Conrad Black

by A Matter of Principle

  That evening, I flew back to New York. It was the last time I would see our corporate airplane. I did not even have the opportunity to say, as General Gordon did to his camel at Khartoum, that we would “ride no more under desert stars.” One of the provisions of the Restructuring Agreement was that that plane would function as it had until the end of the year, by which time Gordon Paris and I would work out a new regime for it through to June 1. It later emerged from a deposition of Jim Thompson’s, uttered with the eloquence one would expect of the continuer of the Illinois political tradition of Abraham Lincoln and Adlai Stevenson, that there was concern that I would use the plane for a book tour. Thompson became “pissed off” and grounded the aircraft, in complete contravention of the agreement.

  They need not have feared. A full book tour was impossible, and I would not have put that expense on the company anyway. I gamely went to a fine reception at Hunter College, near my home in New York, where I was to be given a tour of the Roosevelt home on 65th Street. But we were inundated with aggressive reporters; a book tour was out of the question. Very few interviewers could promise to keep to the subject, and the advice of my lawyer, rudimentary as it was, was that I should not talk about my ouster as CEO and the so-called unauthorized payments, to avoid the fate of Martha Stewart.

  I was not about to go to the mat with Breeden and Paris on the issue of the plane. Commercial aviation had been the means of travel for most of my life and I could quickly get used to it again. I merely recorded with Paris the fact that the agreement had been violated. Evidence started flooding in that the other side had already made our agreement into a Swiss cheese. Outrageous stories of improper financial conduct were floated with the approval of the Special Committee counsel’s staff and shareholder-relations vice president, Paul Healy. Radler and I had tolerated him because he did have moments of effectiveness. His friendship with Christopher Browne in particular was disquieting and we should have got rid of him long before.

  It was leaked and reported in the press that I had spent $14 million of the company’s money on my house in Palm Beach and that I had spent an additional undisclosed and unauthorized $4 million from the same source on Roosevelt papers. Barbara had supposedly spent $3 million decorating the aircraft. David Radler was said to have been taking kickbacks on newsprint purchases, and importing drugs on our plane from Mexico. Another such story was the Financial Times story that I had taken £94 million of dividends directly from the Telegraph, bypassing the private and public companies between the Telegraph and me. These and other fantastic stories popped into the press and remained there until we stamped them out, which took considerable time. There was never a retraction, merely an end to the retailing of the story and a movement onward to the next falsehood planted or amplified by our co-contractants, who had promised to put the best possible public relations face on events.

  On November 21, the Kravises, de la Rentas, and Jayne Wrightsman held a book launch party for me at the New York Four Seasons Restaurant. I had given them plenty of opportunity to dodge it, but they insisted. The former Treasury secretary, Robert Rubin, was holding a reception in the neighbouring room that naturally pulled a great many more people – and many of the same ones.

  The presence of Candice Bergen, Joan Collins, Barbara Walters, the Kissingers, former and current mayors Ed Koch and Michael Bloomberg, World Bank president Jim Wolfensohn, Bill Buckley, long-serving district attorney Robert Morgenthau, Mrs. Nelson Rockefeller, the Ahmet Erteguns, the George Livanoses, Barry Diller and Diane von Fürstenberg, Bob Silvers of the New York Review of Books, the Podhoretzes and others from Commentary magazine, and a considerable swath of New York finance and society convinced even the New York Post that “the New York power structure rallied in support of Conrad Black.” A more widely held view was that of Tina Brown, an undoubted expert on the subject of career reversals from her own and her husband’s experiences, that it was more like a wake for the life we had had. Both descriptions were partly true, but I nevertheless had enjoyed myself. Barbara described herself as “in rigor mortis” throughout the evening.

  The dinner afterwards at Jayne Wrightsman’s was a touching and exquisite occasion. Henry Kissinger, the Weidenfelds, and the Sid Basses were especially generous in their comments, about both the book and its author. But this agreeable interlude could not long distract me from the fact that I was now in a truly horrible crisis.

  No time is ideal for a crisis of such proportion, but this one came at the most inopportune possible point. Though I had tried to give up my citizenship gently, I had incurred great and understandable resentment in Canada for renouncing the country. The British were not generally impressed with someone who appeared as eager as I was mistakenly portrayed to be to become a peer. There was apparently much resentment in that country of what was widely considered my use of the Daily Telegraph and Sunday Telegraph to promote somewhat un-British notions of solidarity with the United States. In the United States, it was a straight rise-and-fall story, leavened by the current hostility to perceived corporate excess. But there was also broad and touching dissent among many who knew me personally and expressed their views privately, with an elegance that often only the British can achieve.

  A blizzard of SEC subpoenas indicated that Breeden had done his best to bring that organization heavily down on our backs. I surmised that they would shortly assault the sources of our revenue as well.

  The extent of the opprobrium I attracted had only one partial precedent in my life: the more jagged moments of my school career. I had been twice expelled from high school, the first time amid great unpopularity because my theft and resale of examination papers had caused hundreds of students to be required to write their examinations over again. I was not a naturally dishonest person, but, in full revolt against a school I disliked, I set out to reduce it to chaos. I was more successful than I wished or expected. The second unscheduled departure from a boarding school was for general insubordination.

