before and this was not my dream debut. Their September 2 editorial headlined “CORPORATE KLEPTOCRACY” began “White-collar crooks typically skim from the top, but Conrad Black stands accused of pocketing the whole top, the middle and much of the bottom of his company’s assets.” I could hear the squeals of delight this must have caused Jonathan Rosenberg, counsel at O’Melveny & Myers, who was apparently the co-author of the report with Richard Breeden, as he and Breeden saw their title so prominently featured. Though the editorial managed a qualified “stands accused” in the first line, it went on to equate us matter-of-factly with Enron and Tyco and “other tales of corporate thievery.” This became the template for reporting.

  The Chicago Sun-Times, our company’s newspaper, took up quoting from the report with fervour. The National Post had one of my children living in a “caravan” on my luxurious Toronto property, implying either a callous father or wicked stepmother. In the early days a great deal of attention was focused on the allegations against “spendthrift” Barbara. She was accused of frivolous spending both of company money and my money (which by the report’s definition was the company’s money as well – apparently I was entitled to no pay for my work) and of manipulating me to spend so much money on our lifestyle that I was reduced to stealing from the company to meet her endless demands.* The assertions were bunk but trotted out endlessly and most often by female writers. Mary Kenny in the Guardian derided, “Barbara Amiel, Lady Black, who was paid 600,000 pounds for her weekly dose of relentlessly pro-Israeli propaganda,” an anger made worse, Kenny confessed, because she felt she had been underappreciated and underpaid herself at the Telegraph. Kenny was a writer Barbara had always championed and respected. At the London Times, deputy editor Mary Ann Sieghart, a cordial social acquaintance, felt well enough informed to ridicule Barbara for “claiming her jogging clothes on expenses, despite being paid $1.1 million for doing very little.” This much-mentioned jogging suit listed at $140 has never been found by us and would never have been charged to the company in the first place even if it existed. Nor are we aware that the exemplary journalist Ms. Sieghart knew a fig about how much work Barbara did, what she was paid, or cared.

  I was compared to Dr. Faustus in the Globe and Mail, Richelieu and Fagan in the Independent (which could not be expected to know that they were hardly compatible characters). The U.K. press was unequalled in its malice. The Peter Simple column in the Daily Telegraph, written by another favourite columnist of Barbara and formerly fawning Telegraph courtier, delighted in naming a toad Amiel. Later on, the Mail on Sunday even went so far as to track down and badger Barbara’s eighty-eight-year-old stroke-ridden mother, in southwestern Ontario, feeding her lies about how her daughter had publicly blamed her for all her misfortunes and waving money in front of the mentally compromised old lady if she would “tell all.” The double-spread story featured a photo of Barbara’s mother in a wheelchair, and began with the quote “Barbara always blamed us.” Barbara’s stepfather wrote her an apology but she chose not to complain to the British Press Council because that would have exposed her mother’s condition.

  From this point on, I was described as “disgraced,” compared un-favourably with every white-collar fraudster and crook, while countless people who had been my guests at a lunch or dinner put in their oar by feeding the appetite for nasty anecdotes to reveal how odious both Barbara and I were. Given the thousands of pages of nasty articles, it’s pointless to select individual abominations. We faced this every day, month after month.

  In terms of real damage, the report created a nuclear fallout from which I would not soon recover. The initial “improperly authorized payments,” a concept that had been heavily compromised from its original presentation as more and more evidence that Breeden, Paris, and Thompson had withheld about them in November came to light, were nevertheless elevated to proof of criminal wrongdoing. They now had “the character of thefts.” Breeden had publicly stated in January that he had no evidence of foreknowledge of these payments by me. Nothing had happened since, except for my refusal to be an accomplice in his destruction of our company. The related-party transactions were all mendaciously trotted out. The great gains that the company received from our efforts as buyers, managers, and vendors of assets were never mentioned. That we gained more than a billion dollars of added value for the shareholders, improved every newspaper we bought, defeated Murdoch in the London price war, shrank the company at great advantage to the shareholders even though it meant reduced income for us, and sustained ourselves as owners of a large number of single-voting shares though it was burdensome to do so and unnecessary for control of the company, was also never mentioned. The 95 per cent of profits claim was false and a red herring; the per cent taken by management should have been calculated against cash flow. The difference is that net profit was reduced by large non-cash items, especially depreciation and amortization, which reduced taxes and amplified cash, which could be applied to debt reduction, acquisitions, dividends, and so on. In such businesses, cash flow is a more important yardstick of performance than net profit. By this measure, as the Special Committee was perfectly well aware,* our compensation was standard for the industry and not controversial.

