WE DREADED FRIDAYS. The pattern established by International early on was for a week of skirmishing ending with the minimally required twenty-four-hour notice given either Thursday or Friday of a board meeting – no agenda. The new management would convene to issue another Breeden Bull, guaranteeing us a weekend of gloom as we scrambled to devise some reply to his latest manoeuvre.
For once, we had roared back and left the enemy scrambling like asphyxiated cockroaches. With the sale to the Barclays, Breeden and his committee had the rug pulled out from under them. The media, now accustomed to me as a completely passive and deposed figure, were startled by this turn of events. Sunday headlines of “BLACK SUED FOR $200 MILLION AND SACKED” were followed by Monday’s and Tuesday’s headlines of “BLACK’S BUSY WEEKEND” and “BARCLAYS: HOLLINGER BID ‘DONE DEAL.’” There was great excitement among worried Hollinger Inc. shareholders that they would now see money, as all classes of stock would be taken out at good prices by the Barclays. Once these counter-attacks were launched, Jesse Finkelstein and Sullivan & Cromwell reconfirmed that this sale was legally invulnerable. I allowed my infant but precociously growing wariness about the operation of the U.S. legal system to be overborne by their confident assurances. It would all be part of a most expensive and painful education.
This time International did not have the luxury of waiting for Friday. A Hollinger International board meeting was called for Monday, January 20. It was probably the most disagreeable directors meeting I have ever attended. (From then on, all Hollinger International board attendances by me, except one, were by telephone.) Gordon Paris was elected chairman. Barbara and I voted against; I pointed out that he was completely unqualified and in a clear conflict of interest as chairman of the Special Committee. Then a Corporate Review Committee (CRC) was established, comprising all the directors except Barbara, Dan Colson, and me, to review the Barclays’ transaction and any other matters. All powers of that committee could be delegated to a subcommittee of two, to be called on minimal verbal notice.
It was designed to be the completion of our marginalization, prior to our completely unforeseen counter-stroke. Henry Kissinger, in his chivalrous confusion, objected (only) to Barbara’s exclusion. Obviously, one had either to reject the concept of the committee entirely or agree to the proposed composition, which, as Barbara pointed out, excluded the only three people on the board who knew anything about the business the company was in. Dan Colson was ostensibly the chief operating officer but was being ceaselessly and ignorantly interfered with by Paris.
Then came approval of the $200-million lawsuit. (It would shortly be escalated to over $1 billion by adding new, even more fantastic counts, and the peculiarly American flourish of the civil version of the Racketeer Influenced and Corrupt Organizations Act, RICO; yes, civil racketeering. I asked myself if the crime of civility could be far behind.) Richard Breeden gave a rambling pastiche of accusations about the original problems of unauthorized payments, which I rebutted in a calm, low voice – so calm it was not entirely understood by some on the call. I reaffirmed the contents of a letter I had sent the directors over the weekend debunking the unauthorized payments theory and referred to the letter the Barclays also sent to the directors in which they objected to the “vendetta” against my associates and me and promised full support for the Strategic (Lazard) Process.
The lawsuit was approved. Dan Colson had to abstain; Richard Perle was not yet on the call. Barbara and I were the sole votes against. I asked Henry Kissinger if he had voted for the suit, since I had not heard him. He replied that he had. I said, after a brief pause: “Et tu, Brute?” This hung heavily in the air for a few moments. Then Henry said that he wasn’t approving the contents of the lawsuit, only upholding the right of the company to take it, and asserted his standard comment that I had “been one of [his] best friends in the world for decades.”
The great Metternichian was befuddled by this sudden agitation in the balance of forces in a small matter, like a coup d’état in the Balkans or, in our times, even in Central Africa. He got it wrong as the passage of years would show.
The final motion of the telephone meeting called for adherence to the Restructuring Agreement. I detailed the company’s violation of six of the eight provisions of that agreement and explained why I believed that the Barclay transaction, supported by the letter the Barclays had sent the directors and the letter I had sent, conformed to the agreement. Richard Perle had now joined the call and supported the position I was taking that the Restructuring Agreement had to be upheld by all parties. The motion passed and the meeting adjourned. Dan Colson, who attended by telephone from London, was so disgusted by the meeting that as soon as it ended, he went to his washroom and vomited.