  The lesson of these far-off and not overly creditable events was that adversity endured does pass. My world had collapsed and many of my social acquaintances together with the press were rejoicing in this. I believed intuitively that if I could stay afloat financially rather than drown in personal bankruptcy, I could eventually rebuild some position and work to regain much of what I had lost in the dramatic suddenness of my setback.

  I accepted the Gaullist formula that I had lost a battle, but not the war of my life. I became a Gaullist in 1955, from reading the general’s memoirs and identifying with what he called his “rejection of the dictates of a false discipline.” My francophilia and realization of the impermanence of triumph and disaster, the value of endurance, and the manipulability and forgetfulness of general opinion dated from these days. I had learned and admired how a civilized country like France could move so quickly between the glories of 1918, of Foch and Clemenceau, and the shame of 1940 to de Gaulle’s proposal of a revival of French grandeur. Of course these were a ten-year-old schoolboy’s narrow perceptions, as de Gaulle was writing of a false military strategy, a corrupted political structure, and national survival. I was complaining only about school teachers.

  To readers who encounter just the normal amount of human frailty and unattractive qualities, the seemingly endless list of morally deformed people you are about to encounter may seem exaggerated and not credible. Please think of it as a sharks’ feeding frenzy: when the possibility of tens (if not hundreds) of millions of dollars is dangled above the open mouths of people who have dreamed of or pursued such sums without significant success all their lives, hunger takes over. Greed, mendacity, viciousness, and even megalomania – which live in most people at a level they can more or less suppress and control – come to the fore in pathological surges. Hollinger International and Hollinger Inc., with their hundreds of millions of dollars and important newspapers, became magnets. Moral codes slipped; the centre could not hold. I was driven often to thinking about Yeats’s poem through one ugly catastrophe a
fter another. In these matters, there was a sort of alchemy that transformed people of some distinction into self-seeking sharpers and the randomly venal into rabid fiends. We were in a psycho-horror film, scripted and produced with, for a time, an almost Hitchcockian gift for terror.

  I AM GENERALLY SKEPTICAL of schoolyard parables, but my school days had familiarized me with the hypocrisy and cowardice and false morality of mob anger, artificially incited. Breeden would have been a good schoolmaster of the old type: authoritarian, and without humour. I knew early on what I was dealing with, not only in him, but in insipid goody-goodies such as Seitz – polishing an apple for teacher and snitching on tardy students. When Breeden threw down the mask and called me a looter and a crook, as he soon did, I was fighting not for my place in school, but for my life.

  THE FIRST DESERTION OF long-standing Canadian allies was the demand of Hollinger Inc.’s independent directors in Toronto that what had happened at Hollinger Inter national be replicated at Hollinger Inc. I would have to go as chief executive, David Radler as president and director, Peter Atkinson as director, Jack Boultbee as director and officer. They had no reason, only that the same had been demanded and accepted in the United States. Even Barbara would have to go, which Breeden had not requested for the American board. We told them in vain that we had only accepted Breeden’s demands for resignations and signed the Restructuring Agreement in New York in order to spare Hollinger Inc. a financial squeeze. Such circumstances had no application in Toronto. Whatever irregularities there were alleged to have been in Hollinger International did not apply to this company. We explained carefully that there was a difference between Ravelston’s debt-free ownership of 78 per cent of Hollinger Inc. and Hollinger Inc.’s debt-encumbered ownership of 30 per cent of Hollinger International. And even so, there was no evidence that all the comparatively distinguished Hollinger International directors would have quit had we not negotiated the arrangements that we did, though the Special Committee would have litigated. We made no headway.

  The four independent directors were Maureen Sabia, Fred Eaton, Douglas Bassett, and Allan Gotlieb. Sabia had become a champion of corporate governance, addicted to preparatory full-day meetings prior to full-day Audit Committee meetings. Peter Atkinson and Fred Creasey, the controller, told me well before the debacle of November that they could not function with her demands on them. Sabia was a lawyer without a real practice, who worked from home. She is an authority on corporate governance and eventually became the non-executive chairman of the large and successful retailer, Canadian Tire. She rightly declined to agree to the return of the allegedly unauthorized non-compete payments Inc. received from International just on Breeden’s say-so. She suggested we turn the matter over for investigation to Joseph Groia, a former director of enforcement for the Ontario Securities Commission. His extensive report, which concluded that the payments were sufficiently authorized, was later proved correct in court.

  Fred Eaton I had known almost all my life. Eaton was the most famous corporate family name in Canada, a household word like Rockefeller, or Guinness in the U.K. I joined the Eaton board in 1976, when it was in serious financial difficulties, and stayed with it through a revival for which Fred was largely responsible. After I went to Britain, he came there as High Commissioner. He performed well, and had more style than most of his recent predecessors, but he was not a born diplomat. There were lapses, such as when he had a party for Ray Seitz, the U.S. ambassador at the time, and asked another guest, who happened to be the husband of the famous and beloved singer Vera Lynn, to fetch him a drink on the assumption that an unfamiliar face in a dinner jacket was hired help. Then there was his dinner for the Queen, when he assured Her Majesty that Canada would remain loyal to the Crown even if she felt obliged to abdicate and the throne thus passed to the Prince of Wales.

