Conrad Black

by A Matter of Principle

  Matthew’s restlessness with what he saw as Perle’s inefficiency was such that we eventually divided Digital in two; each took his own section. Of course there were many losers among the investments and both Richard and Matthew proved distinctly fallible, but we had our share of successes. The last I saw, the company had a fighting chance to come out of it more or less at break-even, a respectable performance compared with the billions squandered in the dot-coms by larger companies with more apparently qualified experts and more orthodox business methods.

  In geostrategic matters, Richard Perle was a refreshing Californian, unburdened by the chronic world-weariness, pessimism, and respect for the status quo of centuries that afflicted Henry Kissinger. The night of the Iraqi invasion of Kuwait, I telephoned Perle at his home in France to recruit him for the Advisory Board we were setting up. He was engaged until after 4 a.m. his time, raising bellicose spirits among his former colleagues now in the first Bush administration, before he called me back to accept. When we next met in London, he got into my car and handed me a manifesto of an organization he co-chaired with two well-known American leftists and bearing a pacifistic, if not bucolic, name. He said, “This is my latest initiative, supposedly to find a peaceful resolution of the Kuwait invasion, but really to get the war started.”

  Always witty, patient, and philosophical, never intimidated by adversity, Perle was a delight as a dinner companion, as a houseguest, or on a Mediterranean cruise (where he and his wife and son twice joined us, once in a particularly uproariously amusing cruise along the Côte d’Azur with Bill and Pat Buckley in 1996). In the crisis, Perle was the last ally to break and run, though break and run he did, but at least he expressed regret.

  This is not the place for a comprehensive biographical sketch of Henry Kissinger. It need hardly be emphasized that he is a world historic figure and one of the great personalities of the last third of the twentieth century. He has a remarkable and unflagging intellect and a brilliant sense of humour; he is a political operator of impressive dexterity within any sphere; and he has a wife, son, and daughter (from his earlier marriage) who do him honour. Allegations that he has no patriotic or sectarian loyalty, no deep attachment to people, and that he lacks respect for institutions of which he is not a natural adherent are untrue (he even has a sophisticated respect for the Roman Catholic Church). Of all twentieth-century statesmen, only Winston Churchill and Charles de Gaulle surpass him as a stylistic memoirist, and they were, after all, symbols and executants of the regeneration of great nations. Kissinger’s best works are a contribution to literature as well as history.

  He also possesses great physical courage. When we were together in Belgium at another Bilderberg meeting, he called me at 3 a.m. to tell me that he had lost the sight of one eye. I accompanied him to the hospital and sat up with him all night. He had suffered a thrombosis and lost the sight of his right eye permanently, but he insisted on chairing his scheduled session a few minutes after we returned to the conference centre at 8 a.m. He was like the Earl of Uxbridge at Waterloo, calmly informing the Duke of Wellington that he had just lost his leg (to a French cannonball). His sang-froid, taking down the names and addresses of the doctors and nurses at the Louvain hospital so that he could write to them, and mentioning the incident to no one, was an inspiration.

  He is not at all without sentiment. I have discussed how, two weeks after this incident with his eye he returned to England so that we could go together to make our farewells to John Aspinall, the flamboyant casino and zoo owner, who died of cancer a few days later. Kissinger wept without embarrassment as we left. When my own brother, whom he scarcely knew, was dying of cancer, he telephoned him and spoke words of great encouragement. He is a punctilious and eloquent correspondent.

  His self-importance, irritability, and roughshod treatment of subordinates are considerable, but he recognizes his own foibles. When we returned from Amman to Berlin for yet another conference, after he had changed hotels because of the inadequacy of the suite accorded him, we went, together with Nancy Kissinger, to Frederick the Great’s palace at Sans Souci. A motorcade was provided that sped to our destination, the docile Germans pulling to the sides of the roads more respectfully than Parisians, Londoners, or New Yorkers would have done. After a few miles of screaming sirens and steady acceleration, Kissinger said, “You know, this isn’t bad for someone who has been out of office for twenty years.”

