The two new directors, Alan Wakefield and Robert Metcalfe, were recruited by Peter White. Alan was an unemployed technology executive with whom I had gone to boarding school forty-four years before. I told him it was “a long time between conversations.” Robert Metcalfe was a non-practising lawyer and former head of the Sifton family’s holding company, Armadale. Both men were well intentioned but not temperamentally well equipped for the rough-and-tumble world they were entering.
On the evening of Monday, September 27, I was walking in Central Park, closing in on the bench Mayor Bloomberg had donated in the name of Barbara and me, when Barbara called my cellphone and told me there was an urgent message. Thus did I learn of Strosberg’s outrage. He was in open collaboration with Glassman to eject us from our company and had reported us to the judge. Don Vale called me back when he came in from dinner and assured me that Strosberg had no such mandate from the independent directors to go to court as Walker had claimed and Strosberg had done. The next day Vale wrote up a comprehensive affidavit, with fellow independent Paul Carroll’s support, debunking the Strosberg-Walker version, which had been featured in the Globe and Mail after they had interviewed Walker speaking eagerly from France.
We proceeded satisfactorily through the week. We completed and announced the refinancing of Hollinger Inc. on Thursday, October 1, and my Can$1.1 billion libel suit, the largest in Canadian history, on Friday. With a knife at my throat, I worked urgently to turn the crisis to advantage. Over the ensuing weekend, I worked out a plan to sell some corporate real estate we had been discussing as a replacement for my Toronto home as the subject of a mortgage, and to privatize Hollinger Inc. This would slam the door on Breeden, Glassman, and Walker.
The enemy’s battle now was to have Campbell pitch Boultbee, Barbara, Radler, and me off the board of Inc., based on our role as Ravelston directors in Peter White’s payment to the Chant estate. (The fact that Barbara was never a Ravelston director nor shareholder was irrelevant. The Special Committee report had labelled her as one and that was The Word.) Walker and Strosberg, in their affidavits and depositions, alleged that the $1.1 million transfer through Ravelston to Dick Chant’s estate had been a straight act of oppression of the shareholders and even theft. Strosberg prattled on for one hundred pages of transcript about how I had objected to his invoices, now totalling more than a million dollars for less than four months of advice.
The deposition was classic Strosberg. The US$15 million I had advanced the company pursuant to Strine’s order in July was represented by Strosberg in his deposition as a manifestation of my blundering in signing the Restructuring Agreement in November 2003 (which did not commit Hollinger Inc. to repay anything). He claimed that the debt had effectively been transferred from the company to me by Strine’s order. Strosberg’s was a false opinion that was contradicted by an opinion I had obtained from Sullivan & Cromwell at Strosberg’s request. This Strosberg version crept into Walker’s affidavit and Kelly’s comments, and constituted the attempted legitimization of outright theft from me by a company of which I was the ultimate majority shareholder.
Walker was now just as dangerous, as he appeared to be speaking as much in disarming sorrow as in anger. He gave some credit to Peter White and to me, but required that we be judicially dismissed from the board, White not so much for the $1.1 million mistake as for his association with me, notorious pickpocket of the defenceless shareholders. This version was being endlessly retailed in the press. And because judges tend to read the press with the attentiveness (and, in the case of some, the approximate intelligence) of bloodhounds on the trail, there was a general feeling among counsel that we were all at risk. All my opponents needed to do was bandy my name about, like Chamberlain flourishing his signed agreement with Hitler after Munich in 1938, to achieve their ends. My American counsel feared a “Strine-of-the-North” excoriation in Canada that would resonate very badly in the endless and countless American legal battles, and advised me to resign before it happened. It was at this point that George Jonas referred to American and Canadian judges as “the Zeitgeist in robes.”
In his affidavit, Walker also gave the impression that the independent directors, under Strosberg’s guidance, met constantly by telephone through September, consistently celebrating the fact that they were “steeled” and “irrevocable” in this view that I had to go as chairman and as a director, which I learned only from the newspapers, taking all the Ravelston representatives with me. Once they were in my presence, which was not infrequently, none of them, not even Walker, could find voice for their grievances, unfounded as they were. These prolonged daily meetings were the method by which they ran up their $100,000 individual monthly fees. (According to loyal sources within 10 Toronto Street, these directors’ fees were helping the Canadian economy, if not the Hollinger Inc. shareholders: expensive new cars and even condominiums were now being acquired with them.) It was during this time that Glassman and Walker together were promiscuously soliciting new directors. For weeks at dinners around Toronto, people had regaled their dining companions that they were about to become Hollinger directors on the Glassman slate. It was, like so much else, very irritating.
OUR LEGAL FORTUNES WERE briefly uplifted by a Chicago Federal Court judge, who threw out the civil RICO charge on October 8, 2004, and dismissed the rest of the Hollinger International claim without prejudice. The opposition lawyer, the mouthy and cynical Jonathan Rosenberg, co-author of the Special Committee report, was, from all accounts, thunderstruck by the decision. In order to reject civil RICO charges, the judge must consider even if all the underlying allegations are true that other civil statutes adequately provided for them. This was a high hurdle, but under the excellent advocacy of Barbara’s lawyer Greg Joseph, who was recruited by John Warden, the judge arrived at that conclusion. Thus vanished the uniquely American absurdity of the civil offense of habitual criminality.
