Conrad Black

by A Matter of Principle

  George Toombs, a pedestrian writer, wrote a reasonably fair biography, concluding with a prediction from Donald Trump that I would certainly rise again. He clung to me, rather “creepily,” as my daughter put it, more than two years later in Chicago and then rushed out an inelegant hatchet job as a sequel to his initial effort. He gloated that I had bought him a drink in Chicago. Of such trivia are some people’s lives made.

  Stretching for the metaphysical, Toronto Life magazine prominently ran a piece welcoming Barbara and me to Hell. Eddie Greenspan sued and alleged that my Catholic faith made this charge unimaginably abhorrent. In the legal correspondence, he represented me as virtually a holy martyr but extracted an abject apology that, in his version, carried pietistic claims to amusing extremes.

  Debbie Melnyk, an engaging and obscure filmmaker, had been following me around with a cameraman for years before the serious problems became publicly visible. Her timely film was telecast in Britain and Canada. I did not watch it but understand that it was not com-pletely unbalanced and that Melnyk evinced some liking of me.

  The celebration of my problems gradually settled down to sporadic outbursts of group media self-reassurance that I really was finished. In general, the press ceased its comparison of Hollinger with Enron or WorldCom and they stopped putting me in the same clause with Dennis Kozlowski of Tyco and other criminal defendants. A mantra of the “disgraced,” “fallen,” or “ousted” Conrad Black was endlessly repeated. I pointed out in a letter to the Sunday Telegraph that when I had been responsible for the contents of that newspaper, it knew the difference between disgraced and defamed.

  I enjoyed writing the odd letter for publication. It gave me some satisfaction, however evanescent. When Alexander Chancellor wrote in the Observer that I was the greatest embarrassment of the House of Lords, I replied that he had been such an embarrassment to the Sunday Telegraph that the editor fired him as editor of that newspaper’s magazine after three issues. When Roger Ebert, the well-known, overpaid movie critic at the Chicago Sun-Times, purported to agree with the paper’s unionized employees threatening to strike, I wrote to that newspaper and the Tribune, which eagerly published it, forcing the Sun-Times to do the same, that his constant threats to quit his “beloved Sun-Times,” his $500,000 annual salary and hundreds of thousands of dollars of options, and his website operated at the newspaper’s (considerable) expense made his “proletarian posturings” rather implausible. We had a rematch, but it didn’t make Ebert appear any more believable.

  The mayor of Chicago, Richard Daley, when taxed by a journalist with the embarrassment of a municipal official who had allegedly embezzled funds, referred to David Radler and me as illustrative of how people are surprisingly dishonest. I wrote him a polite but forceful note, which the Sun-Times published but which elicited no response from His Honor, whom we had always supported and assisted in any way possible. (After eighty years of the Democrats in power in Chicago and its environs, the system could not and does not fail to be a corrupt regime. Daley, finally unpopular, retired in 2010.)

  These were mere pinpricks, of course, in a massive wall of orchestrated press animosity, but I hoped they showed I was still alive and that my (sparsely attended) corporate funeral had not yet taken place.

  ON SUNDAY, NOVEMBER 14, 2004, I heard worrisome rumours of an impending SEC action against us. The SEC, contrary to their usual policy of reasonable discretion, leaked accurate summaries of their action to the Wall Street Journal and the Globe and Mail, which published them November 15 before we received any formal notice of what was afoot. The practice had been for the SEC to reply to the so-called Wells Notice response and then, if the subjects wished, to attempt settlement discussions before charges were laid. An SEC official explained to one of my counsel that this practice was changed in the last year implicitly because of the intense competition to be seen as leading the crusade against corporate licence, greed, or merely, as in my own case, inopportune events. The SEC charges came down on November 15, 2004.