  When he was secretary of state, he was asked by a journalist as he arrived at the bar mitzvah of the son of a friend whether this reminded him of his own bar mitzvah in Germany. He instantly responded. “Actually, von Ribbentrop wasn’t able to come to mine.” He knows to mock his own egotism: when Lord Peter Carrington met him and apologized at the end of their conversation for having arrived a few minutes late, Kissinger demurred and said, “You are feeding my megalomania.”

  He is almost always implacably gloomy about the ability of successive American administrations to achieve anything and about international affairs generally – unless asked what would be possible if he were in charge of the State Department. Yet he is morbidly preoccupied with criticism and easily destabilized by negative press comment. He peremptorily withdrew as chairman of the 9/11 Committee when there was the slightest hint of criticism and then blamed his failing to intimates such as Barbara and me on faulty legal advice. He has contempt for almost everyone and so sees no inconsistency in trying to make friends of his enemies.

  By background, experience, study, and taste, he is a Metternichian manoeuvrer, always aware of weaknesses, with an un-American sense of vulnerability and cautious belief in what is possible, conferring the accolade of friendship on multitudes, of intimate friendship on a more select group, but in fact respecting few and confiding in no one except his wife. His transitory interest prevails over everything, effortlessly, but in the aftermath, genuine sentiment, a historical regard for those who lose, and a desire not to leave enemies behind him causes him to doff his cap to the fallen. Withal, he is, in many ways, a great man, and most of his critics do not deserve to be taken seriously.

  He is a grateful American, a loyal son of Germany, a serious though not especially proud and not religious Jew, an exemplary husband, and, up to a point, a good friend. I have a vast correspondence of warm letters of imperishable friendship from him, and he said under oath in the Hollinger proceedings that I had been one of his closest friends in the world for decades. Our houses contain many books inscribed by him to Barbara and me as “indispensable pillars of my life.” Unfortunately, none of this prevented him from dispensing with us for seven years without a warning or even a pretext when his association with me became even a slight inconvenience.

  It was on these people that I largely depended as I was swept down into the deepest crisis of my life.

  ON NOVEMBER 6, 2003, I received a peremptory letter from Paris and Thompson in their capacities as chairmen of the Special and Audit Committees to “instruct” me to answer many questions about the two lots of supposedly unauthorized non-competition payments. They gave me five days. I did another telephone canvass. Based on what I learned, mostly from Mark Kipnis, as Jack Boultbee and David Radler were unable to recall anything and Peter Atkinson simply threw up his hands and concluded that one of the others had become recklessly addicted to non-competition fees, I cobbled together a reply as best I could. I sent it to Jesse Finkelstein, who was still the only American lawyer I had at the time. My reply was essentially suppositions in respect of the $15.5 million paid to executives, including rather more than $5 million to me. I knew nothing about the origins of the $16.5 million paid to Hollinger Inc., although I naturally recalled when the money came in and had been assured that it had been properly approved (as a court eventually determined to be true). The payments to executives had been declared by the auditors and the Audit Committee to have been approved and fully disclosed many times. I made these points and suggested that the two committees defer taking a position until the Special Committee had finishe
d its work. While I was skeptical about Breeden’s Christmas timeline, it did not seem to me unreasonable to propose trying to put the whole matter in the context of the full report.

  Jesse Finkelstein was in Los Angeles at the time. He made some modest changes only, put the essence of my letter onto his letterhead to preserve lawyer-client privilege, and sent it to Paris and Thompson. He seemed satisfied with what I had written. I thus received very little legal advice, and that from a lawyer whom I hadn’t yet met. Though I realized this was a deadly struggle, I had no real understanding of what corporate warfare in America involved: I was no innocent, but I was an entrepreneur with mainly Canadian and U.K. experience.