On the heels of this RICO victory, the opposition went back to their faithful Strine, asking for an extension of the injunction against my tampering with the Lazard Strategic Process. This was a bit rich, as I was trying to make that process function and they were trying to shut it down. Breeden wanted to keep his million-dollar-a-week gravy train going (about 10 per cent of that to him personally) which would be impossible if Hollinger International were to stop action against us. He also knew that whatever hopes he had of producing criminal charges would shrink if there were a takeout of all the shareholders. What had begun as a routine corporate putsch had clearly become a fight to the financial and reputational finish involving billions of dollars in claimed damages.
The hypocrisy of seeking an extension of an injunction against my engaging in nefarious activities that he was in fact conducting and I was opposing was not completely undetected, even by Strine. He blasted Hollinger International counsel and suggested that the parties try to reach a compromise, apparently unmindful that he had done more than anyone except Breeden to ensure that this couldn’t happen, by loading the dice for my enemies.
When Strosberg was dismissed, we arranged for the well-regarded but very cautious David Roebuck to replace him as counsel to the independent directors. This would have introduced a lawyer of unquestioned stature and integrity. Unfortunately, Roebuck fumbled around for five critical days before concluding that he had irremediable conflicts (which he later overcame). He proposed Toronto lawyer Tony Kelly as his replacement, and the directors hired him, practically sight unseen. He quickly fell in with the Walker-Strosberg line of running out the clock on privatization. The bondholders had given me an extension on the Inc. notes until March 31, 2005, to make the privatization offer, and the simplest way of killing my attempt would be to have me miss the deadline.
I called an emergency meeting of the Inc. directors to sort out our legal position opposite International in accordance with Strine’s instructions for the two sides to negotiate. Our legal position was quickly revealed as schizo phrenic. Kelly took the position that he had sole carriage of any legal
issues involving Hollinger Inc., as if Inc.’s own legal firm of Fogler Rubinoff in Toronto did not exist. I asked Inc.’s Chicago counsel to prepare settlement terms for International in concert with John Warden. Chicago counsel replied that he had instructions from Walker and Kelly to require minimal concessions from International. Notwithstanding, I managed to construct a list of requirements from International that included getting the proceeds owed to Inc. from the Telegraph sale; the implementation of the co-operation and confidentiality agreement between International and Inc. and we asked for the reactivation of the Lazard restructuring process for bona fide prospective investors whom we sent to Lazard.
The Hollinger Inc. directors ignored Walker’s snuffling and approved these terms. All were accepted by Hollinger International on October 21, 2004, except the reopening of the Lazard process, which Breeden was determined to keep closed, despite seeking an extension of the requirement that I not obstruct it.
This agreement was approved by the court. Strine was away for the weekend, so Warden had to deal with the juvenile farce of Hollinger International’s counsel asking for assurance that I would not violate the injunction between midnight on October 31 and the opening of business hours the following day, when Strine would be back to endorse the agreement.
Unfortunately, Strine returned to his usual form over the reopening of the Lazard process and dismissed our request with a flippancy about how he would consider it if we had an offer for a billion dollars for the Sun-Times that Breeden’s robots were not taking seriously. However, the international financial press did cartwheels of astonishment at what they portrayed as my triumph. Laura Jereski snapped that this was “Conrad’s greatest victory.” (I have been impressed throughout that these people refer to me with such familiarity, even Breeden, as if I were a likeable scoundrel.)
We presented the privatization package to the Hollinger Inc. directors on October 26, adjourned the meeting to October 28, and gave Catalyst the two days’ notice our interim agreement required of any material related-party transaction. Catalyst predictably responded with injunctive action, describing privatization as a “stratagem.”
If we could survive the Glassman imposture as a regular shareholder and investor (he was a holder of shares convertible into Hollinger International shares and so was not really a Hollinger Inc. shareholder at all), we should be able to force recognition of the right of the shareholders to an offer we wished to make and they wished to accept. It was preposterous that a court would take seriously the antics of Glassman, someone claiming to emancipate the shareholders whom he was himself disadvantaging. But so perverse was the climate that the Catalyst effort was a deadly threat. Having navigated through to the beginnings of a legal turn and being within sight of a safe financial port, I was in danger of being driven from my principal remaining redoubt by the manipulation of an unworldly and credulous judiciary, with the help of the extravagant pests to whom the court had delivered a great public company for safekeeping.
Because Breeden’s entourage had some of his insouciant arrogance, Hollinger International passed a great deal of information along an Internet channel they shared with us, but which we, for obvious reasons, scarcely used. They also continued to send us, as in olden times, the weekly appointment schedule of everyone in the New York office.
