THE PRESS RELEASE WAS ON the wires the following Monday morning. In the next twenty-four hours, the full force of the media hostility to anyone suspected of abusing an executive position – and to me personally – came pouring forth in Britain and Canada and a few sections of the United States. Murdoch’s newspapers had been stoking up all through the run-up and went straight into joyous orbit. The London Sun began a widely emulated trend by announcing in a headline that I was likely to be sent to prison. Murdoch’s New York Post did the same. Most of the newspapers that reprinted and even embellished the extraordinary vitriol of the British press had no idea that part of the anger with me was an ideological divide. Instead, like children wallowing in a mudbath, North American press and television picked up without any pretense of investigation every last vicious canard written in the U.K. newspapers about Hollinger, Barbara, and me.
MURDOCH HAD HIS OWN MOTIVES, of course. His New York Post became the outlet for every fictional tale of my enemies and then some enthusiastically invented by the Post itself. One day it would report that I had terrorized a table at the New York restaurant La Goulou after overhearing their table chat. Another time it recounted a negative incident involving Barbara that took place, according to the Post, at a London party when she was, in fact, in New York. The inventions were tabloid gutter, which, after all, has never ceased to be Murdoch’s chief stock in trade, in print, and on television. In the post-Enron frenzy, the climate was so hostile to well-paid executives it was hard to rule out anything. I had recently seen Martha Stewart, a casual acquaintance, at a social engagement, and was impressed at her tough Polish Catholic imperviousness to the criminal charges that would lead to her brief imprisonment. I had experienced some of the fury of the corporate governance movement, but rabidly pro-American as I was, I assumed that justice could be had for those who were, in fact, innocent. Whatever might happen, I was going to bear up with as much dignity as I could muster.
I had been a disdainful resister to corporate governance poseurs such as Tweedy Browne and now, denuded of defences and presumed by an eager international press to be an embezzler, came the public relations lynching. My reputation, which I had been building assiduously since my tumultuous secondary-school days, almost vanished in two days. The Toronto Globe and Mail, which had run a very generous review of my Roosevelt book by the distinguished historian Roger Morris on November 15 (including a photograph of my face super-imposed on a picture of FDR, complete with cigarette holder), gave me the entire front page on November 18, under the massive headline “BLACK’S DARKEST DAY.” As I was almost instantly without a reputation I was practically unable to sue anyone. Even in countries that, unlike the United States, maintained the civil tort of defamation, damages would be impossible to prove. The initial New York Times front-page story implied that I had been revealed as an embezzler. The ending of Camus’s The Stranger came to mind: I was going to my execution as mobs howled their execration. And it was deafening.
It was one thing to convict executives of Enron and WorldCom, companies in which there had been colossal bankruptcies, a large accounting fraud, billions lost in the stock market, tens of thousands unemployed, and destruction of evidence. Executives at Adelphi appeared to have been involved in the misappropriation of billions of dollars, disguised from the auditors. Could the corporate governance movement reach such a level of ferocity that an innocent man could be prosecuted in the absence of evidence and effectively convicted and sentenced by a hostile press? I thought not, but I was in free-fall now, so swift had been the collapse of the life I had known. Watching my name crawl across the bottom of the television screen linked to accusations of fraud and “looting” on American news stations was unearthly.
I received generous notes and telephone calls from many individuals, including Marie-Josée and Henry Kravis separately. Attacks came from totally unexpected quarters. In Canada, the initial announcement of the perceived instability of my financial condition came from a man who was generally assumed (including up to a point by me) to be a friend of mine, the Honourable Henry (Hal) N.R. Jackman. He was a prominent financier, chancellor of the University of Toronto, former Lieutenant Governor of Ontario, and former associate of mine. In late October he gave a press interview to proclaim that my career was now ending in a shambles and my company was on the verge of financial collapse as he had, he happily announced, long predicted. He restated his oft-repeated theory about my having both a death wish and a Napoleon complex. For good measure, he threw in that Barbara’s life had been “absurd.”
He and I had many amusing moments over the years, and some sharpish exchanges too, but I was shocked by the tenor of his attack, though he avoided casting any aspersions on my business ethics and gave me generous credit as a writer and historian. (After the lapse of several years, my relations with this intelligent and amusing man would be patched together once again.)
In Canada old comrades from Southam and the National Post, such as Ken Whyte and Terence Corcoran, and political allies, such as David Frum, spoke up on my behalf. The reviews of my FDR book continued to pour in almost universally positive, including Ray Seitz’s generous review in The Times. It was a strange leitmotif to the business and public relations debacle. I will never know how much better the book would have sold if I had been able to market it effectively, nor how much more depressing the time would have been without it. But the publication at least made it more difficult to claim I was just another sticky-fingered, grubby businessman.
In Britain, apart from book reviewers, the media assassination squads ruled the coverage. The Murdoch newspapers played the prison card for all it was worth. The Guardian and Independent joined them. I knew there was no point appealing to my friend Tony O’Reilly at the Independent; he would never try to influence a newspaper he controlled. One edition of the Financial Times, generally a fairly responsible newspaper, bannered the front-page headline that I had taken a £94 million dividend (about $200 million at the exchange rates of the time) from the Telegraph, a complete invention. (We did at least extract a “clarification” on this story.)
During the discussions of a possible business merger with Associated Newspapers, the Mail and the Evening Standard, which they owned, were quite reasonable, and even Richard Desmond showed comparative restraint at the Express. The Daily Telegraph was factual but gradually gave way to showing it was no gentler than the competition. Dominic Lawson and the former editor of the Catholic Herald, William Oddie, and of the The Times, William (Lord) Rees-Mogg, wrote in support of me. The distinguished Daily Mail columnist Melanie Phillips deplored the schadenfreude at my travails. Novelist Freddie Forsyth wrote in the same spirit, adding that the word should be used sparingly now that housemaids were frequently uttering it. Taki, writing in the Spectator, despite our previous disputes, was magnificent from start to finish.
Max Hastings and Charles Moore were guarded. Boris Johnson said a few nice things about me on television and, later, also to his biographer. Charles Moore telephoned me, ostensibly to offer encouragement but really to ask about the future of the Telegraph and to insist that I understand how upsetting the Telegraph journalists and editors found the uncertainty. I suggested that I found it disagreeable to be the subject of hate from people for whom, as Charles knew, I had worked and risked to provide secure, respected, and generous employment. He dismissed this as merely the “five minutes of hate” Orwell had described in reference to Emmanuel Goldstein in Nineteen Eighty-Four. It was more durable than that, but he was probably right insofar as it was faddish and orchestrated. Understandably, he had no concept of what the corporate governance hurricane could do to normal corporate organization. I had no purchase on the fury of events.
The general attitude of the Telegraph journalists from the start was that they had suffered through a pay freeze while my associates and I had stuffed our pockets with non-competition fees – which, to the anti-capitalist, Gladstonian, or non-conformist conscience, or even socialist reflexive habits, of Britain, was a moral outrage. That we had rescued the Telegraph from insolvency; turned it into a full-service newspaper; downsized the workforce generously and without upheaval; got it onto new presses and into new premises; brought it through the price war successfully; improved salaries, working conditions, and product quality; and defended our editors and journalists against all comers seemed, for a time, to have been forgotten. I was deemed to be a crook and compared to Robert Maxwell, who had apparently committed suicide at sea in 1991 after looting the company pension plans before his company went bankrupt.
The unseemly joy that so many seemed to take in the thought of me incarcerated in America was slightly unnerving. I reread de Gaulle’s description of the fall of France, and excerpts of The Bonfire of the Vanities, to try to gain both a historian’s and a novelist’s insight into how to cope with a sudden, overwhelming rout and collapse, when, in de Gaulle’s words, a slope becomes a fall.