  I had sponsored Douglas Bassett as a member of the Toronto Club and as a director of the Canadian Imperial Bank of Commerce. I had been a friend of his father and a pallbearer at his funeral. His defection was a disappointment, but he keeps solicitously in touch with my elder son.

  Allan Gotlieb had been, without question, an extremely distinguished Canadian ambassador to the United States. When he left government service, I gave him the sinecure of being publisher of Saturday Night and persuaded Sotheby’s to engage him as their well-paid Canadian chairman. I had supported his charitable causes and publicly spoken in his support when he was suing several publications for libel. One would have expected better from this relationship.

  After the presentation of the directors’ ultimatum that if we did not do as they demanded they would all resign, the meeting ended and those physically present left, except for the four independent directors. Unknown to the four putative authors of the coup, Barbara remained on the conference line (as did Douglas Bassett, who was at a holiday location) and she recorded their reflections. They could not explain what they were doing, even to themselves.

  They chatted on for a long time about how they did not believe a word I uttered about the impending refinancing deals I had been working so hard on since last summer. “I’m finished with Conrad’s con, con, cons. I never want to hear another one,” said Sabia to general agreement. They were contemptuous of several of my colleagues, including Peter Atkinson, who had worked hard and earnestly to accommodate them and deserved better. Barbara listened to Eaton and Sabia’s description of her as a person whose only concern was for herself and whose expression of concern for my reputation was an act. Gotlieb commended himself for his “Oscar”-worthy performance of concern and his ability to refrain from laughing at both Barbara and me. Bassett was admirably discreet.

  But I had fought hard, and would continue to do so, for Hollinger Inc., which, as the proportions of Breeden’s efforts emerged, would be in a desperate condition. The Hollinger Inc. cabalists would have managed the company into receivership and caused the shareholders’ interest to evaporate in quick time – a few weeks at most. Their resignations would be only a minor embarrassment in the dreadful agony that was unfolding and would make it possible for the board to function again.

  We rejected their demands unanimously, even the conciliatory Peter Atkinson. They resigned and departed the room. Since there was no rational explanation for their leaving, it had to indicate the extent of peer pressure and the influence of the advice of their counsel from Davies Ward Phillips & Vineberg – the firm that the independent directors had retained and whose fees Inc. paid. It was the beginning of a long sequence of bellicose and overpaid advice, ultimately netting that law firm more than $10 million while the company descended into bankruptcy.

  All I had to do now, I believed, was exceed the expectations of complete self-annihilation. This would not be easy. But if we survived, we would win. Should we not survive corporately, it would not be through banishment by this puny quartet. In New York, there were tactical and conscientious arguments for retreat and return. In Canada, the battlements had to be defended.

  My worst fears were soon realized. Hollinger International reneged on its debts to Ravelston under existing management agreements. And the front-loading that Thompson had proposed, and that had been accepted to ensure a flow of funds to Ravelston and Hollinger Inc. until June, was shortly defined by Breeden to one of my counsel as a 95 per cent reduction and the complete denial of the contractual payout sum of six months at the end of the management agreement. Hollinger Inc. would be put quickly to a severe test, as it had to make $14.4 million of annual payments to its bondholders. Ravelston had now lost 80 per cent of its income; if it failed to make the annual support payments of $14 million to Hollinger Inc., a default could quickly lead to a seizure of most of our Hollinger International shares and a complete evaporation of Hollinger Inc. shareholders’ equity.

  Jack Boultbee and I redoubled our efforts to devise short-term patch-through methods. Under Hollinger Inc.’s debt covenants, the super-voting shares were pledged to shareholders, who could seize them in a default. Any change of hands ou
tside Hollinger Inc. would rob these shares of their super-voting rights and we would lose control of both companies. Inc. itself no longer had a line of credit.

  The intention of the usurpatory regime at Hollinger International was clearly to set this chain of events in motion, bankrupt Hollinger Inc., and seize the super-voting shares with which Hollinger Inc. controlled Hollinger International. It was not immediately obvious how we could deal with this, so I began an intensified canvass of refinancing alternatives. I made it clear to Breeden, Paris, and Thompson verbally and in emails with McDonough that under the Restructuring Agreement of November 15, Hollinger Inc. would do what was necessary and prudent to its commercial interest to avoid default. When we next met in New York in January, Breeden professed regret that anyone had behaved improperly, i.e., by telling the press that we were all crooks, which he did not dispute regularly occurred. It was clear that he had shredded the Restructuring Agreement the day after it was signed, but he continued to represent me as the aggressor.

  Though the Restructuring Agreement established Paris and me as co-directors of the Strategic Process, I was never consulted about it, apart from one contact. I was pledged, under that agreement, not to have transactions with any party that would impair the possible success of the Strategic Process, unless threatened with default. As Hollinger Inc. now clearly was threatened with default, I considered, with supportive legal advice, that the Strategic Process would best be served by whatever avoided a default.