REVENGE OF THE CONSIGLIERE

Undermining David Radler’s credibility is harder than it sounds

STEVE MAICH April 23 2007

REVENGE OF THE CONSIGLIERE

Undermining David Radler’s credibility is harder than it sounds

STEVE MAICH April 23 2007

REVENGE OF THE CONSIGLIERE

Undermining David Radler’s credibility is harder than it sounds

BY STEVE MAICH • David Radier is a liar. The two sides in Conrad Black’s ongoing criminal trial don’t agree on much, but they agree on that: the man who was Black’s right hand for more than 30 years is an accomplished dissembler of the first degree. But even the most incorrigible liars have to tell the truth sometimes. The trick is figuring out what and when to believe.

The prosecution says Radler lied repeatedly on behalf of himself and other top managers of Hollinger International, to fatten their prodigious bank accounts at the expense of clueless shareholders, and that he has chosen to tell the truth now because he has no choice. Caught in a litany of misdeeds, his only angle was to plead guilty and mitigate the consequences by testifying against his long-time partner. The defence, on the other hand, says he’s lying now to escape blame, to save his own skin, and perhaps to satisfy a malignant jealousy that has festered for years beneath the surface of his relationship with Black.

The first two weeks of Black’s trial in Chicago only nibbled around the edges of all this. Radler’s name came up a couple of times, and defence lawyers took the opportunity to paint him as a conniving rat. But mostly the focus was on arcane details of dull noncompete agreements and parsing the specifics of a few contentious expenses. Interesting background, perhaps even fodder for debate at M.B.A. schools, but it left many wondering when prosecutors were going to get around to the part where somebody actually commits a crime.

This much is clear: the Conrad Black trial is not about lavish parties, or trips to French Polynesia. Nor is it about who asked for what clause in which newspaper sale. All of the critical questions revolve around David Radler. And this one stands first and foremost: can the testimony of this admitted felon convict Black and send him to prison for the rest of his life? Put another way: if Radler is responsible for the fraud that devastated the company, as the defence contends, is Black still responsible for Radler?

On the surface, it’s a relatively simple legal question. The answer is no. “It’s not enough to say that Radler was Black’s guy, and Radler committed a crime and therefore Black is guilty,” says Sam Buell, a former prosecutor in the Enron trial who is now a professor of law at Washington University. “You have to establish that Black at least knew of, or even helped carry out, an illegal act.”

Black’s team has staked out the position that Radler was essentially an independent operator within the Hollinger empire. He was responsible for Western Canada and the United States, while Black focused on Eastern Canada and Europe. On paper, it’s a strong defence. But the law that prevails among 12 lay people behind the closed doors of a jury room is not always as it’s written in the books, and that’s where things get dicey.

Hugh Totten, a veteran Chicago litigator and senior partner with the firm Perkins Coie, thinks the strategy is “absurd.” “He’s in effect saying Radler was off on a 30-year frolic and detour. That just doesn’t make any sense,” he says. “Conrad Black was a guy who operated on a 24-hour clock. His own attorney said his life was his work and his work was his life. For him to say that he wasn’t aware of the details of these huge transactions, where huge chunks of the company he built were being sold off, and he benefited directly by those sales, I think that stretches the imagination to believe.”

It would have been far better if Black’s team could have gone to Chicago and claimed that no crime ever took place. That would have challenged the prosecution to prove that Hollinger’s problems went beyond bad judgment or negligence, that there was a conscious effort by Black and others to steal. If all the top executives had maintained a united front, they could have all credibly claimed innocence, “but once that united front breaks down, it’s a pretty difficult sell to claim that nothing went wrong here,” says Jack Chin, a professor of law at the University of Arizona and an expert in corporate crime trials. “Radler’s guilty plea is a very credible demonstration there was, in fact, a fraud.” And so, the defence must try to shift blame.

Black’s problems are compounded by the fact that he appears to have been a beneficiary of the crime for which Radler has agreed to go to jail. That leaves Black’s lawyers in the uncomfortable position of distancing their client from a man who was one of his closest confidants and most trusted associates. It’s a manoeuvre with several obvious weaknesses, says Buell. “The prosecution will simply point out it was Conrad Black who hired this guy. It was Conrad Black who promoted him. It was Conrad Black who made him a confidant and an intimate over the course of years and years. Now he’s turning around and saying that he’s a distasteful person, and you shouldn’t believe him. But that’s inconsistent with everything he did with this guy before he was charged with a crime.”

