The prosecution’s next try was with the auditors, and they brought in Marilyn Stitt (of KPMG), a solid professional who would not spin her testimony. The direct examination was brief, designed to incite the inference that the auditors had been misled by the management, though this was never asked or stated. It was insinuated from very bowdlerized extracts from the auditor’s professional handbook that implied it was virtually up to the management to audit itself.
The defence counsel quickly wrung from her (with no reluctance or evasion from the witness) the extensive sections of the handbook that required auditors to do a great many things that gave the jurors a clear idea of the scope of an audit. More valuable, she confirmed to Genson that when she and other KPMG people had visited the Hollinger International Audit Committee on February 25, 2002, it had been confirmed by Jim Thompson and Marie-Josée Kravis to the satisfaction of the auditors that the contested payments that had started this landslide of events had been approved. Genson and other defence counsel walked Stitt through her notes of her and her colleague Pat Ryan’s meeting with the Audit Committee.
Pat had explicitly stated, as Stitt’s notes of the meeting revealed, that KPMG wanted the Audit Committee’s confirmation that it had approved the (later) contentious non-competition payments. Thompson nodded and Kravis remained silent. Richard Burt was not at the meeting. The auditors concluded that they had their confirmation. Marilyn Stitt assured the Hollinger Inc. Audit Committee of this the next month.
The fact that the prosecutors had ignored this key meeting completely, and had tried to misrepresent the nature of the auditors’ obligation to the client, did not resonate well in the court. Again the press took a step back, almost unanimously, from their preconceptions of the guilt of the accused. Marilyn Stitt would not lie to please the government and answered a long series of questions from defence counsel clearly and truthfully, and very helpfully to the defence. The government case had been set back by the cameo appearance of the auditor.
After nearly six weeks of trial, the government had not begun to make a case, and I had scarcely been mentioned, apart from the foolishness about Bora Bora. Despite the implicit claims of the co-defendants to be mere bystanders in a dispute between the U.S. government and Radler and me, they had all been heavily involved with the buyers of the community newspapers, or with the lawyers on disclosure matters, or with the auditors. I had not. Cramer started out comparing us to bank robbers and street thugs. At this point, I appeared to be detached (as I was) from controversial matters, and Mark Kipnis, Peter Atkinson, and Jack Boultbee appeared to have been preoccupied with serving the letter of all laws and regulations (which they were).
Sussman in particular, impossibly thin-skinned, and egocentric, was stung by press criticism, including repeated disparagements from the Chicago Tribune and local television and radio stations, and he reacted peevishly to many of the journalists. The British press had come for the opening, would be back for Radler and for the end, but never really followed the case. The Daily Express representative, a woman with a piercing East End accent, offered Mark Steyn £1,000 if he would take Alana out and pry loose secrets from her. If Mark were so inclined, and if Alana were susceptible to such overtures, Mark might have taken the initiative on his own account and published them himself.
Even the Sun-Times had become almost impartial after hearing the prosecution’s weak early efforts at incrimination. Among the more publicized moments in our press relations were Barbara’s descriptions to Alana of two journalists trying to eavesdrop on them as “vermin” and of another nosy journalist, when speaking to Alana and me in the elevator leaving the courthouse, as “a slut.” She was using the word as a general derogative in the way that “whore” is sometimes used. In both cases the journalists were going beyond commendable enterprise, and though Barbara’s comments were intemperate, they were, I am afraid, le mot juste. They were widely quoted.
[CHAPTER THIRTEEN]
FINALLY THE PROSECUTORS WOULD have to try to put on a case. The Audit Committee would be next. These would be the respectable, unassailable truth-sayers, giving the Radler line from under the impeccable carapace of their careers and reputations. It was hardly a secret that all the defence counsel were going to attack Radler violently. The prosecution hope was that their bullets would bounce off the Audit Committee, lending credence in advance to the carefully crafted testimony of the chief cooperating witness. This, too, is not how it worked out, as we knew that the allegedly secret payments had been reviewed by the audit committee many times.
Richard Burt, whom I had known for many years, and with whom I had often been socially friendly, came first. He was elegantly dressed but seemed to have aged by twenty years since I had seen him last. His face was haggard and his complexion rough. He had been undersecretary of state for Europe and Canada, ambassador to Germany, and chief arms control negotiator. Since he left government, where his service was well-regarded, he had not shouldered such responsibility, and worked for a time for a Saudi group, in which capacity he pestered me unmercifully to buy very questionable assets. That was his notion of the fiduciary duties of a director, a concept in which he now wrapped himself as if in a winding sheet. He had brought Breeden in as Special Committee counsel, and I assumed that he made a sweetheart deal for the Audit Committee as he did so. Of course, Breeden castigated the Audit Committee in his report.
Burt announced that his present occupation was that he was a member of Henry A. Kissinger and Associates. Henry had told me many times that Burt was mediocre, with little aptitude for geopolitics. Henry told me four years later that Burt had never been an associate of his, only of someone with whom he had shared office expenses and other overheads. Rick Burt was just name-dropping, and Henry Kissinger was astounded to learn that Burt had claimed to be an associate of his. Burt would join the other Audit Committee members in the incriminating line they had subscribed to in exchange for non-prosecution by the SEC, and Kissinger would give Burt a needed job, though I doubt if it paid enough to cover his alimony.