In the U.S., a controlling corporation can adopt a consent motion that alters the board and the committees of a subsidiary. We used this at Hollinger Inc. and gutted all the Hollinger International committees, required unanimous approval of various categories of motions, and required one week’s notice of any meeting rather than the twenty-four-hour specials International favoured. We were, after all, still the controlling shareholders of the companies we had built. Both Jesse Finkelstein and Sullivan & Cromwell again assured us this was a legally unassailable step.
Our right to sell to the Barclays would now be challenged by International in the chancery courts of Delaware – which was where International was incorporated. I continued my cheerful daily conversations and fax exchanges with the Barclays, a rather pleasant interlude with two intelligent and humorous businessmen, among the more agreeable people I have dealt with. They issued a 13D (a public SEC filing, which Tweedy Browne had used to call for the appointment of a special committee) in early February that indicated they were prepared to offer $18 a share for all Hollinger International shares but stated that Wasserstein had been instructed by Paris, who was supposed to consult with me about the Strategic Process (and who had told me in the “substantive discussions” two weeks before that the stock wasn’t worth more than $15), to insist on a higher price. I urged the Barclays to stop the tease and make the offer.
They were confident based on advice from their lawyers, Skadden Arps (who had ignored any possible conflict in that they were also acting for both Tweedy Browne and Lazard), which was that we would win the case in Delaware and that they could buy the Telegraph from International via Hollinger Inc.’s controlling interest in that company without having to bid for all the International shares. My plan was to sell Hollinger Inc. and with it International at the best possible price. It didn’t take a genius to see that Breeden and Co. would never be able to run a newspaper company profitably and their animus to me was so clear that co-existence was never an option, though I gave it a try. Nor, from his conduct, was it ever intended to be an option. Only Greenspan, our Canadian lawyer, had seen immediately what we were up against.
In ordinary times we should have been able to get the Ontario Securities Commission (OSC) to intervene to protect the rights of the Hollinger Inc. shareholders from being hog-tied by a putschist faction in the U.S. subsidiary. But a little research confirmed that the OSC saw Hollinger Inc. as me (as my associates and I owned 78 per cent of it), and didn’t approve of multiple-voting shares (with which the parent controlled the subsidiary). Some of the OSC staff remembered being cuffed around by Breeden when he was at the SEC, and importantly, as it turned out, didn’t want to go through it again.
Now came the first of many trials in this saga, in which Hollinger International sought to block the sale of Hollinger Inc. to the Barclays. We were quickly into depositions for the trial in Wilmington, Delaware. The first inkling that there might be greater problems than I had been warned about was Finkelstein’s statement to me that the designated Chancery Court judge, Leo Strine, was flaky, controversial, and unpredictable. Barbara did some research and found him to be an intelligent judge with a creative view of his role, a shareholders’ rights activist, and a left-liberal Democrat whose elevation to the bench had been closely contested in the Delaware State Senate. It wasn’t clear in this case which side a shareholders’ rights advocate ought to be on, but given the public relations debacle, I was unlikely to be the beneficiary of that current of opinion. Though a shareholder myself, I belonged to a category out of favour with the governance movement and one being hunted into extinction: the controlling shareholder with dual-class stockholdings.
We were told Breeden had gone judge-shopping in Wilmington, but I suspect that was quite unnecessary. Breeden and Strine were peas in a pod as far as views on corporate governance activism went, and this case would be one in which Strine would have special interest. Strine’s involvement came from a genuine belief in the need for more radical measures to protect shareholders. He was critical of Sarbannes-Oxley on grounds that it put the regulation of business into the hands of government agencies rather than the courts.
Breeden appeared also to see corporate governance as a profit centre. He had a law firm to deal with miscreants, a governance consulting business to rake in preventative fees, and would soon start his own investment and hedge fund business that could provide financing to companies caught in, or potential targets of, governance demands – had they not been prudent enough to invest with him in the first place. I find it hard to believe that his funnelling such rich business to the New York law firms O’Melveny & Myers and Paul, Weiss went altogether unrewarded.
Businessmen may be familiar with it, but to the larger society, Chancery Court is pretty much unknown. Most states abolished Chancery Courts long ago (New York, for example, in 1847) and whatever cases fell under their auspices were delegated to regular courts of law. A Chancery Court is not tied to rules of law, though naturally the law is considered. Its decisions are based on “equity” and the maxims of equity. This gives the judge, known as chancellor, if chief judge, or vice chancellor, very broad latitude. He is the trier of facts (there is no jury) and is not bound by law or precedent. Delaware, whose Chancery Court was established in its 1792 constitution, has evolved into the most important player in America’s corporate disputes. Early on, the state had a conservative business environment. But no institution can immunize itself against the fashions and fads of the times. Leo Strine would rather lead and extend a fad than resist it.