The only thing for the defence to do is open up an unrelenting assault on Radler’s credibility—and it has already begun. One witness testifying about a sale of newspapers in the late 1990s has already described an episode in which Radler, trying to bully a higher price from the buyer, blew up in a false rage. “You’re wasting my f—ing time!” he fumed, and stormed out of the room, returning a short while later. The lawyer for co-defendant Mark Kipnis asked the witness whether he considered Radler a good actor. The prosecution objected to the question, but the point sticks

and it’s unmistakable. In a fight that may well come down to whether or not the jury accepts what Radler has to say, every little jab at his character is critically important.

In the end, lawyers say the case is likely to turn on a subjective judgment by 12 people, deciding what constitutes right and wrong in a corporate world they’ve never known. As previous white-collar corruption trials have shown, it’s not necessary for prosecutors to produce written “smoking gun” evidence of conspiracy. Even the slightest thread of circumstantial evidence linking top executives to a crime can be enough to win a conviction. When Bernie Ebbers, the former CEO of WorldCom, went on trial in 2005, his chief financial officer Scott Sullivan struck a plea deal and testified against his old boss. Sullivan said he was never explicitly told to do anything wrong, but that Ebbers had repeatedly said it was essential WorldCom “hit its numbers” and meet Wall Street’s expectations. Sullivan said he found Ebbers intimidating. That was enough to convict the CEO and send him to prison for 25 years. “Most juries don’t expect that there would be explicit conversations like ‘let’s go cook the books,’ ” explains Buell. “Often it’s a gradual decision to push the envelope and then exceed the confines of the envelope. The jury simply

needs to come to a determination about what was done and why beyond a reasonable doubt, no matter how they get there. And they’re allowed to use their common sense.”

RADLER with Peter Atkinson (above). His B.C. home is worth $2.7 million.

So, it will fall to Black’s lead lawyer, Eddie Greenspan, to paint Radler as the true villain of the Hollinger saga. “Greenspan has a reputation for going for both jugulars,” says Totten. “He will want to leave Radler in tatters, and will bring out all kinds of‘bad act’ evidence to undermine him.” Still, veteran Toronto media lawyer Julian Porter says it will be very difficult to discredit him totally. “They’ll focus on the fact that he’s changed his story, but everybody lies before they cave,” he says. Most expect the questioning to go on for several days at least. And in the course of that cross-examination there is a question that the jury may well have to consider: why did Radler break ranks with Black and the other three defendants? It surely wasn’t over a troubled conscience. If the evidence so far is any indication, there might never have been an indictment had all the executives stuck together. Perhaps he flipped because he had more to lose than anyone else.

When Hollinger began to crumble in acrimony four years ago, Radler had already begun to expand his personal business empire. He is still CEO of Horizon Publications, a private company that runs about 40 small, profitable newspapers in Canada and the U.S.—including such titles as the Lethbridge Herald—many of them purchased from Hollinger in the late 1990s. Industry sources say the company is worth well over US$100 million. Black and Radler were partners in Horizon until Black sold his share last year. The two haven’t spoken in two years, but there are still some vestigial connections—each holds a 25 per cent stake in Bradford Publications, another private company that operates a few small, profitable papers in the northeastern U.S. Radler’s also known to have been a 15-per-cent owner of a Vancouver investment bank, Salman Partners, though the company declined to say whether Radler is still involved. More recently, a company headed by his daughter Melanie Radler called RISN Operations bought a small chain of newspapers on the U.S. East Coast for almost US$8 million. It’s widely assumed that Radler the elder is involved in that deal, too. He’s also still got his two massive homes—one on Marine Drive in Vancouver, with an assessed value of $2.7 million, and one in Palm Desert, Calif., assessed at US$2.1 million.

Radler has settled most of the major civil suits against him, by paying out just over US$100 million in restitution to his former company and various regulators. He has agreed to a 29-month prison term as part of his plea agreement. But at the end of it all, Radler will be in a position to spend his golden years presiding over the sizable remains of his business empire, and to pass on considerable wealth to the next generation. If the price of that outcome is to be forever labelled a liar, then so be it. The final act for Conrad Black is far less certain—that particular Faustian bargain was never available to him. M