  Furthermore, our compensation was deducted from taxable income, which was assessed at a rate of about 35 per cent. So, although the allegation was made to incite the inference that we scooped 95 per cent of operating profit, only the one per cent of the media-consuming public that is familiar with financial terminology would realize that the entire central management function cost the company, after tax, not 95 per cent of what would have been the net profit, as was implied, but about 27 per cent of what would have been the pre-tax profit, or 17 per cent of the net profit, or 13 per cent of the cash flow. (In each case as if there had been no cost of management at all. Cash flow is net cash after all cash expenses, including taxes. It effectively adds depreciation and amortization, non-cash charges, back to net profit, and in a business where there is extensive physical plant and assets like newspapers, depreciation tends to be high, though capital expenses are moderate, due to the relatively long life of presses.) These percentages were normal, were published every year in full detail, and were judged unremarkable by everyone except Christopher Browne and Laura Jereski.

  The thrust was clear. I was never to return to Hollinger. I was to be made bankrupt (my net worth was less than what Hollinger must recoup from me, Breeden stated) and I was to go to prison. If Breeden could not generate indictments and convictions from this report, he would fail.

  The directors had been whipped into line, espousing an account of events they ought to have known was wrong, by threats of Breeden siding with Christopher Browne, who from time to time demanded publicly that the directors be made complicit with us. Such threats were a significant cause of all that was to follow. Though empty, the notion was terrifying to timorous men used to a world in which their eminence and probity were celebrated. None of them wanted their time taken up with endless depositions and sessions with their lawyers.
In the post-Enron climate, it was too dangerous as well as tedious. Their lawyers would have advised complete and immediate co-operation with Breeden, the SEC, the prosecutors, and, if necessary, the local witch doctor.

  In return, Breeden (deservedly) gave the independent directors a clean bill of health in the report legally. It was only a few weeks before I received a conciliatory overture from Henry Kissinger, via Norman Podhoretz, a loyal friend who had been editor of Commentary magazine for thirty-five years. I picked up the olive branch (which was for a time used as firewood by Barbara) by assuring Norman, who told Henry, that I assumed we could resume relations when this contemptible farce had been concluded.

  I had warned Rick Burt that his Faustian bargain in engaging Breeden would not work: Breeden used the Audit Committee in his vendetta against my associates and me and then threw the Audit Committee to the wolves also.

  I had also cautioned Richard Perle, when his lawyer, the capable but monumentally abrasive Dennis Block, said that “Supporting Conrad is the kiss of death” and urged cuddling up to Breeden, that this would not work. Breeden attacked Richard in his report as a “faithless fiduciary” and demanded the return of every cent he had received from Hollinger. The Audit Committee and Richard Perle had been put on the spit and roasted like Saint Lawrence.

  Richard Burt, Jim Thompson, and the hastily departed Marie-Josée Kravis were accused of being negligent and incompetent to the point of yielding their rights to the directors’ and officers’ liability insurance. Kravis had at least remained publicly silent and thus retained a little freedom to retreat from the Thompson-Burt position that they had been duped by David Radler year after year on a scale that somehow constituted racketeering by me. They and Richard Perle could have screwed up their courage from the beginning and said that the payments approved had been in recognition of an undoubtedly fine management performance, that the amounts were not out of order with comparable companies, and that they need not apologize for any of it. As it was, Burt and Thompson by approving the acceptance and publication of Breeden’s report, engaged in wholesale self-defamation.