The good, gentlemanly lawyers of Sullivan & Cromwell had, with the best and most honourable intentions, but seemingly no knowledge of the chancery bench, led me into an ambush. I was a bull in a china shop, a clumsy capitalist interloper in the regulatory minefield. Once Strine was the chosen judge, we were doomed.
The depositions came in well. Kissinger revealed that Breeden had been loudly proclaiming the commission of criminal acts when he phoned around in November, though Kissinger himself did not believe his claims. Had Kissinger called me then and questioned me about these so-called criminal acts or “unauthorized” payments, he would actually have fulfilled his fiduciary duty to the shareholders. He was the sole person on that board who had the personal weight and stature to halt Breeden. But he was too fearful. This extraordinarily intelligent refugee of Nazi Germany seemed not to understand that the contemporary version of “I was only following orders” is “My lawyer advised me not to.” He kept quiet, followed his lawyer’s directions to a T, and left me and every public shareholder to be fleeced. Thompson and Burt, both Audit Committee members, were hopeless. They knew nothing, read nothing that they had signed, and had no knowledge of the nature of the poison pill. When Burt was asked about my offer to Breeden and Paris to give Hollinger International a right of first refusal on any bona fide offer received for Hollinger Inc., he snorted derisively and said that that was like “the letter Hitler sent the Czechs at Munich.” There was no such letter, but the comparison was scandalous.
My deposition seemed to go smoothly. The only emerging issues that I could see were the interpretation of the clause about not tampering with the strategic process with Lazard and the question of how close Hollinger Inc. was to a default, relieving it of most of the obligations under the Restructuring Agreement. Following my deposition on February 13, I went to Kennedy Airport to await Barbara, who was returning from our home in England.
She duly emerged, pushing one suitcase and pulling the other, flamboyant, indomitable, and glamorous as always, despite her long trip. I was inexpressibly pleased to see her; we hate being apart. She had found my studio in our London home, where for years I had directed our British operations and written much of my Roosevelt book, very sad, empty, and lifeless. There was, she said, a pathetic fallacy about the home: its limbs were in necrosis. Our brilliant and devoted driver, Tommy Buckley, a delightful Irishman, had just died of a brain tumour in his mid-thirties, leaving three small children, and my London assistant, Rosemary Millar, was fighting for her life in a battle she was about to lose. I was technically still the chairman of the Telegraph but with no practical ability to function. This phase of my life was ending, amid the ululations of triumph of my enemies and a conspicuous silence from many whom I had taken for friends.
I went to Wilmington on the evening of February 16 with John Warden, one of Sullivan & Cromwell’s leading corporate litigators and a very congenial man. I was reading a newspaper in my hotel room the next morning when he telephoned after the judge’s pre-trial lawyers’ conference and told me that we stood no chance; Strine had bought Breeden’s case like a salmon leaping out of the water for the bait. Warden said we should consider abandoning any defence of the lawsuit and moving immediately to dismiss the directors, which we had the authority to do.
I rejected Warden’s advice. If we were about to be trashed in our attempted sale, we would certainly receive the same treatment for a general sacking of the directors – with the added joy of Breeden as special monitor. I wasn’t even convinced, and still am not, that with such an ‘activist’ (i.e., unlimitedly aggressive and opinionatedly meddlesome) judge as Strine, turfing out the directors would have ended their case against us. I still think it would have just reinforced Strine in his prejudices, and that he would have reinstalled the directors in addition to any other severities it might please him to inflict on us. This was poor and late advice from Sullivan & Cromwell. There was nothing for it but to fight out the case, no matter how uphill. Still, we had something of an ace in the hole: Warden, our best lawyer, had been present at the “substantive discussions” with Breeden and was prepared to testify to the misleading and deceptive nature of Breeden’s statements about them, no small step for a lawyer of Warden’s stature. It meant he would not be able to lead me in direct examination or cross-examine, but we judged it worth that loss. In the end, Strine did not allow Warden to testify, so we had him as neither witness nor barrister. We had agreed to too constricted a timetable and did not use even that judiciously.
