Past Columns

The Entitlement Defense

Shareholders should have known Conrad Black had a lifestyle to maintain when they bought into his company.

By Michael Miner

January 5, 2007

CONRAD BLACK AND David Radler are two varieties of cynic. Radler's the type Oscar Wilde told us about -- the man who knows the price of everything and the value of nothing. Black's a more romantic type, as certain of his own value as he is that he must make his way in a world overrun by dogs.

"If you can't take their money, drink their liquor, fuck their women, and then vote against them, you don't belong here." I'd heard that LBJ said that. Google gave me attributions to Huey Long, to Jesse "Big Daddy" Unruh (who back in the 60s ruled the California state assembly), and to Molly Ivins, reporting on the ethos of the Texas legislature. Whatever -- it's timeless wisdom, and I'm confident Black subscribes to it.

In 2003, as his world was tumbling around him, Black produced a biography of his hero, Franklin Delano Roosevelt: Champion of Freedom. Black sees an FDR of the Long and Unruh stripe, an FDR more ingenuous admirers might wish to deny. He sees FDR's "vast repertoire of techniques of duplicity, dissembling, intrigue, and all the political arts from the most to the least salubrious." I'm sure that in Black's view an unduplicitous, undissembling, unintriguing Roosevelt would never have accomplished a thing.

Black took "their" money -- "they" being the small shareholders of the company he used to run, Hollinger International -- and if the cascade of criminal and civil litigation that's all but buried him is to be believed, he rewarded them with a royal screwing. Radler, Black's lifelong number two, was the publisher of the Sun-Times. The last time I talked to him, Radler let me know it was he who brokered the Sun-Times real estate deal with Donald Trump. To the serfs who toiled for him, Radler's a snake who shut off the Sun-Times escalators to save pennies on electricity while robbing the company blind; that he's turned state's evidence in Black's upcoming trial suggests he wouldn't exactly deny it. But as the Trump tower began stretching to heaven where the squat Sun-Times building used to be, Radler wanted his props as a mover and shaker too.

The other day I stopped by the Dirksen Building to pick up a document in USA v. Conrad Black, and I looked it over during lunch at the Berghoff. Sorry, make that at 17 West at the Berghoff. The document was a proffer laying out in broad strokes the government's case against Black and three lesser Hollinger officers. In Black's case the charges are mail and wire fraud, tax evasion, money laundering, racketeering, and obstruction of justice -- charges that Black, to judge from his public utterances, finds obtuse and absurd.

Black lived high above the dogs. The proffer quotes him telling another Hollinger officer in a 2002 e-mail: "There has not been an occasion for many months when I got on our plane without wondering whether it was really affordable. But I'm not prepared to reenact the French Revolutionary renunciation of the rights of the nobility." And asserting in a memo to Radler and other execs later that year: "Care must be taken not to allow this [way of life] to degenerate into decadence. . . . But nor should we allow the agitations of shareholders, amplified by certain of our colleagues discountenanced at the performance of their stock options, to force us into a hair shirt, the corporate equivalent of sackcloth and ashes. . . . We have a certain style that all these shareholders were aware of when they came in."

There's a description of the 2002 shareholders meeting. At this point the natives had begun to get restless -- some shareholders were asking why millions of dollars the corporation might have received when newspapers were sold went instead to Black, Radler, and other officers personally in the form of noncompete payments. (According to the proffer, between May 1998 and April 2001 Black and Radler each pocketed $19 million in these noncompete payments; another $43 million went to a private holding company Black controlled.)

Black stood before the shareholders and laid everything off on Hollinger's independent directors -- one of whom, former governor James Thompson, was chairman of the audit committee. (The proffer says that in most of these sales the audit committee was left out of the loop.) Black said, "You're not dealing with greed here, and you're not dealing with sneakiness. You're dealing with a best-efforts attempt to accommodate to industry practice and do what's equitable as determined by independent directors, who as a group are quite a distinguished group." Asked about so-called management fees he got from Hollinger by way of Ravelston, his private holding company, Black "stated that he typically received only a couple million dollars.. . . 'We haven't been sitting here feathering our nest. We've done things that have savaged our own income, because we thought it was in the interest of the stockholders.'"

According to the proffer, executive vice president Peter Atkinson and Hollinger's investor relations officer, Paul Healey, were sitting together listening to Black field questions, and Atkinson told Healey that Black was lying. And a footnote claims that a few days after that meeting chief financial officer John Boultbee "sent Black a memo stating that Black's combined salary and bonus from Ravelston exceeded $6.3 million."

Healey later insisted to Radler and corporate counsel Mark Kipnis that Thompson, who hadn't been at the meeting, needed to be told what happened there. "[Healey] learned that Radler then called Black in London and told Black that [Healey] was 'being a Boy Scout.'" Black called Healey at home and told him, "It's my company, and I'll decide when and what to tell the board." According to the proffer, Black never did inform the audit committee -- i.e., Thompson.

A year later Black faced the shareholders again. By now the heat was on: just two days earlier a shareholder had gone to the Securities and Exchange Commission about the noncompete and management-fee payments. In November Black would resign as CEO and put Hollinger up for sale. But this was only May. "What we are talking about," Black said, "is the size and approval process of relatively small amounts of money, properly approved and fully disclosed, paid to those who built and guided this company in a short span from an embryonic state to the brink of the prosperity that does excite the hopes of all of us. Like all fads, corporate governance has its zealots and its tendency to excess. . . . We will do our best to ensure that the corporate governance crusaders don't inadvertently throw the baby out with the bathwater."

Let me digress. The newspapers tell us that U.S. attorney Patrick Fitzgerald, who on March 5 is scheduled to put Black on trial, is interested in Mayor Daley. The mayor's reelection campaign is likely to turn on the unstated proposition that public governance also has its zealots and its tendency to excess, and that if the bathwater is corruption, the baby is a city that works.

Black's problem is that there was no baby. There was only his high life, which he has asked the court to rule inadmissible. One of his recent briefs states, "The government has failed to establish that the references to Mr. Black's membership in the House of Lords, ownership of multiple residences, lavish decorating tastes, hosting of an elaborate surprise party for his wife, and employment of servants and a chauffeur are relevant to any essential element of any charged offense."

Grandeur has a way of persuading the person ensconced in it that it's evidence of greatness, that this greatness justifies nearly anything, and that if there is a fall it will be tragic. Black may not be alone in seeing himself as a giant beset by pygmies. A TV movie about him aired last month in Canada, and the publicity had this to say about it: "As Conrad Black, [Albert] Schultz delivers a cunning character portrait of a man who -- betrayed by friends and attacked by business partners -- steadfastly maintains his innocence in the face of enormous legal challenges and social exile. As Black's glamorous second wife, Barbara Amiel, Lara Flynn Boyle portrays a woman of style and substance who unfailingly stands beside her embattled husband." Radler's there as his "lifelong business partner and friend," and the movie ends when Black finds out Radler has turned on him.

The movie was constructed as a series of flashbacks triggered by interviews that, according to the publicity, capture "Black's provocative love/hate relationship with the media." The media are embodied in one reporter, played by Jason Priestley.

For more, see Michael Miner's blog.

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