Most of the people who knew me at all well in the United Kingdom remained solicitous and supportive through all the travails that followed. But the press, whose members I had always treated with consideration, continued to attack in the vilest and most relentless assault I have seen on anyone entitled to the benefit of any doubt about his conduct. Such reflexive, resonating, widespread antagonism was unnerving and contagious.
Because Barbara was a journalist and I was steeped in the North American tradition of limited or no social stratification, we often had journalists in our home and treated them hospitably. I also did many personal favours for journalists who were having marital, health, or financial problems, sometimes structuring their incomes to help them with divorce settlements and extending health and pay benefits far beyond what was legally required. Some remembered such consideration; some did not.
A special case among British journalists was Elinor Mills, a Telegraph journalist who had recently been raided by the Sunday Times. She was the stepdaughter of the psychiatrist I had seen in the late 90s, at Barbara’s request when she had urged me to get confirmation that my proposal of marriage to her in 1991 was rational. We needed to round up the numbers for a dinner following a Sotheby’s board meeting, and Mills was one of those recruited by Charles Moore. I had not met her before. When it was related to one of the principals of Sotheby’s that there would be someone present who was about to start at the Sunday Times, I was urged to disinvite Mills. Mrs. Taubman didn’t want any press people other than those I could vouch for from the Telegraph and judged that a departing employee didn’t make that cut. After some unsuccessful remonstration, I did so – with lengthy apologies, because disinviting an innocent guest was a horrid thing to do. The whole matter quickly got into the press and I apologized again. We sent a gift and a note, and I corresponded with Mills’s stepfather. I confessed what I considered to be the inappropriateness of my action at the Brompton Oratory.
When the problems of late 2003 arose, Elinor Mills came forth to the press and again retailed the entire episode to a very receptive world media audience, this time blaming Barbara, who was completely unaware of the disinvitation of Elinor. My conduct was universally condemned. I agreed with the criticism but was less delighted that such behaviour was represented as not untypical of me. I even replied, unusually, to one Toronto reporter who telephoned about it, and I said that Elinor Mills was correct, that I had behaved disgracefully, that it was aberrant, and that it relieved my conscience to be saying so. Nonplussed, he asked if this was on the record. I assured him that it was and asked him to print it verbatim. He didn’t; apparently, a statement of conscientiousness was not what his editor had had in mind.*
I do not believe in false, extorted, or unspontaneous allocutions such as Radler’s, which demean the spirit of confession and repentance and reduce justice to corruptly procured self-humiliation.
Throughout my conscient life, I have been, within reason, a person of law and order, as long as justice is tempered by mercy when advisable. I have been accustomed to punishment for misdeeds since my earliest years, and while fear of retribution has rarely been a deterrent to me, I have never resented its application when I have misbehaved, including in these dolorous events.
I had not behaved dishonestly and had relied on well-paid executives and professional advisers to do their jobs properly. But I should have been more suspicious of Radler and more thorough in following up after Atkinson and Kipnis, both overworked and neither a commercial specialist. I certainly had a right to expect better from them, but the buck stopped with me. More important, I had publicly scorned the corporate governance zealots, without any idea what inroads they had made legally and how easily they could undermine my position as controlling shareholder and director.
My moral and practical objections to the zealots were well founded, as subsequent events, especially their ruination of our companies, demonstrated, but my pride and haughty spirit were of the nature that often leads to a fall. As years went by, more and more companies substituted obsequious grovelling to the fund managers, corporate governance zealots, and shareholder activists for commercial performance. The focus was on a smokescreen of executive humility while executive authority was abdicated, delegated, or collegialized.
From the start, I feared that I had hit a buzz saw and that any compromise with Breeden would make matters worse – and that in the end, I would have to endure the risk of judicial conviction and even imprisonment before I could live in peace again, so powerful and mindless were the forces against me.
The fight would be not just to maintain morale through the prolonged and desperate struggle, but to retain faith that the evil afflicting me was not omnipotent. Through the terrible darkness that has followed, though there were many troubled nights and anxious days, I always returned to my belief that whatever my failings, my honesty would ultimately prevail over malice. However excruciatingly it unfolded, there was no moral or practical choice but to fight it out to the last inch. It was terribly difficult to discern any pattern in events. Providence intervened again and again to prevent my complete annihilation, but never in year after year sufficiently to set me free from the awful persecution.
Mine was the fate many people enjoy seeing inflicted on apparently overconfident, powerful, even glamorous people who seem to be too much enjoying themselves. Much of it was envy and the aesthetic pleasure of a sudden exposure of the weakness behind an imposing facade; pride quickly crumbles into dust. It is an amusing, gratifying, even reassuring spectacle. I couldn’t proclaim to the world my merits as a person; I had to seize this frightful challenge as an opportunity to try to demonstrate them.
In the rugged world I had inhabited, I received much of what I deserved, and took my lumps as I always had, but not when the attack was against my honesty, which was, in fact, unimpeachable. That was unjust. It was in rebellion against that injustice that the resistance within me arose and guided me through the very difficult years ahead, saying in self-reassurance, as the French Maquis in the Second World War had done, “The night will end.”
My book launch in Toronto began with two very civilized interviews, one at the CBC with Michael Enright and another with the very cultured Robert Fulford. The next morning, at the flagship Indigo bookstore, I moved in a unit surrounded by scores of journalists. My old friend Heather Reisman, owner of the bookstore chain, handled it magnificently. Once I got to the front of the store, questions were on Roosevelt only. I signed three hundred books. We had a quiet lunch, after making our way through the pack complete with reporters asking if I did not, as a practice, “suck the blood out of companies” as one of them said, and asking whether I had committed fraud and would, inevitably, go to prison.
Just for a moment, I rose to the bait and unwisely pointed out that the stock was rising. My actual words were that I had made “$50 million yesterday. This is a flame-out I could get used to.” The journalists were there to get precisely that sort of ill-advised remark and I made their day. What they could not know was that I had been trying for a long time to put some upward pressure under the stock price and that although this was never going to have been my idea of how to do it, at least the stock price was rising. And we could all be happy for that. Needless to say, from the moment after I said it, I regretted it. The rise in the stock price was attributed to my ejection as chief executive, said my questioners, debating with me. I replied that I thought the prospect of sale was more of a ratchet than any skepticism about the outgoing management. I also pointed out that the underlying value had been created by the exiting management, not by Tweedy Browne and the directors who had approved what was now the subject of controversy.
That evening, I flew back to New York. It was the last time I would see our corporate airplane. I did not even have the opportunity to say, as General Gordon did to his camel at Khartoum, that we would “ride no more under desert stars.” One of the provisions of the Restructuring Agreement was that that plane would function as it had until the end of the year, by which time Gordon Paris and I would work out a new regime for it through to June 1. It later emerged from a deposition of Jim Thompson’s, uttered with the eloquence one would expect of the continuer of the Illinois political tradition of Abraham Lincoln and Adlai Stevenson, that there was concern that I would use the plane for a book tour. Thompson became “pissed off” and grounded the aircraft, in complete contravention of the agreement.
They need not have feared. A full book tour was impossible, and I would not have put that expense on the company anyway. I gamely went to a fine reception at Hunter College, near my home in New York, where I was to be given a tour of the Roosevelt home on 65th Street. But we were inundated with aggressive reporters; a book tour was out of the question. Very few interviewers could promise to keep to the subject, and the advice of my lawyer, rudimentary as it was, was that I should not talk about my ouster as CEO and the so-called unauthorized payments, to avoid the fate of Martha Stewart.
I was not about to go to the mat with Breeden and Paris on the issue of the plane. Commercial aviation had been the means of travel for most of my life and I could quickly get used to it again. I merely recorded with Paris the fact that the agreement had been violated. Evidence started flooding in that the other side had already made our agreement into a Swiss cheese. Outrageous stories of improper financial conduct were floated with the approval of the Special Committee counsel’s staff and shareholder-relations vice president, Paul Healy. Radler and I had tolerated him because he did have moments of effectiveness. His friendship with Christopher Browne in particular was disquieting and we should have got rid of him long before.