The night before I testified I had a drink with Paul Saunders, there representing Kissinger. Paul and I agreed that this matter should be settled, and he said he would see what he could do. Henry was upset at the deterioration in our relations and might be ready to have another try at getting some sort of agreement going. Henry, whose ability to resist flattery is not one of his most noteworthy characteristics, had apparently been duped by Breeden into co-authoring a “statement of principles” that, when it was eventually produced on a documentary subpoena, was one of the most platitudinous compositions I have read. Even Gordon Paris declined to endorse it.
I testified most of the day on February 20. Jesse Finkelstein touchingly gave me a piece of the rock of Masada, which I held throughout my time on the stand. The BBC credited me with a “magnificent performance.” The New York Post, faithful to its master’s orders, declared that my “well-known charisma was not evident.” The truth probably lay somewhere in between. Warden and Paul Saunders both congratulated me on the strength of my testimony, and Skadden Arps advised the Barclays that we would win the case. I was too confident in the power and truth of my testimony, and elemental advice about the merit of brevity in responses to questions had not been emphasized to me. I had the passion of a man wronged. Much of my testimony, which could have been corroborated by witnesses and documents, went in unsupported. Strine was courteous. Though his sense of humour escaped me, there was no doubt of his intelligence and assiduity.
His reception of me and my counsel’s satisfaction with my performance were such that there was some hope in some circles that we had retrieved the situation. Certainly that was the view of the Barclays, whose Skadden Arps lawyer in Wilmington assured them that we would win. David Barclay called to congratulate me on my testimony. We all thought that Strine’s judgment, if adverse, would at least have to be polite. We were mistaken.
Strine’s judgment came out by email on Thursday, February 26. The first two sentences pulled down the curtain. “As former Chancellor Allen has said, the most interesting corporate law cases,” wrote Strine, “involve the color gray, with contending parties dueling over close questions of law, in circumstances when it is possible for each of the contestants to claim she was acting in good faith. Regrettably, this case is not one of that variety.” I half noted the use of the pronoun “she” in the very first sentence, presumably one of Strine’s little teases with novelty.
Strine resisted using my surname as a synonym for my actions that were in his mind satanic. That is all he resisted. I was “cunning” and “calculated” in my conduct, which “threatens grave injury to International and its stockholders by depriving them of the benefits that might flow from the Strategic Process’s search for a value-maximizing transaction.” My malfeasance rendered the normal corporate rights of a controlling shareholder and parent company inoperable due to these “extraordinary scenarios.” He was issuing an injunction against the Barclay’s deal to “rectify the irreparable harm Black’s wrongdoing obviously threatens.”
Not only had Strine found my character flawed and my behaviour improper; he also described the unauthorized payments as, at the very least, “constructive fraud.” I had only signed the Restructuring Agreement to avoid being charged, he wrote. All this would be refuted by the jury at a proper trial and was outrageously biased and wrong-headed, but Strine had bought a line. He did, however, confirm the Breeden-Paris blackmail, mouthed at the November 12 meeting, that without an agreement, I would have been charged at once. (In fact, the SEC required another six months from this case to charge, and the Justice Department another fifteen months after that. So to some extent, Breeden’s threat may have been hollow, though the government might have moved more quickly if Breeden were not already in control of the company.)
“I am in a good position,” wrote Strine confidently, “to make certain credibility determinations and have done so. Generally, I found the key International witnesses – Paris, Seitz, and Breeden – entirely credible. I can discern no improper motive they may have had at any time to testify other than truthfully.”
This would prove to be an unintended confession of monumental naïveté. He must have had some notion of the millions the three pharisees stood to gain from their putsch, and even of the fact that they could not so enrich themselves by any other method, unlesss they took to armed robbery, for which activity they might have had the ethics but probably not the energy. Strine, like Christopher Browne, would realize too late that Breeden was a false prophet. In neither case was there even the least recognition of the role they had played in fixing these insatiable bloodsuckers on the necks of the unconsulted shareholders, in whose name all iniquities were inflicted. On my side were, with one exception, decent, gentlemanly lawyers and businessmen, sitting ducks, all of us, for the delectation of our enemies. This was the equity of the jungle.