  Jimmy Goldsmith had said he would never attempt business again in America, that it was a corrupt system and one had to fight the U.S. government and its agencies as well as the normal business battles. And Jimmy was as fierce a businessman as I have met. James (Lord) Hanson had similar accounts of his run-ins. But much as I respected them both, I had assumed there was some element of exaggeration. I had read accounts of corporate battles in American business, but such accounts didn’t illuminate the way regulatory agencies were used: not as umpires or “truth-seekers” but as legions to be deployed against the fashionable target of the day, making up new rules as they went along under the flag of “exceptional circumstances.” I had no idea of who or how to find battle-hardened American corporate lawyers and anyway there was no time.

  Finkelstein’s arrangement for David Boies to call on me was made for November 14. On November 11, Thompson and Paris telephoned and suggested they meet me at our New York office the following day in the late morning. There was no mention of their being accompanied by anyone, and I assumed that we would have a fairly informal discussion of the allegedly unauthorized payments. The fact that the two had written to me jointly and claimed to be co-chairs of a joint committee confirmed my fears that a Faustian bargain had been struck to shelter the Audit Committee in exchange for its full assistance to Breeden against the management. Subsequent events would only confirm that impression.

  Because I was chiefly preoccupied with trying to refinance Hollinger Inc. and get out from under the liquidity problem, which had already kicked up Can$27 million of unhonoured preferred-share retractions, I started the day with a meeting with Jonathan Rothermere of Associated Newspapers at the Carlyle Hotel, to explore the possibility of uniting the two British newspaper groups for business purposes, while retaining editorial control of the Telegraph. Rothermere was accompanied by British Merrill Lynch officials, and it was quite a satisfactory opening discussion. I revisited them at the end of the afternoon, but by then my world had changed forever.

  Proceeding down Fifth Avenue to meet Paris and Thompson, I was eventually informed that they and two other men awaited me in the boardroom. I joined them and took the head of the table. The others were Jim McDonough, independent counsel to the Audit Committee, with whose sluggish approach to many matters I was already familiar by telephone, and Richard Breeden. Finally, the person I felt instinctively and by tidbits of corporate intelligence would be my nemesis, and possibly a mortal threat to my position, showed himself.

  Breeden’s appearance was not reassuring: round, flabby face; dull, lifeless eyes behind thick spectacles; a brusque, humourless, and unanimated demeanour. He reminded me of nothing so much as a regional commissar of Beria’s, with the bloodless, piscine coldness of someone whose power vastly exceeded his intelligence. I was not optimistic that appearances were deceiving.

  He said little. When he spoke, it was to restore the prosecutorial tone of the proceedings. As the meeting wore on and its direction was firmly established – my head on a stake – Breeden brought to mind Kafka’s description of Mr. Pollunder in America: “the words rolled furiously over his sagging lower lip, which like all loose heavy flesh was easily agitated.” In the brief period of our civilized exchanges, the only sparks of life I was able to fan from the phlegmatic hulk of Breeden’s personality were his pride in his sons and his love of sailing. I could identify with these, at least, but it was gruel too thin to vary his hostile purposes.

  In a pattern that was to become familiar, it was Paris who delivered Breeden’s message. The payments were rigorously unauthorized and improper. The many retroactive statements of approval of the payments to executives, on SEC forms all filled out long before there was any mention or even thought of a Special Committee, did not alter that fact. They had canvassed the buyers of the newspapers and there was no possibility that they had requested the non-competition agreements from Hollinger Inc. (Eventually, almost the entire Paris–Breeden position would be rejected at trial, and the rest vacated on appeal.) All of the independent directors (Richard Perle was not considered independent) had been consulted, and they were unanimous that I had to go as chief executive officer, leaving me as non-executive chairman in charge of meetings, and that Radler had to go completely. Kipnis and Boultbee had to go as officers, and Atkinson had to go as a director but could remain for a time as an officer. The sums would be repaid in full, with interest, 10 per cent at New Year’s and the balance by June 1, 2004. The management services agreement with Ravelston would end.

