It was a classic revolutionary sequence, as the long-established gave way to moderates (in my brief interregnum as non-executive chairman) who evolved into or were replaced by radical reformers, then terrorists, until common sense asserted itself, Thermidor shone forth, and vengeance was visited on the extremists. It is a complete and deadly cycle, though in this case the end is visible but not yet achieved as I write.
It was also another mighty ratchet upwards of Breeden’s war. In addition to being a cornucopia of lethal accusations, it was also a promise to recover a billion dollars from the deposed owners, and to lead the company forward to unprecedented profitability. Except for Perle, they all signed on to this, Thompson and Burt agreeing implicitly to their own life-threatening flagellation. After minor skirmishing over press leaks and perquisites, Breeden declared war when he sued and fired me. Hostilities commenced in earnest with the first Telegraph sale-case in Delaware. Now we had moved to total war. The nuclear phase awaited.
I began at once to organize a counter-attack. I had to refinance Hollinger Inc. sufficiently to get it clear through the crisis and the call date on the Wachovia notes in March 2007, and establish a double firewall between those involved in the principal litigation and the voting rights in Hollinger International, so that Breeden’s lawyers would have much greater difficulty exploiting my tarnished reputation and claiming in every court they entered that anything was justified to protect the shareholders from me. This could be done by putting my Ravelston shares in the hands of respected trustees and having Hollinger Inc.’s control of Hollinger International also voted by an unimpeachable group of trustees.
I would engage Jefferies & Company and also Westwind Capital to proceed on the privatization of both companies and try to expose Breeden’s interference with the Strategic Process. He was responsible for Lazard’s denial of information to the bona fide prospective bidder I sent to them. Strine, the SEC, and the directors, especially now, after Breeden had put several of them over the side, all wanted a bid for Hollinger International. Certainly the shareholders did. I was under Strine’s injunction not to tamper with the Strategic Process; I was trying to make it work, and Breeden was preventing it from doing so.
I would exploit the lack of any judicial immunity for the report in Canada and launch a colossal libel suit against Breeden, Seitz, Savage, Paris, and Healy. From the notification by automatic email circulation of the whole appointments schedule of the New York office, I could trace Healy’s frequent lunches with the most venomous of our media enemies to bilious articles in the appropriate media outlet. Finally, there would be our try at SEC negotiations. These, I was assured, would have to begin in early October, after the staff of the commission had gone through the motions of reading and rejecting our Wells Notice reply.
Hollinger International had $800 million in cash and no debt except for a tax liability of $376 million that frightened everyone else, but Jack Boultbee and I were confident that little of it would actually have to be paid, given our tax planning. And the company had another $450 million of realizable assets without touching the core of the Chicago assets. We ought to be able to buy out all the shares except our own at a historically high and probably irresistible price. But we would have to make this offer to the shareholders in the teeth of Breeden’s knockout victory in the court of public opinion with the Special Committee report and of his efforts to bankrupt Hollinger Inc., and to generate a criminal prosecution. It was going to be stormy weather for quite a while.
Meanwhile we had to fight Breeden surrogates in Toronto, where shareholder Newton Glassman, the excitable and antagonistic former Cerberus employee who managed a fund named Catalyst, fancied himself the Tweedy Browne of Canada and had been loudly proclaiming for some time that he was going to throw a wrench in the Hollinger works. I have never met him, but from all accounts he is an intelligent but almost terminally bumptious personality. From his conduct with us, this second quality was obvious, but not the first.
He launched an oppression action, demanding an inspector be named by the court to look through all related-party transactions involving Hollinger Inc., Ravelston, and the principal owners. In Toronto, he had the good fortune to have his motion heard by Justice Colin Campbell of the Ontario Superior Court, a former medical-malpractice lawyer who was now inflicting himself on commercial matters. What Campbell lacked in Strine’s intelligence he replaced with obstinacy and similar weakness for the limelight. Together with the Ontario Securities Com mission, he would be the prime factor in destroying Hollinger Inc. Within a week of the Special Committee report, Campbell had agreed to the retaining of an inspector. This would be a plum bit of patronage. In his ruling, Campbell wrote that he “recognized the legitimate concern of the company that it not be subjected to an interfering, overly intrusive, long and costly process.” Campbell allowed the inspector and his team from Ernst & Young accountants to keep going for five years at a cost of $26 million to the shareholders in order to have them report not one cent or incidence of past wrongdoing. They were then appointed receiver of the bankruptcy to which they had so largely contributed and made a few more millions.