  While the sequence was unwelcome, the SEC charges themselves were relatively soft. They wanted us to abandon our appeals to recover the so-called “not properly authorized payments” and demanded an additional $40 million of returned non-competition payments. They had no case for this second provision. They also wanted to ban for life Radler’s or my association with a public company and to levy an unspecified fine. (By this time, no one could now pay me enough to be a director of an American public company.) The SEC had discarded 90 per cent of Breeden’s Special Committee report, and their spokespersons told my counsel and the press that they would be happy to begin settlement discussions at any time. The claim itself was as modest as we could have hoped in these dismal circumstances and was generally not overplayed by the media.

  In an inspired moment, Paul Colucci of Westwind Capital suggested that on that very day we make known our anticipated offer price of $7.25 for the Hollinger Inc. shares, which had been trading at just above $3 a week before our privatization announcement. This was a brilliant method of putting additional momentum behind the privatization move and also of sending the message that we took the SEC in our stride and that it was business as usual. Financial community and press comments were favourable, and the stock rose about a dollar, to $6.90.

  We had a public relations success when Hollinger International was required by SEC disclosure rules to acknowledge that Breeden’s inquisition had cost $57 million and that they had underestimated its third-quarter cost by $14 million. Even at this revelation, and after a fairly acidulous press release that I had a hand in composing, the institutional shareholders did not rise up. Now the Special Committee was costing more than $1 million a week, and its declared intention was to go on for another two years. Though RICO had been thrown out and the usurpers were unable to deny us our share of the Telegraph proceeds, the Tweedy Brownes and Gordon Walkers plodded forward in agreement with Breeden.

  IT WAS A GREAT COMFORT to conduct this phase of the battle from my house in Toronto. Barbara and I walked (holding hands, as the Globe and Mail breathlessly reported) in the late afternoons along the street my father had created fifty years before when he developed the neighbourhood now known as the Bridle Path. I had carefully assembled and placed twenty thousand books in the libraries and there remained important traces of the original house where I was brought up. The long-serving staff were thoughtful and unobtrusive, and the swimming pool and chapel I had built were great sources of exercise and refreshment of body and spirit.

  The chapel, containing my memorabilia of John Henry Cardinal Newman, my friends Cardinal Emmett Carter and Cardinal Paul-Émile Léger, together with some religious artifacts I had collected over thirty years, had a small attached reading room and theological library. It provided a serene end to even the most tumultuous days. This was especially true in the autumn, when I sometimes stayed up so late I could see, often only a few feet away, deer lured up out of the ravine by the delicious apples of our orchard.

  I had some comforting sense of fighting for my parents and descendants as well as my wife and myself, and for certain principles. Surrounded with the discreet love and friendship of family, I felt like the home team in a struggle against a numerous and loathsome enemy.

  It was heartening when Robert Kent, the assistant U.S. attorney in Chicago, who had carriage of the Hollinger matter, assured attorney Greg Craig, an associate of Brendan Sullivan at Williams & Connolly, that I was not a target of a criminal investigation. Even Eddie Greenspan concluded that a charge of criminal activity was unlikely.

  We were convened at the November 30 meeting of the Hollinger International directors to approve implementation of a series of guidelines of the New York Stock Exchange, including enthroning “whistleblowers” and setting up a toll-free number for anonymous telephone complaints about management to the chairman of the Audit Committee, that Lincolnian pillar of corporate disinterestedness, Jim Thompson. It was a regime of squealing, denunciation, and presumption of guilt. There
was a scent of Maoism about the proceedings, something of the village committee and their kangaroo self-criticism sessions with a local leader present to report to a regional leader to report to some sub-committee or other of the central committee.

  One of the NYSE guidelines required the appointment of a chairman of the non-management directors, who were to meet at least once a year. Thompson and Burt put forward Seitz. I commended them both on their forbearance in promoting the candidacy of one of the co-authors of the Special Committee report, which had denounced Thompson and Burt as grossly negligent and incompetent. Thompson and Burt were like dogs licking the hand of the vivisectionist as he sharpens his knife in his operating room, their tails debouching from between their legs only to wag contraintuitively to appease the author of their impending fate.