It was leaked and reported in the press that I had spent $14 million of the company’s money on my house in Palm Beach and that I had spent an additional undisclosed and unauthorized $4 million from the same source on Roosevelt papers. Barbara had supposedly spent $3 million decorating the aircraft. David Radler was said to have been taking kickbacks on newsprint purchases, and importing drugs on our plane from Mexico. Another such story was the Financial Times story that I had taken £94 million of dividends directly from the Telegraph, bypassing the private and public companies between the Telegraph and me. These and other fantastic stories popped into the press and remained there until we stamped them out, which took considerable time. There was never a retraction, merely an end to the retailing of the story and a movement onward to the next falsehood planted or amplified by our co-contractants, who had promised to put the best possible public relations face on events.
On November 21, the Kravises, de la Rentas, and Jayne Wrightsman held a book launch party for me at the New York Four Seasons Restaurant. I had given them plenty of opportunity to dodge it, but they insisted. The former Treasury secretary, Robert Rubin, was holding a reception in the neighbouring room that naturally pulled a great many more people – and many of the same ones.
The presence of Candice Bergen, Joan Collins, Barbara Walters, the Kissingers, former and current mayors Ed Koch and Michael Bloomberg, World Bank president Jim Wolfensohn, Bill Buckley, long-serving district attorney Robert Morgenthau, Mrs. Nelson Rockefeller, the Ahmet Erteguns, the George Livanoses, Barry Diller and Diane von Fürstenberg, Bob Silvers of the New York Review of Books, the Podhoretzes and others from Commentary magazine, and a considerable swath of New York finance and society convinced even the New York Post that “the New York power structure rallied in support of Conrad Black.” A more widely held view was that of Tina Brown, an undoubted expert on the subject of career reversals from her own and her husband’s experiences, that it was more like a wake for the life we had had. Both descriptions were partly true, but I nevertheless had enjoyed myself. Barbara described herself as “in rigor mortis” throughout the evening.
The dinner afterwards at Jayne Wrightsman’s was a touching and exquisite occasion. Henry Kissinger, the Weidenfelds, and the Sid Basses were especially generous in their comments, about both the book and its author. But this agreeable interlude could not long distract me from the fact that I was now in a truly horrible crisis.
No time is ideal for a crisis of such proportion, but this one came at the most inopportune possible point. Though I had tried to give up my citizenship gently, I had incurred great and understandable resentment in Canada for renouncing the country. The British were not generally impressed with someone who appeared as eager as I was mistakenly portrayed to be to become a peer. There was apparently much resentment in that country of what was widely considered my use of the Daily Telegraph and Sunday Telegraph to promote somewhat un-British notions of solidarity with the United States. In the United States, it was a straight rise-and-fall story, leavened by the current hostility to perceived corporate excess. But there was also broad and touching dissent among many who knew me personally and expressed their views privately, with an elegance that often only the British can achieve.
A blizzard of SEC subpoenas indicated that Breeden had done his best to bring that organization heavily down on our backs. I surmised that they would shortly assault the sources of our revenue as well.
The extent of the opprobrium I attracted had only one partial precedent in my life: the more jagged moments of my school career. I had been twice expelled from high school, the first time amid great unpopularity because my theft and resale of examination papers had caused hundreds of students to be required to write their examinations over again. I was not a naturally dishonest person, but, in full revolt against a school I disliked, I set out to reduce it to chaos. I was more successful than I wished or expected. The second unscheduled departure from a boarding school was for general insubordination.
The lesson of these far-off and not overly creditable events was that adversity endured does pass. My world had collapsed and many of my social acquaintances together with the press were rejoicing in this. I believed intuitively that if I could stay afloat financially rather than drown in personal bankruptcy, I could eventually rebuild some position and work to regain much of what I had lost in the dramatic suddenness of my setback.
I accepted the Gaullist formula that I had lost a battle, but not the war of my life. I became a Gaullist in 1955, from reading the general’s memoirs and identifying with what he called his “rejection of the dictates of a false discipline.” My francophilia and realization of the impermanence of triumph and disaster, the value of endurance, and the manipulability and forgetfulness of general opinion dated from these days. I had learned and admired how a civilized country like France could move so quickly between the glories of 1918, of Foch and Clemenceau, and the shame of 1940 to de Gaulle’s proposal of a revival of French grandeur. Of course these were a ten-year-old schoolboy’s narrow perceptions, as de Gaulle was writing of a false military strategy, a corrupted political structure, and national survival. I was complaining only about school teachers.
To readers who encounter just the normal amount of human frailty and unattractive qualities, the seemingly endless list of morally deformed people you are about to encounter may seem exaggerated and not credible. Please think of it as a sharks’ feeding frenzy: when the possibility of tens (if not hundreds) of millions of dollars is dangled above the open mouths of people who have dreamed of or pursued such sums without significant success all their lives, hunger takes over. Greed, mendacity, viciousness, and even megalomania – which live in most people at a level they can more or less suppress and control – come to the fore in pathological surges. Hollinger International and Hollinger Inc., with their hundreds of millions of dollars and important newspapers, became magnets. Moral codes slipped; the centre could not hold. I was driven often to thinking about Yeats’s poem through one ugly catastrophe after another. In these matters, there was a sort of alchemy that transformed people of some distinction into self-seeking sharpers and the randomly venal into rabid fiends. We were in a psycho-horror film, scripted and produced with, for a time, an almost Hitchcockian gift for terror.
I AM GENERALLY SKEPTICAL of schoolyard parables, but my school days had familiarized me with the hypocrisy and cowardice and false morality of mob anger, artificially incited. Breeden would have been a good schoolmaster of the old type: authoritarian, and without humour. I knew early on what I was dealing with, not only in him, but in insipid goody-goodies such as Seitz – polishing an apple for teacher and snitching on tardy students. When Breeden threw down the mask and called me a looter and a crook, as he soon did, I was fighting not for my place in school, but for my life.
THE FIRST DESERTION OF long-standing Canadian allies was the demand of Hollinger Inc.’s independent directors in Toronto that what had happened at Hollinger Inter national be replicated at Hollinger Inc. I would have to go as chief executive, David Radler as president and director, Peter Atkinson as director, Jack Boultbee as director and officer. They had no reason, only that the same had been demanded and accepted in the United States. Even Barbara would have to go, which Breeden had not requested for the American board. We told them in vain that we had only accepted Breeden’s demands for resignations and signed the Restructuring Agreement in New York in order to spare Hollinger Inc. a financial squeeze. Such circumstances had no application in Toronto. Whatever irregularities there were alleged to have been in Hollinger International did not apply to this company. We explained carefully that there was a difference between Ravelston’s debt-free ownership of 78 per cent of Hollinger Inc. and Hollinger Inc.’s debt-encumbered ownership of 30 per cent of Hollinger International. And even so, there was no evidence that all the comparatively distinguished Hollinger International directors would have quit had we not negotiated the arrangements that we did, though the Special Committee would have litigated. We made no headway.
The four independent directors were Maureen Sabia, Fred Eaton, Douglas Bassett, and Allan Gotlieb. Sabia had become a champion of corporate governance, addicted to preparatory full-day meetings prior to full-day Audit Committee meetings. Peter Atkinson and Fred Creasey, the controller, told me well before the debacle of November that they could not function with her demands on them. Sabia was a lawyer without a real practice, who worked from home. She is an authority on corporate governance and eventually became the non-executive chairman of the large and successful retailer, Canadian Tire. She rightly declined to agree to the return of the allegedly unauthorized non-compete payments Inc. received from International just on Breeden’s say-so. She suggested we turn the matter over for investigation to Joseph Groia, a former director of enforcement for the Ontario Securities Commission. His extensive report, which concluded that the payments were sufficiently authorized, was later proved correct in court.
