What does it feel like to be the object of Black’s wrath? STEVE MAICH tells all.
CONRAD & ME
What does it feel like to be the object of Black’s wrath? STEVE MAICH tells all.
IT WAS ALMOST exactly a year ago that Conrad Black told me to buzz off. Of course, Black being Black, he said it far more colourfully than that, but his point was unmistakable.
His correspondence with me was brief, just a couple of florid emails about a week apart, after I’d started snooping around the gathering controversy at Hollinger International in August 2003. In his notes Black was
the supremely self-assured general that the world had come to recognize over almost three decades in business. He was convinced this tempest would remain confined in its teapot, and would soon pass into history, just another footnote to a long, confrontational career.
Considering all that has come to light over the past 12 months, it’s easy to forget that Black had good reason for his confidence. Aside from being the proprietor of some of the world’s biggest newspapers, he was surrounded by a cadre of staunch loyalists and advisers connected to the very peaks of financial and political power in Europe and North America. They stood by him as he built a media leviathan. He had no doubt they would stand by him again.
His condescending dismissal of his critics may seem hollow now that his own company has accused Black of running a “corporate kleptocracy” in which he and other top officials allegedly siphoned US$400 million from Hollinger over seven years. But it provides a clue to how this man, who was once considered among the most powerful business leaders Canada had ever produced, allowed himself to be humbled.
At the time I corresponded with Black, the controversy at Hollinger International was already at a low simmer. A handful of irate investors were demanding explanations about hundreds of millions of dollars in management fees and other bonuses paid to Black and others at the top of his media empire. The company, owner of such prominent titles as the London Daily Telegraph,
Jerusalem Post and Chicago Sun-Times, had been a disappointing financial laggard for years, and yet Conrad Black and others had seen their generous compensation maintained far above that of other major newspaper executives.
To quell the furor, Black had assembled a three-person special committee to investigate the investors’ complaints and produce a report. He was sure it would absolve him of any wrongdoing. But I had heard from a source inside Hollinger that the committee uncovered some unsettling information, and things were getting chilly behind the company’s closed doors.
Still, one doesn’t just blunder into a conversation with Conrad Black and start lobbing accusations. So I sent him a few pointed questions, worded as respectfully as possible. His reply was swift and unequivocal. There were no problems with the committee investigation, he said. He was co-operating fully and everything at the company was completely above board. “You may put the same questions in a thousand slightly different ways, but you will eventually have to accept the fact that no one, officer or director, at Hollinger, has behaved with anything less than complete propriety,” he wrote. He
went on to describe the “fatuity” of the recent media coverage of the controversy and the “desperation” of many in the press to defame him.
I replied with more questions. What about the U.S. Securities and Exchange Commission? Was it investigating? Why did noncompete payments from the sale of various newspapers go to him and other executives rather than to Hollinger International? Was his Canadian subsidiary, Hollinger Inc., facing a cash crunch? And would he consider giving up control of the company to satisfy his critics?
If my first missive was mildly annoying to Black, the second got me crossed off the Christmas-card list for good. The very next day my inbox contained a scathing reply, making it clear that I was now a charter member of the fatuous and desperate club.
His note began wearily: “Haven’t we been all through this quite adequately by now?” But it quickly picked up steam. The noncompete payments always go to individuals, he argued, and they were demanded by the buyers of the newspapers, including CanWest Global Communications chairman Izzy Asper. As for the threat of insolvency or the possibility that Black might lose control of his empire, he would hear none of it. “The theory that there is any threat to the stability of the ownership structure is a complete fraud,” he said.
But it was my raising the possibility of an SEC investigation that really touched a nerve. “There is no regulatory or prosecutorial
‘WHY DONT YOU find a real story somewhere instead of trying to scrape the barrel with all this nonsense?’ he wrote. Then, ever polite, he signed off: ‘The best of luck to you. Yours sincerely, CONRAD BLACK’
question here at all. So all these feverish references to Enron, WorldCom and so forth [by various media] are just defamatory nonsense, as those companies are insolvencies where felonies have been alleged.”