My sophistical answers, wrote Strine, were all of piece with my taking the Fifth Amendment at the SEC hearing, though he knew perfectly well why I had to take it and it had nothing to do with credibility or evasiveness. (Strine had small faith in the Barclays’ credibility either, which so angered them that they issued a rebuttal press release.) He had one cautionary footnote after his factual findings: “This is not to say that there is not evidence from which another reasonable mind might draw different conclusions on some of the factual points.” Bingo; unfortunately, he wasn’t reasonable. He was gullible and cocksure. A not particularly brilliant or fair-minded, but more exacting jury later eviscerated his findings, but too late to help the shareholders, victims on whose behalf he waxed so righteous.
The Strategic Process, which the judgment said “had great promise for the shareholders” so long as the court prevented my deal with the Barclays, with its anticipated stock values in the $20 to $24 range, did not materialize. Breeden and Paris quickly decided to sell only the Telegraph to the Barclays, without making them pay for the entire company, which they most certainly would have were it their only means of getting International’s crown jewel (as they had asserted in their 13D). Shareholders saw a total of $6 per share in special dividends after the Telegraph sale, before the stock descended into bankruptcy. No other offers for the entire company materialized. The Special Committee that Strine wrote would wrap up its work in June 2004 would continue to pay itself through 2008, with Richard Breeden staying on as monitor (a well-paid, completely redundant post to which he prevailed upon the docile, terrorized directors to elevate him in 2006) until January 2009. Gordon Paris would lose $70 million of shareholders money investing in sub-prime mortgages – an unusual venture for a media company – but he would leave with $13 million for himself. Chairman Ray Seitz (annual salary $600,000, board earnings and perquisites as yet unknown) would only be separated from his office effective January 2009 by a vote of the bondholders.
These were governance buccaneers, and Thompson and Burt, and later Kravis, and even Perle, were press-ganged, with an inelegant lack of reluctance in some cases, into complicity. Seitz, Savage, and Paris may have begun their roles on the Special Committee with every intention of acting fairly on behalf of all shareholders. When Breeden arrived with a more murderous agenda, they seem to have fallen into line.
Thompson, Seitz, and Burt, like Perle and Kissinger were names known in the world beyond boardrooms. I had admired the accomplishments of each, yet here they were engaged in unworthy activities, now voting (except Kravis who had withdrawn), for motions that they should have known to be empty and fatuous, or at least requiring abstention.
Seitz counts as one of the most horrifying mistakes of my life in judging character. Behind the impeccable facade of the ambassador of a great nation lurks a bureaucrat, a process freak, the ancient curse of the foreign services, disguised by unusually fine packaging. Too intelligent to be a time-server, but too long separated from anything not requiring the instincts of a safe player to be effective outside the foreign service cocoon and lacking the cunning, daring, or cross-disciplinary background of a great foreign minister (like Kissinger), Seitz proved to be only a bloodless valise-carrier ambling gracefully among more formidable players. Seitz would not budge from our corporate trough until, finally, in November 2008 he was muscled out by impoverished debt-holders. The stock at that point was worth .08 cents per share, on a vertical descent to zero at the speed of gravity.
To become the four-term governor of as large a state as Illinois shows that Jim Thompson had a very sharp political intuition. Tall, loquacious, banal, simulating folksiness when not engaged in scowling righteousness, Thompson never in the ten years he was on our board showed any spark. He too disappointed me.
If Thompson’s performance under fire was a disappointment, it was a mere sorbet compared with Richard Burt. Burt succeeded Perle as the informal chairman of the independent committee of directors when Perle became an employee. The related-party transactions, which were necessary as we consolidated assets in one company and then dismantled the secondary assets of the company when we delivered at the height of the economic boom, had been skilfully handled by Richard Perle and Dennis Block and never became a source of controversy; both Hollingers greatly profited. But they were relatively sloppily handled by Radler with only Burt and Thompson as overseers.
Gordon Paris has a perfectly nondescript and entirely forgettable personality, except for a penchant for self-righteous inflexibility, when he assumes a whiny, grating persistence, like a malfunctioning appliance. He hit the jackpot with our company.
Had Breeden not breeched the Restructuring Agreement, I would still have had to sell out. Once there was a Special Committee, my ability to act as a real CEO was gone, as Marie-Josée had foreseen. Breeden was in charge and I knew the newspaper business was in decline. All I could hope for was to get the highest price for the company and take my share of cash and move on to something else. The Barclays were the best bet, as events confirmed.