  Barbara and I voted against Seitz as the new chairman, and so did Richard Perle, disillusioned with his failed dalliance with those trying to destroy him. Barbara added that she did not consider the majority on this board capable of ensuring the honest governance of the company and did not think they should be entrusted with it. That judgment was certainly proved accurate.

  It was hard to believe that our fine company, meeting in the same place and with most of the same personalities, could have been reduced by Breeden and those whom he intimidated or suborned to such a degraded mockery of a corporation. As I listened on the telephone to these people dispose of our company, I placed my hopes in privatizing what remained and in so doing salvaging something for the other shareholders and myself.

  The privatization of the American company, Hollinger International, was begun in the first week of December 2004 as the investment proposal document was finalized and circulated to possible investors. It had commercial merit, and I was reasonably hopeful it would succeed. Canadian privatization continued to gain strength; American privatization had made a promising start. Though almost every hand had been turned against me, I thought I could finally see a gleam of hope. Such a hope, in such a time, was an invitation to disappointment.

  *This became the official News Corporation version: The Times couldn’t catch the Telegraph’s circulation but drove me to theft from my own company to maintain a cash flow adequate to sustain Barbara’s profligate lifestyle. Not one additional cent was extracted from the Telegraph, and its profits were at all-time highs on the heels of its price war victory when the controversial payments, from huge North American asset sales, occurred.

  * Especially Paris, who had vouched for the presentability of our accounts when assisting in our corporate bond issues in the five preceding years.

  * I would be remiss not to emphasize that though their efforts were not overly successful, both John Warden and Ben Stapleton are excellent lawyers and delightful gentlemen.

  * Brian Stewart, the senior network news commentator of CBC Television for many years, could have been mentioned on almost any page of this book, as we have been close friends since we fetched up together in the same high school in 1960, both at tangled academic moments. We often travelled together, in Canada, the U.S., and many parts of Europe and Africa, on university holidays and after. No one could ask a truer, more constant, more amiable, intelligent, and even-tempered friend. Apart from some different historical perspectives (and not many of those), especially over what I consider his unjust disparagement of the military command talents of General Douglas MacArthur, there has not been an impatient word between us since he considered me, with some reason, an unruly sub-tenant of his in Twickenham, England, in 1966. We have been much involved with each other’s lives, including many of their most intense moments, from our teens to our officially designated “golden years,” including those recorded here.

  His friendship has been an inexpressible pleasure and consolation for many decades.

  [CHAPTER EIGHT]

  THE THICK GLOOM HAD LIFTED and Christmas and New Year’s Eve 2004 were far more agreeable occasions than those of the preceding year. Now there was an apparently competent team of counsel and other advisers, a plan of action, visible progress, the rejection of the RICO claim, and a year of implacable endurance to strengthen the soul and temper the steel. Barbara and I even managed modest gifts, accepted almost furtively by her, lest the boot in her sky notice we were having a good moment – something we had judged inappropriate in the hair-shirted, Dickensian bleakness of December 2003.

  And although there had been terrible stresses at times in the preceding fourteen months, and indeed on many occasions throughout the twenty-six years since I had taken over Argus Corporation, the structure of assets I had built and enough of the corporate associations in which I had invested such effort had held. Financial ruin had receded as a prospect. It had only been a year before that I had had to borrow money from Nelson Peltz to pay our public relations firm, which was swimming like spawning salmon upstream against a raging torrent of hostile press attention.

  Yet I was still strategically on a back foot. The lawyer engaged by Strosberg to advise on honouring the Hollinger Inc. indemnity for legal fees effectively suggested that none of our legal fees could be covered by the indemnity in respect of these accounts. Even the imposter regime at Hollinger International, in all its malice, managed better than this. It was paying half our bills.

  Gordon Walker devised other methods for aggravating me. He never ceased to tell the press, especially the Globe and Mail, that he was the “new broom,” sweeping the corruption of the former regime away. He hired a public relations firm to peddle his nonsense about a “suite of corporate governance reforms,” which he had printed up in a self-righteous little pamphlet, at the shareholders’ expense.