Fred Eaton I had known almost all my life. Eaton was the most famous corporate family name in Canada, a household word like Rockefeller, or Guinness in the U.K. I joined the Eaton board in 1976, when it was in serious financial difficulties, and stayed with it through a revival for which Fred was largely responsible. After I went to Britain, he came there as High Commissioner. He performed well, and had more style than most of his recent predecessors, but he was not a born diplomat. There were lapses, such as when he had a party for Ray Seitz, the U.S. ambassador at the time, and asked another guest, who happened to be the husband of the famous and beloved singer Vera Lynn, to fetch him a drink on the assumption that an unfamiliar face in a dinner jacket was hired help. Then there was his dinner for the Queen, when he assured Her Majesty that Canada would remain loyal to the Crown even if she felt obliged to abdicate and the throne thus passed to the Prince of Wales.
I had sponsored Douglas Bassett as a member of the Toronto Club and as a director of the Canadian Imperial Bank of Commerce. I had been a friend of his father and a pallbearer at his funeral. His defection was a disappointment, but he keeps solicitously in touch with my elder son.
Allan Gotlieb had been, without question, an extremely distinguished Canadian ambassador to the United States. When he left government service, I gave him the sinecure of being publisher of Saturday Night and persuaded Sotheby’s to engage him as their well-paid Canadian chairman. I had supported his charitable causes and publicly spoken in his support when he was suing several publications for libel. One would have expected better from this relationship.
After the presentation of the directors’ ultimatum that if we did not do as they demanded they would all resign, the meeting ended and those physically present left, except for the four independent directors. Unknown to the four putative authors of the coup, Barbara remained on the conference line (as did Douglas Bassett, who was at a holiday location) and she recorded their reflections. They could not explain what they were doing, even to themselves.
They chatted on for a long time about how they did not believe a word I uttered about the impending refinancing deals I had been working so hard on since last summer. “I’m finished with Conrad’s con, con, cons. I never want to hear another one,” said Sabia to general agreement. They were contemptuous of several of my colleagues, including Peter Atkinson, who had worked hard and earnestly to accommodate them and deserved better. Barbara listened to Eaton and Sabia’s description of her as a person whose only concern was for herself and whose expression of concern for my reputation was an act. Gotlieb commended himself for his “Oscar”-worthy performance of concern and his ability to refrain from laughing at both Barbara and me. Bassett was admirably discreet.
But I had fought hard, and would continue to do so, for Hollinger Inc., which, as the proportions of Breeden’s efforts emerged, would be in a desperate condition. The Hollinger Inc. cabalists would have managed the company into receivership and caused the shareholders’ interest to evaporate in quick time – a few weeks at most. Their resignations would be only a minor embarrassment in the dreadful agony that was unfolding and would make it possible for the board to function again.
We rejected their demands unanimously, even the conciliatory Peter Atkinson. They resigned and departed the room. Since there was no rational explanation for their leaving, it had to indicate the extent of peer pressure and the influence of the advice of their counsel from Davies Ward Phillips & Vineberg – the firm that the independent directors had retained and whose fees Inc. paid. It was the beginning of a long sequence of bellicose and overpaid advice, ultimately netting that law firm more than $10 million while the company descended into bankruptcy.
All I had to do now, I believed, was exceed the expectations of complete self-annihilation. This would not be easy. But if we survived, we would win. Should we not survive corporately, it would not be through banishment by this puny quartet. In New York, there were tactical and conscientious arguments for retreat and return. In Canada, the battlements had to be defended.
My worst fears were soon realized. Hollinger International reneged on its debts to Ravelston under existing management agreements. And the front-loading that Thompson had proposed, and that had been accepted to ensure a flow of funds to Ravelston and Hollinger Inc. until June, was shortly defined by Breeden to one of my counsel as a 95 per cent reduction and the complete denial of the contractual payout sum of six months at the end of the management agreement. Hollinger Inc. would be put quickly to a severe test, as it had to make $14.4 million of annual payments to its bondholders. Ravelston had now lost 80 per cent of its income; if it failed to make the annual support payments of $14 million to Hollinger Inc., a default could quickly lead to a seizure of most of our Hollinger International shares and a complete evaporation of Hollinger Inc. shareholders’ equity.
Jack Boultbee and I redoubled our efforts to devise short-term patch-through methods. Under Hollinger Inc.’s debt covenants, the super-voting shares were pledged to shareholders, who could seize them in a default. Any change of hands outside Hollinger Inc. would rob these shares of their super-voting rights and we would lose control of both companies. Inc. itself no longer had a line of credit.
The intention of the usurpatory regime at Hollinger International was clearly to set this chain of events in motion, bankrupt Hollinger Inc., and seize the super-voting shares with which Hollinger Inc. controlled Hollinger International. It was not immediately obvious how we could deal with this, so I began an intensified canvass of refinancing alternatives. I made it clear to Breeden, Paris, and Thompson verbally and in emails with McDonough that under the Restructuring Agreement of November 15, Hollinger Inc. would do what was necessary and prudent to its commercial interest to avoid default. When we next met in New York in January, Breeden professed regret that anyone had behaved improperly, i.e., by telling the press that we were all crooks, which he did not dispute regularly occurred. It was clear that he had shredded the Restructuring Agreement the day after it was signed, but he continued to represent me as the aggressor.
Though the Restructuring Agreement established Paris and me as co-directors of the Strategic Process, I was never consulted about it, apart from one contact. I was pledged, under that agreement, not to have transactions with any party that would impair the possible success of the Strategic Process, unless threatened with default. As Hollinger Inc. now clearly was threatened with default, I considered, with supportive legal advice, that the Strategic Process would best be served by whatever avoided a default.
As the public relations debacle unfolded in the second half of November, I engaged Linda Robinson, whom I had known socially, as my public relations adviser. She recommended Sullivan & Cromwell as counsel because she had worked closely with them before. Three of their senior lawyers, John Warden, Ben Stapleton, and David Braff, visited me on November 20, and I engaged them. Warden and Stapleton had excellent reputations, and as the firm had been led by John Foster Dulles and had negotiated the initial acquisition of the Panama Canal zone, I was biased in their favour to the considerable exasperation of Barbara, who felt that my affection for historical antecedents occasionally marred my vision. They recommended that I retire two days early as chief executive of International and leave it to Paris to sign the 10Q if he chose to do so. I followed their advice.
I finally had serious lawyers, supplemented by David Boies’s firm in specific matters (Boies himself was too busy to act for me, but was available for advice at times) and by Jesse Finkelstein in specialist Delaware questions. I relied heavily on my friend Eddie Greenspan, Canada’s most famous defence lawyer, to advise me on criminal matters, which were so universally touted as being of imminent importance. At this time, Greenspan was invaluable. He early expressed reservations that whatever Sullivan & Cromwell’s talents in commercial and civil matters, they had little sensitivity to the potential implications of dealing with so dangerous an enemy as Breeden. For a long time, Sullivan & Cromwell showed no recognition of the seriousness of Breeden’s intent. When they eventually did recognize it, they were not the best-suited firm to reply to so sinister an opponent. Even had he been well intentioned, the powers available to Breeden as counsel to the Special Committee and as the man who had given Paris his job as nominal chairman of that committee were practically unlimited. He was in charge of any aspect of the investigation that had legal implications and he determined its entire scope. He had the power to identify derelictions and to critique directors’ and officers’ performances, not just in cozy office sessions but in published reports. He was responsible for the Special Committee report and had a power of moral suasion, if not intimidation, before which everyone buckled except Barbara, Dan Colson, Jack Boultbee, and me. No substantive move could take place at Hollinger International without his prior approval.
Evidence of Breeden’s real intentions continued to accumulate. In late November, I had received a gratingly obnoxious letter from Gordon Paris, cutting off credit cards, expense accounts, car leases, and telephone arrangements and relegating the continuing chairman of the board and chief stockholder to the status of a junior employee. Back in early December in our New York City apartment I had shown Greenspan a letter from Paris. He read it and looked at me quizzically: “You think you can make a deal with these people? This is war.”