The Strine judgment was the official seal of approval on Breeden’s demonization of me. From that moment on, his words, endlessly quoted, tainted every move I tried to make to rescue Inc. and International. The press, which we had brought around a long way to seeing the weakness of the initial Breeden-Paris-Thompson case about the so-called unauthorized payments, lapsed back into the mode of regarding me as an ethically flawed character.
I had already heard from Paul Saunders before the judgment came down that he could not deliver serious peace discussions. Breeden did not want peace. Strine’s judgment gave as much impetus as a civil case could to a criminal prosecution. Though Strine would not have been moved from his pseudo-populist biases, I believe that if Sullivan & Cromwell had administered our evidence more effectively, he would not have been able to assassinate my credibility as severely as he did. As it was, Strine had to note my efforts to act within the rules of the Restructuring Agreement but could shunt these efforts aside with only a reference to them prefaced with an “admittedly” or an “although,” something he could not have done if our evidence had gone in with adequate corroboration.
We publicly took the position that we were disappointed, we appealed the case, and we told Hollinger International to “put up or shut up.” They were supposed to produce a third-party offer of $20 to $24 per share; we said, let them get on with it, knowing they neither could nor wished to do anything of the kind.
THE BENEFIT OF THE JUDGMENT was that International’s stock now rose sharply on Strine’s enthusiastic endorsement of the Lazard process and his belief that I had undervalued the company in my prospective sale to the Barclays. Jack Boultbee and I worked with Canadian counsel on a plan to capitalize on this. We would package up almost all of Hollinger Inc.’s Hollinger International single-voting shares and sell them as Series II exchangeable preferred shares of Hollinger Inc. This would fulfill certain indenture conditions and eliminate all the arrears and outstanding unhonoured retractions (which had started the rockslide on our company in April 2003), leaving us with a reasonable cash balance. It was the old trick of turning adversity to advantage: the Strine-created balloon in the stock price.
After taking some time to recover my balance from the Delaware disaster, I retreated to our house in Palm Beach, which I had not seen in eleven months. To the great delight of the international press, the house was for sale. But our rising stock price enabled me to sell my own Series II preferred shares, thus repaying Hollinger Inc.’s loans to me, which had been a bugbear to Maureen Sabia and to Strine (or “Swine,” as Eddie Greenspan now generally called him). I withdrew the house from sale. I had one conversation with David Barclay, who was now so paranoid about the United States that he insisted that we both speak on cellphones (for all the good that would have done us, as mobile phones are even easier to intercept than land lines, as even royal victims of media intercepts in London would know). It was cordial, but they were the last words we would exchange.
The weeks in Palm Beach flowed agreeably past. I had a reasonably active social life, and rejuvenated my tattered strategic plan. First, I needed new counsel. I arranged a teleconference with Brendan Sullivan, who had been recommended by Brian Mulroney, Alan Dershowitz (who was very generous with his advice and time), and Eddie Greenspan. Sullivan was the chairman of Williams & Connolly and the successor to that firm’s founder, the legendary Edward Bennett Williams. He came to Palm Beach on his way to visit his mother for her eighty-ninth birthday. Eddie Greenspan, who was in Miami, joined us, and Sullivan brought his partner, David Aufhauser, a former Treasury chief counsel and specialist in money-laundering cases. (Aufhauser was latterly general counsel of UBS Investment Bank when he was accused by the SEC in 2007 of insider trading. Aufhauser settled for $6.5 million. On my acquaintance with him, I don’t believe he would have done anything unethical.)
Both Sullivan and Aufhauser knew Breeden slightly and despised him almost as much as I now did. Sullivan, whom I had seen in action in the Iran-Contra hearings, where he represented Colonel Oliver North, was very impressive. He has a slight trace of a New England blue-collar accent and speaks in a spare, efficient way. He makes no effort to impress with volubility or his legendary legal experience. He is a nuclear-tipped missile of a man; wiry, not a pound overweight, no vices, very direct, fanatically partisan for his client. I had the sense that we were finally reaching for the best. He would be busy on a trial for several months, probably until the end of August, but we would not need him until then, if at all, and in the meantime his firm would take over my legal position.
Williams & Connolly familiarized themselves with the complicated case but remained in the background as strategic and potential criminal counsel. We agreed on a search for “fresh eyes and fresh minds,” as Eddie Greenspan put it, on both the securities and the civil side.