Thus, from looking at the Internet site, we had all the accumulated costs of the Special Committee, including the nearly $7 million that Breeden had taken for himself in fees.
In the arguments before Campbell, the judge regularly became flushed, rude, and aggressive with my counsel, Alan Mark. We concluded that Campbell’s rudeness was based on his having bought into the line that I was a corporate governance delinquent and he lacked the judicial temperament necessary to extend normal courtesies to the legal counsel for such an abominable client. Hollinger Inc. lawyer Avi Greenspoon participated importantly on the call that determined the fate of the Glassman injunction against privatization on the evening of October 27. He completely but courteously demolished the spurious arguments of Glassman’s lawyer. The judge ruled that the process of privatization must be allowed to proceed.
Later that evening at a reception, Justice Campbell explained to Jack Boultbee’s lawyer that he sought a “win-win” outcome, meaning that he wanted the shareholders to get the benefit of any privatization offer but that he also wanted to support proper corporate governance by installing and maintaining the inspector. In another pattern with which I would become distressingly familiar, the judge had not thought it through. He had not weighed the balance between the inspection process he had unleashed, on the one hand, and the requirements to complete the facility from the noteholders, which had to be acted upon by March 31, 2005, on the other.
In his “win-win” world, condensed into his Warholesque fifteen minutes of fame, as the international financial press watched and attended his courtroom, Campbell thought he could conduct a comprehensive inspection of the company, thus inciting the expectations of the enemies of the shareholders who wished to stop the privatization, while at the same time espousing the privatization.
Privatization of Hollinger Inc. was approved by the directors on October 28, 2004. The relatively solid Robert Metcalfe was made chairman of the privatization committee; Wakefield and Walker were the other members. The hearing on the composition of the board was on November 2 and 3. In order to run no risk of being thrown out, I retired that morning (November 2), as Alan Mark informed the court. I emphasized in my press release that I was doing so to facilitate the privatization of the company.
After an inexcusable three weeks of deliberation, on November 18, Campbell rendered his decision. Alan Mark was successful in his argument that Glassman had no standing and that his interests diverged from those of the common shareholders. Peter White was exonerated of anything but an innocent error and retained. However, incomprehensibly, Campbell ruled that although Barbara and Radler knew nothing of the $1.1 million transfer and Boultbee had warned White against it, an oppression remedy was justified. So, he removed all three from the board.
What ensued was the predictable attempted putsch by Walker. He arrived, very crisply turned out in a new suit, in Peter White’s office on the morning of Friday, November 19, and announced to White that he wished to be chairman of Hollinger and asked White to nominate him. White declined and said that the company should not have a chairman, that it was in a transitional phase toward privatization, and that there should be chairmen of meetings only, rotating alphabetically.
Walker smugly stated that he would be elected chairman anyway and left. A series of acrimonious and comical meetings occurred at Walker’s office, involving all the directors apart from Peter White. The five were constantly forming and breaking alliances and were unable to agree on a chairman. When they were not in informal session, they were no less cranky and conspiratorial. Our sources kept us well informed of their antics.
On the second full day of fruitless and febrile discussion, Walker went off the walls and distributed a paper threatening to go to the inspector (Ernst & Young, who were looking at related-party transactions and had nothing to do with this sort of issue) and the judge directly, as well as to the Ontario Securities Commission and the SEC (which had no jurisdiction) with the complaint that some remaining directors were not independent of Peter White and me. In his paper, Walker modestly described himself as a “perfect chairman” and “superb consensus-gatherer.”
Walker had thrown down the mask the day before and said that privatization would not happen. He revealed that he considered that I was, in effect, a crook, that Ravelston was a corrupt influence, and that this board had a mandate and duty to crush the 78 per cent shareholder and take over the company in whatever direction pleased it. He ignored the fact that was mentioned by several of his colleagues, namely that virtually all the shareholders wanted the company privatized. His judgment of almost everything was warped by his indecent ambitions.
Westwind Capital lined up the Toronto-Dominio
n Bank and several other large shareholders to commit to or vocally support our privatization offer. We had nearly 40 per cent of the minority in hand before the new board structure was agreed. Walker and Strosberg were starting to look like the East German satellite regime that declared in 1953 that it had “lost confidence in the people.”
WE HAD ALSO COME INTO the season of the books and film and television programs about my rise and much-applauded fall. The inevitable Richard Siklos, not the most obnoxious of journalists but no prize winner for quality of research or objectivity either, subtitled his quickie rehash of his earlier Shades of Black as The Rise and Fall of Conrad Black. From my brief scan of it, it appeared to be a cataract of low gossip and clumsy gropings toward pretended insight.
Jacquie McNish and her co-author, Sinclair Stewart, obsessed with what they took as a morality play in which the corporate governance forces of righteousness prevailed over my chronic wrongdoing, appended to the title of their book, Wrong Way, the elaboration The Fall of Conrad Black, as if I had managed this feat without ever having risen. I read about ten pages of Siklos and not a word of McNish.
Conrad Black Page 29