JUSTICE

THE SINISTER MISTER BIG

MARK STEYN May 7 2007
JUSTICE

THE SINISTER MISTER BIG

MARK STEYN May 7 2007

THE SINISTER MISTER BIG

JUSTICE

It strains all reason that Black was able to ‘dupe’ all these biz experts

MARK STEYN

Conrad, Barbara and Alana Black lunched in the courthouse cafeteria the other day. I was wandering through on the cellphone and did a quick double take at the defendant’s clan holding their trays in line at the register. Some catty passerby sneered, “Oh-ho. So the great Lord Black has deigned to eat among us mere mortals?” But, in fact, Conrad and Co. seemed to be doing their best to appear familiar with the general principles of cafeteria dining, anxious not to pull a Lady Curzon or whichever dowager it was who climbed on a Number 27 bus and told the conductor, “Drive me to Kensington, my good man.”

Shortly after Black’s downfall at the end of 2003, a mutual friend said to me: “If he’d got rid of the planes, he’d still have the papers. Who’s more important? A man with a corporate jet? Or a man with newspapers?” Like many close observers of Black, he meant that all this—the four grim years that led to the special-of-the-day at the courthouse caf— could have been so easily avoided. A man who owns the Daily Telegraph and the Chicago Sun-Times will always have access to the corridors of power. But just another multimillionaire with a corporate jet, and a Canadian, too . . . who cares? This is really the best argument even his pals have been prepared to make: even if whatever he did wasn’t illegal, he still shouldn’t have done it.

That’s too tepid a defence for Conrad Black, and for 3 Vi years he’s offered an alternative narrative: he’d bought and sold newspapers for 30 years, and in the late nineties, unlike the dozy complacent types running the New York Times and the Los Angeles Times and all the rest, he recognized the jig was up. It was a dying business and he didn’t want his company to die with it. He figured they’d done as much as they could with the North American

titles and now was the time to sell. And they sold them for some humongous numbers$80 million for American Trucker, a magazine for American truckers; half a billion for a ragbag of “community newspapers” in hick burgs nobody’s ever heard of; and, finally, $3.5 billion for the Ottawa Citizen, the Calgary Herald and the rest of Canada’s Southam group. “We made one billion dollars in three years in a stagnant industry,” Conrad bragged last Friday as he arrived at court. It’s even more stagnant today—look at the rump Hollinger’s figures at the Sun-Times as run by the white knights who slew the kleptocrat Conradian dragon. And nobody’s doing any $3.5-billion deals for the bland flailing mono-dailies of the North American news biz.

“The transaction envisioned here would be a historic event for Canada and a model for similar convergence activities throughout the Western world,” a gushing Izzy Asper wrote to Black in the early stages of their negotiation. But, as Beth DeMerchant, the Torys law firm’s lead lawyer on the deal, confirmed in her testimony last week, Conrad was eager to press on with the deal before Izzy found out there were no other bidders for the Hollinger fish wrap.

You’d think the Can West patriarch could have figured that out. After all, in Canada, it’s illegal for a non-Canadian to own any Canadian newspapers. So by law no bids for the Vancouver Sun and the Montreal Gazette would be flooding in from Gannett or Rupert Murdoch or Viscount Rothermere or Bertelsmann. After decades of the usual self-defeating CanCon protectionism, by the year 2000 there were no Canadians available to take over Canada’s newspapers. The only Cañad-

‘SO THE GREAT LORD BLACK HAS DEIGNED TO

ians who knew how to run a nationwide newspaper group were the handful of Hollinger execs already doing it.

I wonder whether the federal prosecutors in Chicago are even aware of that. To judge from their ever more expansive approach to jurisdictional enforcement, the “Northern District of Illinois” extends way north to Whitehorse and Yellowknife these days. But I’d be intrigued to know whether Eric Sussman, the boyish charmer growing more thin-skinned with each day of his floundering case, understands the underlying business reality of the Can West transaction: the biggest deal in Canadian history at that time was scored in a market in which there were no other buyers.

So what was Izzy paying all that dough for? He was paying, in part, to get the only group of Canadians left who knew anything about the business to agree to stay out of that business in Canada (that’s the “non-compete” fees) and, in another part, to secure their cooperation in the transition to the CanWest

regime (the “management agreement,” by which Black and Co. agreed to help integrate the newspapers with the Aspers’ TV and radio interests). Given that underlying reality, is it unreasonable for Conrad Black to receive, for agreeing to retire from the Canadian newspaper scene for five years, a payment of $11.9 million on a $3.5-billion deal? You do the math: that would be a very low sales commission in most businesses.