It must be said that Rick Burt put on a pretty good show. He was not present at the Audit Committee meeting that had satisfied the auditors that they had approved the contentious payments, and beyond that, the many attestations he had signed or given in teleconferences of approval of the contested payments were just oversights. “I don’t remember” recurred quite frequently, but with the quiet confidence of a former ambassador.
Because Burt had alleged to the Special Committee that Peter Atkinson had broken down and in his testimony to the Audit Committee had admitted a fraudulent scheme of doling out non-competition payments to ourselves, Benito Romano had asked to go first for the defence. He did so, although there was no such allegation in Burt’s evidence at trial. Benito brought out the vital fact that all the Audit Committee members had signed a statement for the SEC and had achieved a promise of non-prosecution. He was careful not to claim an exact quid pro quo, but this was his chief contribution to the trial. When I had urged my own counsel to do this, Genson had insisted that this deal with the Audit Committee could not be introduced at all, or the Strine-Breeden-like document written up by the prosecutors for the SEC and pushed in front of and signed by the Audit Committee members would come into evidence. In fact, the non-prosecution agreement was revealed, but the joint statement was not. This was one advantage of having several groups of defence counsel. At least one of them was usually right. This information grievously damaged the Audit Committee’s credibility, even before a third of their evidence came in.
Most of the cross-examination of Burt was ineffectual apart from that. Gus Newman came next and was too jocular with Burt and too deferential to him as a former ambassador. On the second day, April 26, Newman started to make serious inroads on Burt, but then asked him about the February 2002 Audit Committee meeting. When Burt pointed out that he had not been at the meeting as was recorded in its minutes, Newman, inexplicably for such an experienced barrister, became evidently flustered and sai
d, “Heads will roll in my brain trust.”
He should have said that he was aware of that but presumably Burt had received a description of what had occurred at the meeting; anything but appear completely nonplussed as he did. He then wasted the court’s time with a long irrelevancy about a non-compete deal Burt had approved at the Weirton Steel Company (a single, obsolete mill), of which he had once been the chairman. Newman’s cross-examination fizzled.
Newman’s sudden erosion, coupled with all the concerns we had about Greenspan’s serviceability, and Genson’s evident infirmities, though rather flamboyantly borne, highlighted the trouble with the disparate energy levels of the prosecution and defence tables. The four prosecutors were young, obnoxious, and prone to tactical blunders rooted in Sussman’s endless schemes and Cramer’s belligerency and the innate weakness of their case, but they had the energy of comparative youth, a fervent belief in their case, and the self-confidence that the usual success of the government’s steamrolling techniques gave them. If one devious tactic didn’t work, they knew another one could be improvised, always with impunity opposite the judge.
At one point Greenspan had laid out two large boards (called “demonstratives”) in front of the jury. He had secured the assistance of Chris O’Connor in setting them up on tripods, but unfortunately they barricaded Chris into the far corner of the courtroom, where he had to remain for ninety minutes until there was a break and he could decently extricate himself. The jury found this rather amusing.
Genson rose to the occasion and tore into Burt, and recovered the situation quite well for the defence, asking him about each individual occasion when he had seen the non-competition payments referred to (Chris O’Connor had discovered the number of 10K drafts* that contained these references that had been circulated, so that each member of the Audit Committee had seen the paragraphs on the payments eleven times). Genson also brought up a due diligence teleconference† that Burt had attended by telephone, in December 2002, in which the same payments were declared by Thompson to have been approved. Burt waffled and didn’t recall. He didn’t lose his composure, though he lost his verbal swagger, and Genson exposed his memory, if not his veracity, to be deficient many times. Nothing was made of Burt’s brain tumour and operation, as that would arouse sympathy and give cover for his amazingly selective amnesia, though I believed the tumour had contributed to his peculiar mental state. He seemed as unbothered when inaccuracies were revealed as he was when he uttered them.
I encountered Rick Burt as he was leaving and I was entering the washroom. When the door was opened and we came face to face at a range of barely two feet, I groaned, he sighed, and we passed by. That, I hope and assume, is the last contact there will ever be between us, the unforeseeable end of a friendship of twenty-five years.
As a witness, he credited me with “an intimidating vocabulary” and other attributes of intelligence but threw in completely with the abominable falsehood that I was part of a scheme to defraud the shareholders and directors in favour of my associates and me. On his character, Kissinger had been right.
All was now in readiness for the appearance of my old and formerly somewhat close friend Marie-Josée Kravis. Greenspan had Pat Tuite start, because he wanted him to establish the basic facts. The suspense about whether Greenspan was up to the task of being chief cross-examiner was about to be addressed.