Our Hollinger Inc. directors were beginning to hyperventilate. Gordon Walker, timorous and repetitive but at this point not apparently lacking in goodwill, was concerned for his potential legal liability and was easily fussed on almost every subject. General Richard Rohmer is a more noteworthy character – author, lawyer, reserves general, and political roué. Unfortunately, it was Rohmer, whose conduct was in other respects honourable and constructive, who brought in Harvey Strosberg, a well-known former official of the Law Society of Ontario, as counsel to the independent directors, and chaos ensued. It soon became clear that we had the Breeden of the North in our midst. Strosberg saw himself as a ruthless and brilliant lawyer. He thought it an achievement to be known as something of a fixer and was always on the lookout for the next opportunity.
Strosberg careened quixotically about, blustering and bullying and then, as is his custom, falling silent when his plan collapsed around his ears and moving on to some new scheme like a pollinating bee. He agitated to have one of his protégés in the Law Society and a partner of his both named Hollinger Inc. directors. His duty was to represent and advise the independent directors effectively while maintaining as smooth a relationship as possible with the 78 per cent shareholder.
The status of the independent Hollinger Inc. directors (Walker and Rohmer) had evolved through the year. They had come on the board initially to approve the Barclay deal and had expected to leave again in a couple of months. Strine had emphasized the role of the independent directors and recommended discussions between the independent directors of both Hollingers. This played to the ambitions of Walker and Rohmer, who understandably didn’t want to seem to be anyone’s cat’s-paw. Rohmer even resorted to the Gaullist – and Caesarean – formula of referring to himself in the third person, and went those two one better by invoking his rank: “The General will not be moved.” It was often difficult to believe that any of it was happening.
More dangerous, Strine’s emphasis on the independent directors enflamed the ambitions of Strosberg. At the second Delaware appearance in July 2004, Strosberg announced to our delegation that Hollinger Inc. should be put into creditor protection, for reasons I never understood, as the company’s financial condition justified no such drastic step. Yet he was sworn to uphold the interests of the independent shareholders, as were his clients. The surest way to savage the equity interests of the shareholders was to enter any such arrangement.
Strosberg opened up another front in his war against me by claiming that Strine’s decision that I was jointly responsible for the Hollinger Inc. repayment to Hollinger International legally transferred some of Hollinger Inc.’s debt to me permanently. The money I was lending to Hollinger to pay disputed amounts yet to be adjudicated was now to become a permanent ex gratia infusion of cash by me to the company. This was an outrageous concept. Right after losing the origina
l Glassman action, and after submitting legal bills for $915,000 for three uniformly unsuccessful months, Strosberg left for Italy, where I had visions of him lolling, in all his amplitude, on beaches and in posh cafés, advising his clients by telephone, as they huddled around the speaker phone in our boardroom, passing time in their daily day-long, hideously over-compensated meetings. They were an infestation and should have been the subject of corporate pest control, rather than the fawning of an addled judge.
JUST BEFORE THE BREEDEN REPORT was published, we received the Wells Notice from the SEC, informing us of the staff recommendation that I be charged with civil infractions of the Securities and Exchange Act. The SEC was eager to show its independence of Breeden, their former chairman, though, of course, they were in close and intimate contact with him. I felt that a trial – a civil one – would put me on a more equal footing than I had been on in the many months of preceding character assassination, with the steady peeling away of former friends and the complete absence of any sense of due process, presumption of innocence, or benefit of doubt. I was psychologically ready to face my accusers if I must and more confident of the outcome of a trial than of my ability to sustain Barbara’s and my own morale and credibility and possibly financial means, should the endless pounding of the Breeden persecution – with its echo chambers in the media and the lower courts of both countries – continue indefinitely.