In his heart, Black believes he deserved this “non-compete” fee. The Ottawa Citizen, hitherto the dreariest newspaper of any G7 capital, was transformed under his stewardship. The Montreal Gazette invested in new presses, thereby ending decades of strain on the Quebec opticians’ network from anglophone readers who’d wasted the morning trying to determine whether the colour picture on the front page was of the Queen Mum or Anna Nicole Smith. Hollinger improved its properties and found a neophyte willing to pay top dollar at a time when no one else in Canada would.

Eric Sussman doesn’t think Black deserves his “non-compete.” But he’s conceded he can’t sell that to a jury. As part of their Honey, I Shrunk the Case approach, the U.S. government, in the weeks before the trial began, shrivelled the charge that the Black cabal stole $84 mil down to $60 mil. In the Can-

West deal, their argument has evolved as follows: it’s not the “non-compete” fee that’s criminal, it’s that he didn’t “disclose” it to the SEC. Or, if he did disclose it to the SEC (in the December 2000 8K fding), he didn’t get approval from the independent directors of Hollinger. Or, if he did get approval from the independent directors of Hollinger, he didn’t get it in a timely fashion.

Was ever a prosecution fought so defensively? Day after day, week in, week out, the government produces lawyers and auditors and other advisers who are simultaneously presented as (a) authoritative experts in their field and (b) dupes who didn’t spot how the wool was being pulled over their eyes by a man with no particular specialist knowledge in auditing or securities law. Marilyn Stitt, the lead auditor for Hollinger at KPMG, gave an elaborate account of a 2002 meeting of the audit committee called at KPMG’s request to confirm to their satisfaction that Governor Jim Thompson and the other independent directors had approved the non-compete payments. KPMG left satisfied. Conrad Black did not attend the meeting. He was thousands of miles away.

Yet it’s Conrad that Eric Sussman and his prosecutors want to send to jail for 101 years.

In his forthcoming biography of Nixon, The Invincible Quest, Black writes of Tricky Dick’s tormentors:

“The American prosecutorial system encourages a system of suborned or intimidated perjury, or at least spontaneous clarity of recollection, to move upwards in the inculpation of officials in any organization where wrongdoing is alleged. Plea bargains are negotiated by threat and financial strangulation and reduction of penalties, as lower echelons roll over in sequence blaming higher-ups.”

I get a lot of mail from American correspondents who agree, if not in respect of Watergate then at least of Hollinger: “If any juror in the Conrad Black case has ever worked in business, he will wonder why witness after witness is saying things that would get him fired in an instant were he to say them to his clients or his boss,” writes Ezra Marsh of Baltimore, bemused by a procession of top-dollar experts testifying, in essence, that their legal advice has no value and their auditing is just a bit of pro forma number-running. “It would seem that the main thing connecting the pieces of the puzzle is the prison-stripe patterned background: the defendants are all trying to stay out of jail.”

The problem in applying this familiar template to Hollinger is that it’s a holding company and very short of “lower echelons.” It was basically a half-dozen core execs with some local enforcers at its various branch offices, and a big bunch of celebrity directors and high-priced outside legal and accounting advice. Though the SEC and the U.S. attorney have had some success leaning on Governor Thompson and the other dilettante celeb directors, as we’ve seen so far in this trial it’s a lot harder to put big-time lawyers and the world’s top accounting firm and a former federal prosecutor and an ambassador to Germany and a national security adviser and all the rest in the witness box and sell them to a jury as innocent “lower echelons” involuntarily conscripted by the sinister Mister Big—or in this case the sinister Lord Big of Crossharbour.

Perhaps, when Governor Thompson and Ambassador Burt take the stand, this unlikely narrative will start to make sense. But, if it doesn’t, Conrad Black may have a point even his friends were reluctant to concede. It’s not just that this is an ill-advised government intrusion into the normal grey areas of business negotiation brought on by Black’s own imprudent behaviour. The cramped and defensive way this prosecution is arguing the case suggests something closer to a total crock. To appropriate his Nixon title, The Invincible Quest, whether or not quests can be, technically, invincible, the U.S. government’s quest to nail Black has certainly done its best—impervious to reason, proportion and plausibility. M