As important elements of the agreement were in the ambiance of the settlement, and the ambiance had been poisoned, all sense of goodwill and cooperation was vaporized. It is hard to give a sense of the relentless psychological pressure Breeden and his new lackeys asserted. They specialized in a sort of quiet terror – one never knew what new charge would be made or what old perquisite or aspect of your job would be taken away. Our apartment doorbell would ring. The private entrance outside it would be empty but for an envelope lying on the floor. Inside, on Hollinger International letterhead embossed with the name of my successor, would be a new list of personal divestments by fiat. I could no longer do this. I no longer had that. My car had been taken. Access to the company email server had been severed, although I was still the chairman of the company. Each item could be replaced or done without (though the email server presented rather more difficulties not eased by the irritation that International had managed to preempt virtually every combination of my name and Barbara’s that would make a recognizable domain), but as a campaign it was successful. I was living every moment with that terrible feeling of missing a step in your sleep, or losing a heartbeat. The psychological treatment almost instantly cracks weak people – of whom, unfortunately, we had no shortage. Many, with the right sticks and carrots, were prepared falsely to denounce others to spare themselves even slight inconvenience. (The best recent illustration of this was the Grasso affair, where many of Wall Street’s lions, most of whom have since hit the wall, deserted Dick Grasso, former head of the New York Stock Exchange – except for the magnificent Ken Langone, who then made a bid to buy the NYSE. Of course, Grasso and Langone were vindicated.)
After the resignation of the Hollinger Inc. directors, the next element of the Canadian establishment to desert with a minimum of decorum was the Canadian Imperial Bank of Commerce, of which I had been a director for twenty-seven years. As soon as the November events were announced, I heard from the non-executive chairman, Bill Etherington, that the bank would require my retirement as a director at the next annual meeting, a few months later. I replied that this was premature and that I would have expected a little more benefit of the doubt.
As weeks went by and the enemy succeeded in steadily poisoning the wells in the press, it became obvious that all the public companies I was associated with were going to come under great pressure not to re-elect me. In the circumstances, I phoned John Hunkin, the chief executive of CIBC, and said that I did not want to embarrass the bank. I suggested that I might need a well-secured loan from CIBC. He didn’t commit himself but was encouraging.
What happened then was predictable but disappointing. I was informed that the bank’s nominating committee had met and that while no vote or resolution was taken, it was their view that I should not stand for reelection, and that this view had been informally approved by the directors. I had had no notice that this was being discussed, and no ability to arrange a more dignified exit for myself from a bank for which I had generated many millions of dollars of profits over more than thirty years.
Practically all other departing directors were thanked in resolutions and at the annual meeting and in the annual report. I received one parting email of good wishes from a fellow director, a person whom I did not know well, as well as a gracious word from my friend of nearly forty years, Galen Weston. My loan request was denied by Hunkin in an email beginning: “We would not normally make a loan to someone in your condition.” Perhaps because I was already becoming punch-drunk, I couldn’t help thinking of the cartoon from Punch more than a century ago, of the cardinal and the admiral on the railway platform, where the cardinal mistakes the admiral for a baggageman and the admiral replies: “I wouldn’t be travelling in your condition, Madame.” I was a director also of Brascan, CanWest, and Sotheby’s, though my association had been briefer than with CIBC. These three public companies also concluded that they did not want to brave the barrage of hostility from institutional investors. Even though all of them were more or less controlled companies, they were concerned about their stock price. They put their views very courteously and they profusely thanked me, in both the annual meetings and in the annual report, for my services to them.
At a practical level, I had no credit facilities of any kind, although I had an apparent personal net worth of hundreds of millions of dollars. Tony Fell, Canada’s leading merchant banker and a friend and neighbour in Toronto of fifty years, had kindly visited me in New York in December. I asked him whether the Royal Bank might consider a loan, heavily secured. He phoned back promptly and in his opening sentence included the phrase “fraudulent preference.”* I interrupted and said he need not continue and that I would not be bothering the Royal Bank (of which I had been invited to become a director in 1976) again.
It is hard for someone who has not been through it, as I had not, to grasp how inaccessible assets become. (I had several times lent money to financially distressed friends and asked no security, though the amounts were not negligible, and told them to pay me back when they could, if they could; sometimes they did, sometimes not.) I found that credit cards were all right, as long as there were no deferrals of settlement dates, which I never engaged in anyway. But apart from that, only cash could be used. No loans or overdrafts were available, as no collateral was thought to be invulnerable. Prosecutors were apt to claim that anything was ill-gotten gains. These wells were poisoned immediately by Breeden’s allegations, as he had driven off the private equity firms in the summer of 2003, before he had a hint of any problems, as he isolated and started to starve his quarry.
Now most lawyers would be more concerned to assure collectibility of their invoices to me than about doing what my burgeoning legal problems required. I was then overbilled for counsel’s unjustified belligerencies to collect their invoices – I was billed for superfluous extra-collection measures on myself. My income stopped almost at once, and all that could be used to replace it was cash on hand and asset sales. These were fine for a time (I was particularly pleased to sell my CIBC shares at a fine gain), but not the nature of most of my assets. American and Canadian lawyers lectured me on the need to sell my homes and other assets to have a pool of cash to pay them with, and presumed to lecture me on the limits of my means (about which none of them knew anything). I was to ensure that they, and not other claimants, took every cent I had. Fortunately, I had laid in enough over the years, and could rely on reserves with adequate agility, to avoid that fate, but there would be many tight corners and narrow passages. Brendan Sullivan said, “Money is the ammunition of this war.” It was, I suppose, but it often seemed to be all that the well-paid and not overly successful warriors were interested in.
What ensued was a prolonged, intricate, and ultimately very successful series of asset sales, often through interposed vendors so as not to rouse the bottom feeders, who were more numerous, devious, and passionately convinced of whatever they wanted to believe about the prostration of the vendor, than I had ever imagined. In these respects, I had spent all my career in the cozy cocoon of the establishment, a bank director since I was thirty-two, and able, fairly effortlessly, to get whatever money I needed, when I needed it. I had an absolutely perfect credit record (and still do), and over forty-five years as an autonomous businessman, sometimes including corporate loans of billions of dollars. It was no use to me now.
I don’t think personal bankruptcy was ever in prospect, but a disorderly retreat, a rout in which I peddled fine assets at knockdown prices, was. And ghoulish publicity, alleging or implying extreme financial discomfort, was a hardy journalistic favourite for a long time, even up to the Globe and Mail’s fanciful account of the virtual forced sale at a knock-down price of my Palm Beach house in early 2010. The story was republished all over the world, having been lifted without verification from the Palm Beach Daily News, a seasonal photo paper that is probably the most inane newspaper in the English-(more-or-less)-speaking world. In fact, the sale was conditionally revocable and at a price still to be finalized.
By 2010, I had no trouble returning fire with stinging accuracy, where it was worth doing so, in this case, at the end of a National Post column. But for several years I was pasted by the press at almost every opportunity. It was very unpleasant, but, I suppose, character-broadening.
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THE REAL PROBLEMS, now about to unfold, were harrowing enough.
The screws were tightening everywhere. David Boies’s law partner told me that David’s son had a high-risk, high-yield, money-lending operation. He had read that I might sell my Palm Beach house and suggested a mortgage could be arranged (at double the normal rates). When we got to Palm Beach, our housekeeper was informed that we had to pay cash for the newspapers at the local newsagent despite my having been a customer for more than twenty-five years. Apparently there was concern about whether I was good for the cost of newspapers. There were also irritating stories of arrears on charitable pledges, and the charities in question, especially those headed up by the more exalted figures of New York society, showed indecently little discretion. Every pledge was fulfilled to the last cent, and would have been even if I had had to sell my own possessions and wash dishes for a living to accomplish it. It was very discouraging, or would have been, had I permitted it to become so.