–
M-J, TOO, SEEMED AGED SINCE I had last seen her, three years before. She appeared to be embalmed, so white and taut was her face, though that might have been the result of having a bad allergy and flu that day. She was well dressed and walked and spoke confidently. Her rather high hair appeared to be set with magic glue, and her wax-works face was not well served by dollops of red lipstick like Anne Hathaway’s in The Devil Wears Prada. It had been a grand progression from convent girl in Duplessis’s old French Canada to liberated career woman admirably ahead of her time in Quebec in openly leading a relaxed personal life, to cohabitant with one of Trudeau’s ministers, to wife of the all-purpose-energetic conductor of the Montreal Symphony Orchestra, to the highest socio-economic stratum of New York. I had known her socially through most of this time and she had managed each stage with admirable sang-froid and panache.
When she raised her hand for the oath ending “So help you God” intoned by the judge, it reminded me of the picture she had once shown me of her at her First Communion. What unexpected and contrary currents had carried us along, and where might they take us yet?
The direct examination led her, in the manner that was now familiar, through a very labyrinthine course around awkward facts and events and obligatory admissions, but, like a good mystery hunt, to the objective: the witness knew nothing about the money we had supposedly taken for ourselves.
Pat Tuite started and was worrisomely deferential. I asked him at the break what he was doing and he said, “The jury likes her.” (The usual pallid excuse for defence counsel not doing their jobs properly.) I said that it was his task to disabuse the jurors of that. Tuite’s soft methods did entrap her several times in the dense 10Ks, where she claimed to have read things adjacent to the related-party section that detailed the matters she claimed not to have read. In his gentle way, Pat had made inroads and attracted the curiosity of the jury, which was not an effortless intellectual accomplishment.
They closed out Friday, April 27. She would be back on Monday, to face Greenspan. This was the time for him to show his mettle. Monday, April 30, opened with a more determined M-J striding to the witness box. I assumed that her husband’s public relations apparatus had got her the quite good puff-piece in the New York Times on the weekend, and where she had been demure on Friday, she came back in black and with spikier shoes, a slightly dominatrix look. Her face was less stiff and the overall effect was good. She rebutted Tuite quite effectively and his strategy of undermining her popularity in folksy increments made no progress on this second day. She won the first round. If we were going to derail the prosecution strategy of using the Audit Committee as respectable beaters for Radler’s tales, it had to be now.
Greenspan stepped to the questioning podium and, as was his custom, gave no greeting or introduction, in the falsely folksy American manner, paid no deference to her status as an economist or as president of the Museum of Modern Art, and started into a trenchant series of questions. She fought scrappily, challenged, and sometimes tried to speak over him, but he bore down on the real questions. She claimed not to remember being on one teleconference where she was recorded as present and where the contested payments were confirmed as having been approved. Then she answered that she could not speak of what she did not remember. Greenspan pounced on this with the agility of a cougar and went through a long series of confirmations of the payments that she had signed or attended, where the Audit Committee approved, and claimed now to have read but did not now remember. “We can’t count on your memory for anything.” If she had read the 10Ks, how had she missed, etc?
He went through version after version of the approval of these payments. He even wrung from her that she had read the first 104 pages of the 2002 10K very carefully, by establishing that she had read a selected paragraph that stopped on that page. This happened to be the very paragraph before the exposition of the disputed payments. This was not credible. Even less credible was the fact that, as she emphatically restated that she had read everything up to that point, she somehow missed the original reference to the same payments, in an identical paragraph, forty pages before.
What particularly incensed me about her performance was that she fell in enthusiastically with the government’s position on the perquisites of the Hollinger executives with enthusiasm and determination. These were not areas that involved the SEC, and a refusal to comply with these trumped-up charges would not have inconvenienced her husband’s business. (I assumed the SEC had threatened KKR, as well as the defendants as individuals.) She had caused the Audit Committee to adopt the position that Radler and I should always travel on the
company planes for security reasons, as she was aware of the security threats we had had, from extremist Irish and Muslims. We received threats almost every week. Now she was conscripted, with no knowledge of the facts, and after the matter had been demolished by Greenspan cross-examining Creasey, to object to my flight to Bora Bora. When Greenspan asked to confirm that there had not been a policy permitting or prohibiting personal use of the airplane, she replied: “That’s not correct. There was the law.” He said, “I’m sorry. There was what?” “The law.” “The law is policy?” “I would hope so.” He pointed out that she had moved the requirement that senior management use the company’s plane for security reasons, and her attempt to masquerade as a sheriff petered out in a debate about when the IRA had blasted our old office buildings in London. It was a very irritating rodomontade.
Even more outrageous was her pompous disparagement of the December 4, 2000, dinner that was billed as a birthday dinner for Barbara, as illegitimate for any corporate participation in the cost. I had consulted her about what arias should be sung by the person from the Metropolitan Opera that I engaged. She knew perfectly well that it had begun as a corporate dinner, and was approved in the minutes of the previous directors’ meeting as such, and she was aware from attending the last phase of it that it was certainly a corporate occasion. The commercial role played by Barbara’s conversation with Donald Trump, whom she sat next to and had never met before (an unusual placement for a supposed birthday party), was also referred to subsequently, and Kravis knew about it.
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