He finished with a few telling predictions, and some more advice. “There will only be two further aspects to this story: when we recapitalize Hollinger Inc. in a few weeks, and when the special committee confirms in a few months that the directors and officers acted with propriety. I know it will be a tragic fate for you, but you are going to have difficulty keeping readers on the edges of their chairs with spurious ‘updates’ and trivia from quarterly filings until then. Why don’t you try to find a real story somewhere instead of trying to scrape the barrel with all this nonsense....” Impeccably polite to the end, he signed off with “The best of luck to you. Yours sincerely, CONRAD BLACK.”
A FEW MONTHS later, Black’s carefully constructed line of defence began to crack. The special committee revealed to the SEC that Black and others had shared US$32.2 million in unauthorized payments from Hollinger International. Black resigned as chief executive of the media company, but stayed on for the time being as chairman and insisted that he had not intentionally misled anyone. Behind the scenes, Hollinger’s board meetings had taken on a nasty, accusatory tone, with threats being lobbed back and forth.
I sent him a few more notes, but he never responded—which was probably wise, since Black rarely did himself any favours when he spoke off the cuff. In the middle of the storm last November, Black boasted outside a Toronto bookstore that he “made 50 million bucks yesterday” thanks to a rise in Hollinger’s share price. The quip only hardened the resolve of those determined to bring him down.
With hindsight, of course, Black’s confident emails and pronouncements seem like the false bravado of a man backed into a corner. Surely he must have known the committee would take issue with US$1.4 million allegedly spent on staff at Black’s personal residences; or the company-paid US$42,870 birthday dinner for his wife, Barbara Amiel Black; or the US$530,000 trip to Bora Bora, half of which was allegedly charged to Hollinger. But I don’t think Black was
BLACK underestimated the committee members’ independence, their instinct for self-preservation, maybe even their integrity
bluffing me. I think he believed he held the high hand.
Black had stared down crises before. At various times in his career he had locked horns with the SEC, the Ontario Securities Commission, organized labour, the government of Ontario, even the prime minister, and each time Black emerged unscathed. Compared to such past confrontations, this one must have seemed trivial.
He even got to personally select the special committee that would investigate him. Gordon Paris was a former investment banker who had structured bond deals for Hollinger. Raymond Seitz was a former U.S. ambassador to the U.K., and a prominent member of the conservative political establishment in both countries. In fact, Seitz reported to Black’s confidant, Heniy Kissinger, in the U.S. State
Department of the 1970s. And Graham Savage was a well-respected corporate director who came recommended by Black’s long-time ally Peter Atkinson, who served with Savage on the board of Canadian Tire. These were the kinds of people Black had always been able to count on for support: prominent men who ran in his social circles and had little to gain by stirring up trouble.
But Black underestimated their independence, maybe even their integrity, and certainly their natural instinct for selfpreservation. Paris, Savage and Seitz weren’t going to hop on Black’s sinking ship just to help him bail.
Soon, many of Black’s friends and associates decided they too should make themselves scarce. Marie-Josée Kravis, the wife of Wall Street financier Henry Kravis, resigned from the board of Hollinger International, as did all of the high-powered independent directors from Hollinger Inc.: Allan Gotlieb, Douglas Bassett, Fredrik Eaton and Maureen Sabia. Former diplomat Richard Burt and one-time Illinois governor James Thompson both pledged their support for the special committee. Peter Atkinson resigned and cut a deal to avoid being sued. Even Kissinger sided with Black’s foes. And this month, the last of Black’s political bedfellows abandoned him, as Richard Perle told the New York Times that he had been misled, along with the rest of the board, about Black’s compensation.
It must have been inconceivable to Black, a man who cultivated connections and political power as fervently as he pursued wealth, that he would find himself so starkly alone. In the end, none of those friends in high places were willing to risk their own careers and reputations for the sake of protecting his. Black had believed they would, and he believed their support made him untouchable. That conceit was the foundation of all his dismissive pronouncements to investors and analysts—and reporters like me. When that conceit began to crumble, I never heard from him again.
ON THE PROSPECTof an SEC investigation, Black informed me,‘There is no prosecutorial question here at all. So all these feverish references to Enron, WorldCom and so forth are just defamatory nonsense.’
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