Although it was never acknowledged that this was his intention, the Breeden strategy to bankrupt Hollinger Inc. was now being pressed relentlessly. The only solution I could see was to begin serious negotiations to generate money at the Hollinger Inc. level, while remaining well within the terms of the Restructuring Agreement and the requirement not to impair the Strategic Process with Lazard. I felt this could be done so long as I made sure that any agreement I reached contained the express proviso that the contracting party work with Lazard in the future disposition of the company. But I was equally sure that I could not, in advance, inform Breeden via Gordon Paris of whom I was dealing with while they were busy trying to bankrupt Inc.
Sir David and Sir Frederick Barclay, wealthy and somewhat reclusive, almost identical twin brothers in the United Kingdom, had periodically expressed an interest in buying the Telegraph whenever our competitors managed to generate a negative story about our financial condition. David Barclay was back, so I initiated discussion with him, in parallel to talks with Jonathan Rothermere at Associated Newspapers and Mathias Döpfner of Axel Springer, a most charming and intelligent man whom I had known for some years. I would have been happy to deal with any one of them, and pursued discussion with each.
Also in the frame was the inimitable chairman of Triarc, Nelson Peltz, a swashbuckling buccaneer of colourful phrase and manner, a financially well-travelled sidekick of Michael Milken, Carl Icahn, and even Kerry Packer. (At one point in December, my financial condition was so strapped I had to borrow $100,000 from Nelson to pay our public relations firm, a fact that shortly made its way into the press. I repaid the loan after one month at the agreed, very fair, interest.)
Peltz is in most respects a delightful man. He is a brilliant raconteur and has had a rich business and, in a general sense, social history. Since he spends his time scrutinizing the business press and attempting to take advantage of distressed situations, he has encountered an astonishing range of people and businesses. If it is possible to align one’s interests with his, a powerful and ingenious champion is acquired. But Peltz could never resist the temptation to believe what he wanted to believe: that I had no practical choice but to accept his offer, no matter how one-sided.
Because our personal relations were (and remain) so congenial, we generally reached a provisional agreement on whatever we were talking about, which moved trapezoidally into a cave-in to Peltz when committed to paper by his amanuenses. As a result, we never agreed on anything material, except that loan to pay my public relations agency.
The great advantage of associating with Nelson Peltz, apart from the fact that he was a rewarding dinner companion and a pure capitalist who was not overly preoccupied with the excesses of corporate governance, was that he frightened the living Jehovah out of my enemies. The report that he and I had dinner together (in a restaurant that Peltz owned) was enough to set my enemies thinking that they should adopt a poison pill. This is a restriction on acquisition of control of a company. In this case, the restriction would be imposed by a subsidiary, the acting management of Hollinger International, on its parent, Hollinger Inc., an unheard-of concept.
Despite a reasonably active business and social life in New York in December, I found my days very lonely and difficult. For the first time in my life, I had night sweats. I was awakened by my racing heart, stirred to acute fear by unremembered dreams. People were taking their distance as the press virtually throughout the world pounded me daily as a “disgraced” and greedy executive quite possibly on my way to prison. My faith and determination were assaulted but not seriously shaken. But it was horribly nerve-wracking and hard on Barbara, who was losing weight and colour. Her remedy was to work even more frantically. She continued and even increased the frequency of her writing, and the quality of it was better than ever.
As money evaporated, Breeden closed in on his objective of breaking Hollinger Inc. and dictating terms of eliminating the tangible fruit of my more than thirty-five years in the newspaper business. Of the groups that had already surfaced, the Barclays, as owners of a private company little disposed to excessive dalliance with financial advisers, were the most promising. Peltz was unshakably convinced that no one would bid for Hollinger Inc. because it would not be able to complete its year-end audit due to non-cooperation from Hollinger International. He was skeptical that any of my future deals to extract myself from the problems would be successful. He never offered more than to take an option to buy our shares. He would then pad around to meet Breeden and Christopher Browne. The film rights to such meetings would have been valuable, but his offers were not.
The auditors, KPMG, turned in one of the most shameful performances of all in these awful days. Having endlessly attested to the full approval of the non-competition payments to individual executives, they now claimed to have been misinformed. Breeden and I had agreed that their turn as litigation respondents would come and that it would be painful. (Sadly this was not to be. Breeden became Special Monitor of KPMG, which had its own legal problems, and was conflicted. Even before he became Special Monitor for Hollinger International he had determined not to sue them. My informed intuition is that he believed this would make it easier to prove the case against us.)
Throughout December I continued to narrow my differences with David Barclay, with the capable technical assistance of Ben Stapleton, an experienced high-level corporate negotiator, who met with the Barclays’ emissaries in New York. I sat in my cluttered little library in New York and sent my own faxes to the Barclays, who live in a castle they built in the Channel Islands. I once asked David Barclay how far he was from one of the main islands if he wished to go out to dinner. He replied that there was no need for that because he had built a replica of the main dining room of London’s famous restaurant Mark’s Club in their castle.
We had to use faxes because employees of Richard C. Breeden and company (known to us as Breeden’s thought police) were scanning all our emails and I did not want to arouse suspicions at this point by changing to another email channel. I occasionally took advantage of this by planting completely false messages in them.
One of the many depressing episodes in the steady erosion of my position was my visit to the SEC in Chicago in response to a subpoena, on December 22, 2003. I assumed that Breeden had generated the subpoena, which, at least for a long time, was not accompanied by any parallel action to gain testimony from other Hollinger officials, past or present. I also thought it likely the Special Committee staff were acting in Breeden’s name and with the benefit of his connections, to generate the concurrent rumour of a Department of Justice criminal investigation, which was eagerly taken up and publicized by the New York Post, though Murdoch’s flunkies were certainly capable of hatching this brain-child themselves, with no more encouragement than a wink from their boss.
Since we could achieve no confirmation of the existence of a criminal investigation and the SEC refused a brief deferral or informal questioning, there was no possibility that I could testify. The prosecutor’s greatest specialty in current U.S. practice is to put anyone under investigation into a position where he or she gives sworn or even unsworn testimony to several authorities. The slightest discrepancy can then be seized on to allege obstruction of justice and perjury. John Warden and David Braff of Sullivan & Cromwell as well as Eddie Greenspan (out of solidarity and at great inconvenience to himself) accompanied me to Chicago. It was a tedious but civil process as I endlessly invoked the Fifth Amendment formula against self-incrimination, which, like most people, I had long unjustly associated with gangsters.
I correctly judged that invoking the constitutional right not to testify would be used to undermine what was left of my position in Hollinger International. We were completely responsive to SEC subpoenas for documents and handed over more than one hundred thousand pages of material, withholding nothing except what benefited from a clear lawyer-client privilege, just as I had handed over all of my more than ten thousand emails to Breeden’s committee.
CHRISTMAS WAS EXTREMELY GLOOMY. My children were with their mother. Barbara’s former husband, George Jonas, a delightful and very cultured man, and his wife, Maya, came to lunch. It was the only day in the period from November 15, 2003, through to the end of 2004 that my press service reported no references to me at all. This was a Christmas present of sorts, as most days there were never less than a dozen and often more than fifty negative stories. Barbara and I vowed that we would emerge from under this horrible cloud in the ensuing year. I spent New Year’s Eve reading the Barclays’ latest proposal for the acquisition of Hollinger Inc. and, with it, control of Hollinger International and the Telegraph, apparently the long-standing citadel of their heart’s desire.
By the end of December, rumours of my social and financial activities had created such alarm among my enemies that they circulated a proposal for a poison pill. That would impose an inability for anyone to acquire a control block. In essence Hollinger Inc. would not be able either to vote or sell its shares in Hollinger International. Virtually all monies to me and my company had now been blocked and this would render our shares useless. When I received the twenty-four-hour directors’ notice of the suggestion that Hollinger Inc. would be handcuffed in this way, I concluded that it might be time to go to war.