I still doubted there would be a criminal charge, though that was obviously a possibility. Received wisdom was that my story, whose denouement had been joyously proclaimed in the media and at dinner tables for months now, was going to be satisfactorily resolved only by some horrible end, preferably in a prison cell, bankruptcy and divorce courts, and, if possible, a funeral home. (My possible suicide was a matter of public speculation.) I was too thoroughly defamed and thus too unsympathetic a figure to attract any underdog sentiment, or even, at this point, much credit for tenacity.
The whirlwind of abuse would subside eventually; Breeden’s ambition would be exposed, and I comforted myself with my belief that ultimately people respect those who bear adversity with some dignity, and it is respect untainted by the envy that conventional success attracts. Public and media opinion would move in tandem, and the impressionable denizens on the bench would be dragged behind them like clumps of seaweed on a ship’s propellers. Thus would justice unfold. It was a war of attrition. If I could survive, I would win, though I was aware that my hopes were based on frail armour and weapons protecting the fact that I was not guilty of any of the allegations. It was far from an idealized version of the rule of law, but I had to believe that I could still win.
Only when my dear Barbara, always prone to attacks of generic rabbinical pessimism, sadly whispered, “They’re going to take you away from me,” did I really fear a criminal trial. In general, despite the corruption of the American system, the pre-trial advantages to the prosecution, and a climate hostile to my version of capitalism which could portray any sense of individualism as licence and vanity and wanton self-indulgence, I still thought we would win because I knew, better than anyone, how unfounded Breeden’s whole onslaught was.
Disposing of Strosberg would be made somewhat easier by the retirement of Rohmer, his original champion. The general retired graciously in early August 2004. He is a substantial man and remains a friend. Don Vale and Paul Carroll – the first a very positive English business troubleshooter, the second a lawyer-businessman, who had been, and remained, Argus directors – moved up to the Hollinger Inc. board, which now had three independent directors. Carroll had squandered tens of millions of dollars of other people’s money in unwise ventures and had been branded by a Nova Scotia court as a “liar” in a famous financial case twenty-five years before. I did not know any of this when he was invited at the suggestion of a friend who could not accept himself but volunteered to get someone suitable. The proposer meant well but like many other well-intentioned people had no idea of the pressures and temptations that would soon engulf anyone who embarked on our financial group at this stage. Getting directors of any sort, let alone those of integrity and with proper qualifications for any company to which my name was linked, had become increasingly difficult. My attempts to recruit qualified directors were among the least rewarding chores of this very difficult time. This was a far and sorrowful cry from the days when Carrington and Kissinger had been directors of Hollinger International and Marie-Josée Kravis, when asked by me if she would like to be a director of the company, instantly replied, “I’d love to.”
Barbara and I went to Washington in the third week of August and interviewed some competing law firms as new civil counsel. In the end, we went with William Jeffress, one of the most respected trial lawyers in the United States, of the firm Baker Botts LLP. Breeden had been a partner in this firm, so Jeffress had to do a check to ensure that attacking Breeden would not occasion any difficulties with his partners. Breeden was not pleasantly remembered, and Jeffress was encouraged to “blow Breeden’s ass off” if that was what the client’s interest required. It did. Brendan Sullivan of Williams & Connolly was now criminal counsel, as well as co-securities counsel with John Warden of Sullivan & Cromwell (who graciously agreed to discount their bill after the fiasco in Delaware*). Jeffress would take over as civil counsel for the U.S. cases, including the Delaware appeal and the $1.25 billion Breeden racketeering lawsuit in Chicago (as it had become).
I had turned sixty on August 25, 2004. For my fiftieth birthday, there had been no significant celebration because we were in the middle of the price war in London and it would have been inappropriate. Needless to say, we were hardly in a state for much celebration now. This time we had a small gathering: George Jonas and his wife, Maya Cho, a splendidly brave blind Korean; Brian Stewart* and his wife, Tina; Ken Whyte and his wife, also Tina; as well as my children, Jonathan, Alana, and James, who were living with us in the Toronto house. It was a pleasant evening.
