JUSTICE

NOTHING LEFT TO SELL BUT HIS PARTNER

Consummate dealmaker David Radler is closing his last big deal

MARK STEYN May 21 2007
JUSTICE

NOTHING LEFT TO SELL BUT HIS PARTNER

Consummate dealmaker David Radler is closing his last big deal

MARK STEYN May 21 2007

NOTHING LEFT TO SELL BUT HIS PARTNER

JUSTICE

Consummate dealmaker David Radler is closing his last big deal

MARK STEYN

David Radler stood in front of a map of Canada studded with dots and started to warm to his theme. The red dots represented papers operated by Conrad Black (just three of them), the blue dots represented papers

operated jointly by Black and Radler (another three), and the yellow dots represented papers operated by Radler—hundreds and hundreds of them, across the land, and each dot signifying not a lone paper but the hub of a regional network encompassing not just a major daily but a web of weekly community papers and local “shoppers” and giveaways.

A small hunched man, David Radler seemed to come out of his shell in front of the display, his voice strong and confident, his arms lively and expansive. “It’s like he’s making a presentation at a board meeting,” the National Post’s Mary Vallis whispered to me, and she was right. But he was, in fact, speaking directly

to a jury just three feet away. Radler, the consummate deal-maker, is closing his last big deal. Not with some bespoke executives round the boardroom table but with a dozen bluecollar Chicagoans. When the United States government finally caught up with him, he had nothing left to sell but his business partner of four decades. And so here he is, in the well of a federal courtroom, working the room, or at least the jury panel, to send Conrad Black and three other colleagues to jail for a couple of centuries.

What does he get in return? Twenty-nine months in the slammer, and not in the same federal correctional institution Black will be headed to but a British Columbia country club. Radler is a foreigner, and thus ineligible under U.S. law for a minimum-security facility. He’s also a germaphobe: sneeze in his presence and watch him jump. His horror in the communal showers doesn’t start with dropping the soap but with having to stand there between the guy with the slight sniffle and the fellow with a sore on his thumb. It would not take much to persuade such a man that he could not endure in such a place. But the U.S. government’s deal isn’t signed, sealed and delivered. He won’t get the sentence until

after this trial, so he has every incentive to perform. And on direct examination he made a better tap dancer round the murkier questions of Hollinger life than the celebrity directors of the previous week.

On Monday afternoon, at the end of his first day, Radler stepped down from the witness stand and squeezed between the rows of swivel chairs toward the courtroom door. He stared straight ahead and avoided catching the eye of Black, seated with his lawyers in the centre of the court. But Black’s eyes caught him, and coolly followed Radler through the room and to the exit.

It’s a familiar pattern for the defendant. Hollinger’s all-star audit committee—former Illinois governor Jim Thompson, former nuclear arms negotiator Richard Burt, and brainy gal economist Marie-Josée Kravis—all did the same. With the exception of Radler, Black has been genially indulgent of each betrayal, at least in advance. “Oh, I don’t think [Your Name Here] will be so bad,” he’ll say. “He doesn’t bear me any ill will.” The witness then takes the stand and shows a weird determination to put Conrad away in jail for several decades. Mrs. Kravis, for example, was fiercely hostile way beyond the requirements of the Hollinger directors’ agreed narrative that they were innocent dupes of the Black cabal: she clearly resented him for sullying her good name with his shabby little company, and only a life sentence for Black in the federal penitentiary would provide her with the necessary catharsis. Her testimony that she only stayed 15 minutes at Barbara Amiel’s controversial Hollinger birthday party was one of MarieJosée’s more pointed twists of the knife.

The celebrity directors were pretty much a disaster for the prosecution. Thompson, Kravis and Burt’s position is that they all took their fiduciary duties incredibly seriously yet they all somehow managed to “miss” the same 11 paragraphs in 11 different documents stating that they’d approved the “non-compete” fees to Black, Radler and Co. That’s 33 “misses” in total—and half those documents were official filings with the SEC personally signed by the three directors.