I called Henry Kissinger and told him that I found this so outrageous that I was considering sacking some of the directors. He urged me to be cautious, and I suggested that if he could intervene with Breeden and arrange “substantive discussions toward a comprehensive settlement,” I would enter whole-heartedly into them. Henry had persevered in a state of friendliness through December. He and Nancy had most kindly invited me to Thanksgiving dinner at their home in Connecticut, which is always a warm occasion, with family, neighbours, and old friends, including in 2003 the recently widowed wives of Lane Kirkland and Isaac Stern. Barbara pleaded illness, preferring to stay home.
I had a conference call with Henry and his lawyer, Paul Saunders, and John Warden on Sunday, January 4. From it, discussion arose between Warden and Breeden that led to a two-week standstill and the promise of “substantive negotiations.” It was specifically understood that Hollinger Inc. could negotiate in that period if it chose to, but could not conclude an arrangement. Henry subsequently put it about that he had laboured mightily to bring these talks about and to persuade me not to have “another Saturday night massacre,” an invocation of Richard Nixon’s firing of Watergate special prosecutor Archibald Cox, which led to the resignations of Attorney General Elliot Richardson and the dismissal of his deputy, William Ruckelshaus. The comparison was completely spurious. I was being threatened with something I was advised and convinced was an illegality and breach of contract. And I wasn’t threatening to fire everybody, unless it was the only way to preserve the interests of the parent company, to which Breeden, Paris, and Thompson had paid ample lip service. Henry’s efforts consisted of one telephone call with Breeden, admittedly a taxing undertaking, but hardly a prodigy of diplomacy by his historic standards.
Our first meeting with Breeden and Paris in the Kissinger Substantive Round was on January 7, 2004, at the Sullivan & Cromwell conference centre in midtown Manhattan. The session, which now included Warden, began cordially enough. I gave a summary from memory of about forty minutes, touching upon the principal evidence of approval of the non-competition payments to executives that they claimed had not been authorized. I pointed out that the former director of enforcement of the Ontario Securities Commission, after his extensive investigation, had concluded that the buyers of the newspapers in question had requested that the non-competition agreements include Hollinger Inc. I also contended then, and again in a letter to the Hollinger International Board of Directors two weeks later, that Thompson had misled the directors about discussions he had had with the auditor about the non-competition payments. (Thompson’s versions of these events were rebutted at the eventual trial.)
I went over the threats Paris had made to me on November 15, when he had asserted that any hesitation on my part or of our management to resign would lead to litigation. I reminded them of their pledge to put the best possible public relations face on my departure as chief executive and the Restructuring Agreement and their assurance that the flow of cash to Hollinger Inc. would be front-loaded to continue as closely as possible the former rate of cash flow until June 2004. Six clauses out of eight, including my status as joint director of the Strategic Process with Lazard and the arrangements for the aircraft, had been violated. This, I pointed out, was a worse record of breach of agreement than Stalin’s violations of the Yalta Accords. I had been grossly defamed, and Savage and Seitz especially, since they had property in Canada and the United Kingdom, could be vulnerable to libel action when the legality of my conduct was no longer in question. I said that I had been wrongfully deprived of my position and my reputation and that I intended to regain both.
There was a break in proceedings, and when we reconvened they gave us a very lame reply. We agreed to meet again in a few days. The next meeting was January 13, in the same place. I said I would not pay back the so-called unauthorized payments because they had been authorized, but that I was happy to defer that discussion until the end of their proceedings and try to negotiate a final settlement. I told them candidly that there were a number of negotiations underway at Hollinger Inc. and offered to sell them Hollinger Inc. for preferred shares, and to give them a first refusal on any bona fide offer we received for Hollinger Inc. Paris gave me a sanctimonious lecture on how they did not value the stock at above $15, which was well below what Lazard professed to be seeking and was even a couple of dollars below the current market price and below the imputable value of the impending Barclay offer. This was the first control block discount I have ever heard of. He said that they would have to canvass our noteholders, and that it would require months for them to consider this. (I had never had any difficulty getting consents from the same noteholders within a couple of weeks.) They had no proposals except that Hollinger Inc. should pledge to do nothing for at least four months, in which time it would, they obviously hoped, go into default. We agreed to meet again by telephone on Thursday, January 15.
By this time, most of the personnel were showing great wear and tear. Poor Rosemary Millar, my brilliant and devoted London assistant, was in hospital. Although her lung cancer was inoperable, there were various chemotherapies for her, which she paid for by selling her options at the current higher prices. Peter Atkinson, who had been monosyllabic and almost catatonic for some time, had finally reached the breaking point and abruptly resigned on January 9. As the war for survival steadily intensified, he was not a fit combatant. He was opposed to any initiative that might keep the company functioning, had lost faith in what we were trying to do, was concerned for his own health and that of his wife, and presumably bore some burden of guilt for his own failure – as legal vice-president – to correct the documentary incompleteness of the now notorious payments.
He thanked me for what I had done for him; I returned the sentiment and wished him well. It was a sad end to what had at times been a distinguished association. Like so many other things in my life, a valued and trusted relationship had crumbled under the pressure of unforeseeable events and the frailties of formerly trusted comrades.
ON JANUARY 8, I HAD GONE to find Barbara for dinner, and she was not in the house. There was an agitated and ambiguous note from her on my desk. Her cellphone was not with her. Her car was in the garage. There were footprints in the snow to the chapel and then out onto the driveway, but it was impossible to follow them into the road. I called George Jonas, who came to our house. The night was bitterly cold. I called the police and drove around the neighbourhood looking for her. The police called for the canine unit, but because they were careful not to put it over the police radio, there was a delay in the arrival of the dogs. I was on the phone with Eddie Greenspan, when Barbara, almost frost-bitten, entered through the front door. She had walked three miles to the Don Mills shopping centre and back and bought me two combs, items that I did not need but have used fetishistically ever since. She appeared to have spent a number of hours outside in the snow, but I didn’t want to badger her with questions. She was upset and had dealt with it her own way. It was a harrowing time and the police were magnificently efficient, solicitous, and discreet. This was the only time that Barbara allowed the strain of events to get the better of her briefly and she overcame that herself.
The controller of the Hollinger companies, Fred Creasey, was full of good intentions but was so nervous he started grinding his teeth at night. He ended up having to go to the dentist for it. He fainted when his lawyer told him that the SEC wanted to interview him, and eventually vanished for three months’ rest, which stretched to several years. Peter White, unflappable and indefectibly loyal, rushed in to be a daily presence in the office.
We needed independent directors to represent the shareholders after the resignations of the previous year. Peter White recruited Gordon Walker, a former justice minister of Ontario (a resonant-sounding position that was in fact only the chairmanship of a committee of justice-related ministers in the Ontario cabinet) who had represented the city of London, Ontario, in the provincial legislature, and I persuaded Richard Rohmer, a much decorated general of the Canadian Reserves, a lawyer, author, and old friend, also to become an independent director.
I faxed David Barclay that I had offered Hollinger International a first refusal on any sale of Hollinger Inc., although the authors of what Barclay called the “vendetta” against me had not shown much interest. I wrote that if they took up the offer I would have to abide by that. Our telephone meeting with Breeden and Paris on January 15 was a failure. They showed no interest in my proposals. We agreed on a further telephone conference the following day, January 16. I pushed the Barclay deal forward to close immediately after the expiry of the agreed stand-still period, at midnight on Saturday, January 17.
All my legal advice from Sullivan & Cromwell and Jesse Finkelstein was that the Barclay deal, fortified by their promise to support the Strategic (Lazard) Process, was legally bullet-proof. I thought of papering our exchanges off with special-purpose faxes to reinforce the record but was assured that that was not necessary.