James went off to university a few days later, eighteen years old and six feet, five inches in height. I remembered leaving from the same house, forty-two years earlier, to go to university in Ottawa, and suddenly felt very old, though physically I felt as I had in 1962. In mid-September, my executive assistant of sixteen years, Rosemary Millar, succumbed to her lung cancer at the age of sixty-two. She had always seemed indestructible, a Thatcherite force of exquisite courtesy, correct formality, high intelligence, and splendid British humour. Her passing was not, at this point, a great surprise, nor probably an unmerciful development, but it was terribly hard to accept. She was a wonderful woman and one of the aspects of Britain I most enjoyed and relied on. Rosemary and I had emailed almost to the end. She had been appalled at the horrible press inflicted on me in Britain, and we sent each other encouragements up to a few days before she died. It was a great sorrow to think now that I would not be seeing her again. A few months later, Morton Berg, the psychoanalyst I had frequented many years before and whom I occasionally still consulted, died in Toronto. Their deaths added to a leaden cumulative sadness.
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BACK AT THE WITCHES’ COVEN now based at my 10 Toronto Street office, Gordon Walker, under the domination of the chief warlock, Harvey Strosberg, had decided that Jack Boultbee and David Radler, as well as Barbara and I, should be kicked out as Hollinger Inc. directors. Walker had already told the Globe and Mail that I should “move on.” I met with the three independent directors and faced Walker down. I said that I was prepared to entertain retirement to the private companies when Hollinger Inc. had been refinanced, the Damoclean sword of default had been removed, and my other objectives in response to the Special Committee report had been accomplished. Then, a wild card intruded. At this point in my career, such unbidden events were never positive.
Dixon Chant, an elderly partner of ours from the very first days of the Argus takeover out of which I had created Hollinger, died, leaving his eighty-five-year-old widow. His estate had Ravelston shares that we had agreed to buy in the event of his dea
th, and Peter White, who had performed admirably as a replacement for Peter Atkinson, had, for the best of motives, transferred $1.1 million from Hollinger Inc. to Ravelston to buy in and cancel them, feeling it was more honourable to owe the money to one of the companies than to leave his widow waiting for it. (With all the court orders demanding payments and restricting our ability to sell our own shares, raising a million dollars in cash required a bit of time.) Peter’s action was ethically correct – but in the circumstances lethally inopportune. I had thought this money was coming from Ravelston itself. Jack Boultbee cautioned Peter in an email not to transfer the money without the approval of the Hollinger Inc. independent directors, but Peter didn’t see the email until after the cheque had been issued in early July. Radler and Barbara did not hear of it until many weeks later.
When Strosberg heard of the transfer at the end of August 2004, he squealed with delight, described it from his Italian watering place as “theft,” and urged a public statement and confidential confession to the Ontario Securities Commission of an “unauthorized payment.” He well knew the explosive and excessive nature of what he was counselling and, by now, the suggestibility of the judge involved. On September 24, Strosberg, now conveyed back from Italy, attended upon the inevitable Justice Colin Campbell in chambers together with Glassman’s counsel and revealed the $1.1 million transfer in the most tendentious terms possible.
Our directors met on September 27. Unaware of Strosberg’s and Walker’s stab into what was now the crowded pincushion-dartboard between my shoulder blades, on the preceding business day, I put through my whole program: the election of two new independent directors; the terms of the refinancing; the proclamation of my firewall plan to re-empower Hollinger Inc. as a Hollinger International shareholder; the engagement of Jefferies & Company and Westwind Capital to explore privatization of both the U.S. and Canadian companies; the disbandment of the litigation committee because the independent directors were now half the directors; and the end of Strosberg’s retainer. I felt that we had accomplished this fine surgical stroke in time. So we had, but on a tighter basis than I had any reason to believe. In the middle of the September 27 meeting, a message was delivered to the boardroom stating that Glassman had launched a new action seeking to remove all the Ravelston directors from the board. I mistakenly assumed that Glassman was not acting on the basis of any new facts and that he had overreached. We had agreed to repay the $1.1 million. The court intervention of the previous Friday was not mentioned.
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