This is supposedly the crime: not the noncompetes, but the non-approval of the noncompetes. As Radler tells it, it was all an accident. One day in 2000, Hollinger lawyer Peter Atkinson called him up and said Izzy Asper was demanding he sign a non-compete in the sale of the Ottawa Citizen et al. to CanWest. “I was kind of stunned,” Radler testified, “and when I gathered up my feelings I told them I would have to have compensa-

tion... because it would be taking me out of business in about 80 per cent of English Canada. So I asked for $25 million.”

It was off the top of his head, but he came pretty close-$19 million. And a couple of days later that number looked even better. “I had been made aware,” he said, “that noncompetes were an area of potential tax savings.” That’s to say, he chanced to read an

article “either in the Globe and Mail or theNational Post” which revealed that non-compete payments were tax-free for Canadians, and that’s when the thought occurred to him that maybe this thing he’d signed with Can West that he hadn’t wanted and which had left him so “stunned” might profitably be applied to Hollinger newspaper sales south of the border. He mentioned it to his pal Conrad. “I said that we had the opportunity to extend the non-competes to the U.S. and he was supportive of this.”

That’s it. That’s the “scheme.”

It’s clever rather than criminal—as long as you get the non-competes approved. And there’s a lot of official documentation to indicate they were approved, at least by the desultory standards of the Hollinger International audit committee. And even if you untangle the prosecution’s artful muddling of Hollinger Inc. non-competes and individual non-competes and Can Westrequested non-competes and non-requested non-competes, the government’s argument takes a lot of swallowing.

On the other hand, it seems to me, after two months in court, that the most likely explanation is the simplest one: Black, his colleagues, his lawyers, his auditors, his directors and his purchasers all went along with these non-competes because they thought them perfectly legal. Which they are.

The star witness’s arrival in court marked the first time the quartet of “co-conspirators”—Black, Radler, Jack Boultbee and Peter Atkinson—had been in a room together for a couple of years. In November 2003, when matters at Hollinger came to a head, Peter Atkinson resigned from the board and was described as “a broken man” but remained as executive vice-president and co-operated

fully. David Radler resigned as president and chief operating officer and repaid $8.5 million to the company. Conrad Black stayed on as chairman and issued a press release expressing his “delight” and “full support” for the new “Strategic Process” at Hollinger, but quickly found himself less delighted and no longer supportive. And Jack Boultbee, Hollinger’s accounting genius, told the usurp-

ers to go to hell, he’d done nothing wrong and wasn’t going to resign, and, if they wanted to get rid of him, they’d have to fire him. So they did.

With hindsight, Boultbee got it right.

Today, bald, paunchy and jovial, he seems entirely at ease with himself, as well he might. After all, where did Peter Atkinson’s full co-operation get him? A seat at the same

HIS HORROR OF THE SHOWERS DOESN’T START WITH DROPPING THE SOAP

defendants’ table in Chicago. As for Black, the reality is that there was never any prospect of the smooth transition supposedly agreed to at that November meeting. His nemesis Richard Breeden, the former SEC chairman brought in to disinfect Hollinger, had no intention of letting the press baron slide gracefully into early retirement. Not just because Breeden’s on a Hollinger retainer of $800 per hour, but because his ability to charge that rate and the maintenance of his lifestyle as America’s first corporate-governance billionaire depends on nailing high-profile scalps to his shingle. From the moment he was called in, it was clear that he intended this to end not with a bland press release and a new CEO but with SEC referrals and eventually a criminal conviction. The disgruntled minority shareholders would like to have seen Governor Thompson, Mrs. Kravis and the whole gang in the dock. But criminal prosecution doesn’t work that way. So the lawyers who’d worked on the deals, and the auditors who’d fine-combed the accounts, and the directors who’d signed the SEC filings, and the germaphobe who dreaded the communal showers, all were leaned on, and all caved.

Had everyone stuck to the Boultbee line—there’s no crime, get lost—it might have been very different. But they didn’t. And so, having signed

up a cast of witnesses, the prosecution had to craft a crime to fit the guys who were left. David Radler made more money from these “crimes” than three of the four defendants combined. But the United States government has decided to send his colleagues to jail for his deals. Conrad Black, said Radler in 2003, “took the glory on the way up. He can take the shit on the way down.” This was the week he made good on his promise. M