Breeden peremptorily cancelled the meeting on January 16, and we learned at the end of the day, after the opposition had leaked it to the press, that the ex-officers of Hollinger International and I had been sued by Hollinger International for $200 million, including a demand for the disgorgement of all dividends Hollinger Inc. had received from Hollinger International in the last six years. The news report said that Hollinger International had acknowledged to the SEC that it had filed some false statements and had alleged to the SEC that the Special Committee was under threat. This was completely false, but the company had “consented” to the imposition of Breeden as “special monitor” if we altered the composition of the board of directors. A special monitor has tremendous power made even greater by the fact that those powers are unspecified.
This was a disgraceful stitch-up; the SEC had simply taken Breeden’s word for it (a terrible mistake I had already discovered), that his committee was under threat from me, which it wasn’t – I had only asked for adherence to the Restructuring Agreement and threatened eventual defamation actions where appropriate, and in the first of several acts of ex parte pseudo-legal gangsterism, had installed Breeden in another impregnable sinecure riveted on the neck of our company on his own assurances of a non-existent threat by a party not invited or permitted to respond. Bernard Madoff went on pillaging his investors. Wall Street and its rating agencies went on shoveling out worthless mortgages and consolidated debt obligations, and the SEC cheerfully turned our company into a trussed-up partridge for Breeden.
It subsequently came to light that Louis Zachary had told Wasserstein that the effect of the SEC consent decree was to assure that “no one would invest in” Hollinger Inc. Breeden had now become the humanoid equivalent of a poison pill.
Saturday, January 17, 2004, was an eventful day. The Argus Corporation, Ravelston Corporation, and Hollinger Inc. directors met and approved the sale after ample but constructive discussion.
In the midst of this intense day, Nelson Peltz called to say that Packer had withdrawn their joint offer (which, in any event, was so stingy I had not replied to it) and to predict that the Barclays would not go ahead with a deal. Then my ex-wife phoned to say that she thought it timely for me to settle a large amount of cash on our two sons and daughter. With considerable patience, I explained that her request was quite impractical at the moment. I did not tell her that I was down to barely $100,000 in cash. My financial condition was critical.
I had called Alfred Taubman, a former director of Hollinger International and a former controlling shareholder of Sotheby’s International, and asked whether, in an emergency, I could borrow something from him. I said that I could pledge one of my houses to him. He said that he would certainly lend me money, that he didn’t need a pledge, that all he needed to know was the amount required and the place to which it should be sent. Alfred, at least, did not forget favours, at least not for a time, and his promise, though I never acted upon it, was a great comfort. (Unfortunately, when I later did seek his assistance, he was not forthcoming.)
The Hollinger International executive committee met at 7 p.m. As usual, they had given us just twenty-four hours’ notice and no indication of the purpose of the meeting. I feared that they might be trying to institute a poison pill, so I made sure the Barclays’ New York lawyer and one of ours were in an office in New York with all the sale documents in front of them. Barbara was on the phone to them from the other telephone in my library. That way I could signal to her if a poison pill was in contemplation and she could ensure the deal was consummated before the pill was installed.
This proved not to be necessary. There were three issues for the executive committee. First, the previous day’s consent arrangement with the SEC was approved, with me in dissent. It had been approved by the Audit and Special Committees after five minutes of discussion. No one was able to tell me the justification for the claim that the Special Committee was under threat. I expressed shock that Burt and Thompson would have been a party to a bogus concession of guilt implicating themselves and that all of them would subscribe to such a false bogeyman as a threat to the Special Committee, and further to such a rape of the rights of shareholders as the special monitor provisions. I was speaking to myself, but I hoped it would be on record. Next was approval of their lawsuit of the previous day. Again I dissented and received no coherent response. There was no real defence of either measure. They were merely executing Breeden’s instructions.
The third item was announced by Seitz as being a consideration of my position. I was assured that this was the last item, so I was able to signal digitally to Barbara to stand easy in her hookup with New York. Given the treachery of my interlocutors, it was not appropriate to end the telephone connection, so the lawyers at the other end of her call remained on standby. Seitz moved that I be fired as chairman, as casually as he might ask for some small capital expenditure. I asked for a reason. Answer came there none. Finally, poor, plodding Jim Thompson said that it was “in the power of the board to take this action.” I replied that this committee was not the board and that that was not my question. I added that they would all have the opportunity to answer my question in due course, when silence would not be an option. (At time of writing, that moment impends.) A pristine silence continued. Eventually, after I was again outvoted four to one, termination of the meeting was proposed. I said that I would be delighted to make that motion unanimous.
Barbara and I had dinner and I enjoyed the better part of a good bottle of claret. The sale of Ravelston and Argus corporations’ 78 per cent of Hollinger Inc. to the Barclays was concluded shortly after midnight. Reciprocating the plentiful courteous notice of important events that our enemies traditionally gave us, Sullivan & Cromwell sent a faxed notice of the impending sale to Breeden’s office at about nine o’clock that evening.
While I was right to resist the corporate governance fanatics as I did, am proud to have done so, and am sure I will eventually be vindicated, and at the time of writing, I substantially have been, I had underestimated their strength and identified my own contempt for the movement too strongly with the corporate interest. If the motion to remove me had been presented for the correct reasons and in acceptable terms, I would have abstained. Of course, under any scenario, I intended to return, as Gordon Paris couldn’t run a two-car funeral, and it shortly became clear that it was precisely toward just such a fate that Paris, with the help of Breeden and Seitz, was driving the company. But for me to cling on to an impotent position, fronting for the usurpatory acting (in each sense of the word) management, was an intolerable state of affairs.
Most important, I did not want to be associated in any way with the vandals now in control, with Paris acting in Breeden’s name, as chairman, president, and chairman of the Special Committee. The events of the last few days made the distinction clear between those who built, largely owned, and would normally control the company and those complicit in their overthrow and in the subsequent destruction of the Hollinger companies. The Hollinger International shareholders would pay a terrible price for the fact that their fate was to be entrusted to Breeden.
Breeden and I had both crossed the Rubicon in opposite directions. I assume that he was accustomed to, and had achieved, in his corporate governance role, the complete submission of his targets, and was even addicted to it. Certainly, that was what he had effortlessly extracted from Radler, Atkinson, and the independent directors, except, up to a point, Perle. And that is how his operatives behaved, from his law firm down through the people who appeared at our offices to take our hard drives (with a peremptoriness usually reserved to bill collectors or minibar inspectors).
In making a Swiss cheese of our Restructuring Agreement, and a farce of our “substantive discussions,” and then launching a legal onslaught while we were supposedly in constructive negotiation, he had escalated our disputes to a war which had to result in one of us being completely crushed. He had seized, and for a (long) time, would retain the high ground, and I was severely defeated at the outset and repeatedly. But my weakness was my strength. I had little left to lose, and I was, after all, innocent of wrong doing, if not of misjudgment.
I had just demonstrated an ability to continue the fight that startled the other side. The more the war escalated, the greater the danger to Breeden would become. With each new overreaching act of belligerence, Breeden would risk more; we were locked in a death struggle on a runaway train. He had to finish me off as the crook he falsely claimed I was, or fail.
No matter how often and noisily I was pronounced dead, it wouldn’t happen if Breeden, to borrow what has become an American political expression, couldn’t close the deal, by destroying me. He took the task upon himself, and kept raising the stakes. He has sown, and he shall reap.
* I eventually had a very congenial correspondence with Elinor, and she accepted my invitation to dinner when I return to London. I look forward to it.
* This was the fear that if my finances collapsed, the Royal Bank could be accused of advancing the interests of one creditor over others by monopolizing, for security purposes, a principal asset, to the exclusion of other creditors. Five years later, Canadians would be grateful for such caution in their bankers, but it wasn’t really caution here; it was an infelicitous fusion of terror and animosity, and was absurd in practical terms.