  It was all part of Walker’s effort to let everyone know that there would be no privatization, despite the lip service he gave it. His unctuous homilies to the press were exceedingly irritating, but they had the value of helping to lower the noise level. Walker, monotonous and repetitive, was a providential anesthetist.

  We had to have independent valuators and Griffiths McBurney & Partners had been retained as a respected merchant bank that would carry weight with the Ontario Securities Commission as valuators of Hollinger Inc. shares. The senior partner, Gene McBurney, a capable and likeable man, despite his supportive stance and comments, soon urged a delay in the valuation. He, too, wanted to await the chimera of quarterly reports of 2004 from Hollinger International, the progress of the inspector, Ernst & Young, and so on.

  It was the Bain-Cerberus syndrome all over again. McBurney was showing a level of caution that he ought to have known would push our privatization over the end-of-March deadline. Hollinger International would take its time filing, in part to inflict as much inconvenience on us as possible and in part to enable Breeden to squeeze as much for himself as he could out of his rich feathered bed as special monitor. Ernst & Young simply demanded more and more and more and claimed the need for unlimited time and money.

  At this point every possible faction was in feverish and fluid negotiation. Walker was a partisan of pre-emptive concessions to the SEC and Hollinger International. He and Carroll made a Chamberlain-style visit to Thompson and Paris in December that was a fiasco. The Hollinger Inc. lawyer in SEC matters, Nate Eimer, was a compulsive optimist and instinctive author of compromise. He was seeking a voting trust.

  We warned Walker that any attempt to settle without full consultation with the controlling shareholder or to institute the infamous executive committee that had been conceived after the Campbell decision and modelled on the Hollinger International Corporate Review Committee would lead to immediate injunctive action. We won those battles.

  Hollinger International finally brought out its 2003 annual statement in mid-January 2005 with minimal changes and restatements despite fiendish efforts to detect fraud, causing a good deal of comment that it had hardly been worth waiting for. The interventions of Williams & Connolly and Eddie Greenspan had cleaned up the text by about 20 per cent, but it remained a stated risk factor that I might regain control of the company and
disserve the shareholders.

  The stock price was a levitation; the Strine-Breeden-Paris-Zachary-Seitz claim of what could be achieved by the Strategic Process had been exposed as very inflated. The initial Wasserstein summary of Hollinger International as being worth from $18 to $24 a share had dwindled by the end of January 2005 down to below $17. Those to whom we sold in June to refinance Hollinger Inc. had taken a loss on their shares. Those who remained would lose everything.

  Seeing that there was no chance of getting out their filings in order to be current before May or June 2005, the Hollinger International rump decided on another special dividend of $3 a share to buy them a bit of time with investors getting restless about the stalling of the grand strategic process. Hollinger Inc., which I had been widely advised through the autumn to put into creditor protection, as Peter Atkinson and the Torys law firm and Strosberg had advocated, would as a result of this dividend now have more than US$100 million in the till. The end of its financial crisis had come, or should have.

  Barbara and I went to Donald Trump and Melania Knauss’s wedding in Palm Beach on January 22, 2005. Trump had been an unfailing and vocal supporter of ours through these difficult times. Former U.S. president Bill Clinton, also a guest, urged me not to give an inch to my legal tormentors. The same message was delivered even more forcefully by Rudy Giuliani. At times like this, when many so-called friends, some of fifty years or more, had gone missing, such gestures by such well-travelled people were appreciated. Barbara began humming “Little Things Mean a Lot,” which was part of her vast repertoire of Hit Parade songs from the 1950s. They did.

  I NOW HAD TOO GREAT A PROPORTION of assets in residential property. I did not wish to sell any of my houses; they were fortresses of the life that I had built, and I wished them all to continue into the new and stronger position that would arise from the shambles of my former life. But I did not have an unlimitedly optimistic view of the economy, and I had no banking relationships whatever and needed the cash.