  It was agreed that Lazard – with whom I had been dickering since May and whom I proposed to engage to assist in smashing the capital strike and getting our stock price up – would be engaged for what Breeden portentously called a Strategic Process. This would be defined as an exploration of a whole range of alternatives, from doing nothing to selling the entire company. Hollinger Inc. should avoid any refinancing that would constitute a dilution of the control of the existing principal shareholder, Ravelston. The controlling shareholder was to be transformed at once into a eunuch, bound hand and foot to Breeden’s war chariot, and I was to acknowledge, in effect, that my control had been merely a masquerade, an imposture. The jig was up, and I was to drop any pretense to directing the company’s affairs or having any real equity in it and humbly retire, like a schoolboy resuming his place after receiving a severe thrashing in front of his classmates. Paris said any balkiness on my part would lead to the whole board going to court to remove us all. These measures would be written up in what would be referred to from now on as the Restructuring Agreement.

  It was a thorough putsch. My dear colleagues on the board, whom I had not lobbied because I thought it would be unseemly, gave me no notice of the stroke Breeden had prepared, though it subsequently emerged in a deposition of Kissinger’s that Breeden had been bandying about for several weeks the likelihood of crimes having been committed. Kissinger later told me, during the weeks while he was still pledging never to desert me, that Seitz had instantly called for far more extreme measures – namely the summary dismissal of all of us, and that he, Kissinger, had defended my status as chairman of the Telegraph.

  I had to choose between resistance and collaboration, and decided to see whether the carapace of my visitors could be probed. I said that of course if money had been paid improperly, it should be returned. I could not speak for anyone else, but I had done nothing wrong. No allegation of wrongdoing against me had been made, and it was impossible that there was evidence of any. Obviously, if it were otherwise, I would not have been invited to remain as chairman. I could accept having a co-chief executive officer. I emphasized, and they agreed, that perceived financial instability at the top of the group was a bad thing for the whole group and that they should not hobble Hollinger Inc. It was a public company in another country with its own shareholders, and they should not try to control it.

  It was a perfectly civilized and courteous exchange, and they gave some ground. It was agreed to reconvene at dinnertime at Le Cirque. I returned to meet with Rothermere at the Carlyle, went home and telephoned Atkinson and Radler, and then went to dinner. My guests straggled in half an hour to an hour late, without a hint of an apology, and negotiation recommenced. Again it was quite cordial, and I did what I could to loosen things up without seeming to take our purposes lightly. It was cle
ar that they had again canvassed the directors, as they acknowledged, and steadied the ranks in a somewhat more forward position than where we had left off in the afternoon. Again I had to defend the prerogatives of Hollinger Inc. and again I protested that I could not commit that company which was in a different jurisdiction with a separate board of directors or commit any other person to terms I might negotiate. I would do what I could to persuade Inc.’s board to accept its part of any Restructuring Agreement I agreed to, if the allegations proved accurate and provided International would keep up its cash-flow obligations to Inc. for six months. We fenced through dinner. When Thompson proposed to retain the level of cash flow to Ravelston and therefore Hollinger Inc., even if that meant at its current level through to June 2004, and even if that meant front-loading the payment, I promised a best effort at agreement from Hollinger Inc., provided the version of events they gave me was confirmed.

  I got Thompson to reminisce about his political career, and elicited the fact that Paris was an opera enthusiast, which gave us some common ground. Breeden’s conversational forte was noisily dropping the name of George Bush Sr. and talking about his time as SEC chairman, but he did lighten up a little. He volunteered that I had been terribly let down by subordinates and acknowledged that, in his brief and modest time as an executive (before he discovered his true métier as the snarling, righteous face of corporate governance), he, too, had counted on others to do what I had counted on others to do in this case. Breeden was severely critical of KPMG and the Torys law firm – one of the few subjects in which we were in complete agreement. McDonough, apparently at the outer limits of his amoeboidic social capacities, sat mercifully mute and inert. A few weeks later, when they were challenging every conceivable expense, it was suggested that I, and not the company, should pay for this dinner at Le Cirque. When I pointed out that this quartet was not my idea of a social occasion, they had, for the only time, the decency not to challenge me.