Strine had written that Breeden’s fear that I “might transfer assets to jusidictions from which recoupment is practically impossible is not irrational,” and it soon became clear that Breeden had excited at least some of the SEC staff to believe that I might just seize the proceeds of my sale of Hollinger Inc. preferreds and flee. Hollinger Inc.’s Chicago counsel, Nate Eimer, was told by the Chicago SEC office chief that the Breeden demonization of me was taken seriously in Washington. John Warden called upon the SEC’S director of enforcement and had a very civilized exchange. But the SEC was stirring up the Ontario Securities Commission (OSC), which kept layering in more and more onerous conditions for getting the Hollinger Inc. sale of the preferred shares, a reasonably routine transaction, approved. In other circumstances, it would have gone through like an express train. Finally, after a long session with officials of both regulators at 11:57 p.m. on April 2 three minutes before the deadline (revealing more clearly than ever that the OSC is a branch-plant operation of the SEC), the deal was approved for offering.
The acting management of Hollinger International dropped the next shoe by firing Dan Colson, managing director and co-chief executive of The Telegraph plc, and chief operating officer of the company, thus depriving the company of the last executive who knew anything about the business. This was at another meeting of Seitz’s lynch mob on the executive committee, and I was again in dissent. I asked what possible excuse there could be for this, and was told by Jim Thompson in his folksy, oafish voice, as if it were emanating from a prematurely enlarged teenager: “It’s time.” I said, “What do you mean, Jim, it’s time? He’s a brilliant manager. You have no one adequate to replace him. Dan has performed prodigies in terribly difficult circumstances. It’s time for what, more wrongful dismissals of the people who built the business, for capricious reasons?” Thompson replied, “For Gordon to put in his own team.” To which I retorted: “Jim, you’ve promised to sell the company for a lot more than the $18 per share we were going to get. Gordon has no team and has no capacity to assemble one.” Then Thompson fell mercifully silent, like the rest of Breeden’s spear-carriers. It was another disgrace, even though they all represented Dan Colson’s departure as a retirement. Consistent with their usual ethical standards, Seitz and Paris reduced Colson’s retirement package as much as they could, and then added him as a defendant in a civil suit a few weeks later, despite having given him an indemnity for his legal expenses as part of his “retirement.”
BARBARA AND I LEFT PALM BEACH in mid-May. It had been a welcome stay after the horribly tempestuous late autumn and winter, right through to the mockery in Delaware. Liberated, after six years, from working on Roosevelt, I was able to return to traditional reading and rereading. There were two busy weeks in New York. Neal Kozodoy arranged for my Roosevelt book and me to receive a considerable ovation at the Commentary magazine annual dinner. There were reports in the press of my social ostracism, but in fact I was out most evenings. In New York, as in Palm Beach, Barbara was less inclined than I to mingle. I felt reasonably social anyway but was particularly determined to show that I was not afflicted by the slightest embarrassment.
My poor Barbara was blameless but nevertheless buffeted by these events, and more vulnerable to them. One of the heaviest blows of all fell when International reformulated their lawsuit, claimed that the Racketeer Influenced and Corrupt Organizations Act (RICO) applied, and trebled the damages claimed to $1.25 billion. They included Barbara and Dan Colson in the lawsuit, though not in the RICO part of it, and then dismissed Barbara as a Telegraph columnist. (They could not have done that without removing Dan Colson first.)
The disgraceful initiative of dismissing Barbara was taken by the editor that Dan Colson and I had installed, Martin Newland, previously deputy editor of the National Post. This brave act was made more odious by his endless prattling that he had agonized over it and that therefore it was somehow brave of him to have stabbed Barbara – an unoffending and much-appreciated columnist writing at the very top of her game – in the back. The saddest sight from this entire series of horrors was when I was walking up Fifth Avenue alone on the day of the outrage and saw Barbara ahead of me, ambling distractedly along, oblivious of the rain and, as I suspected, crying. It was a horribly humiliating injustice to inflict on someone against whom they had no possible grievance. Barbara had her own haters and they were out in force.
Where were the previously chivalrous now when they should have helped Barbara? My contempt for almost all of them is almost, but not quite, beyond my powers of expression.
I returned to Toronto on May 25 and chaired the Hollinger Inc. special shareholders meeting, which approved the refinancing of the company. There had been one very obstreperous objector, a Newton Glassman, who objected to everything, especially when he was excluded from the issue because he had failed to meet the deadline for filing the objection, a mistake a law articler would not make. The measure passed. Glassman then launched what amounted to an oppression action, which is, in theory, a claim by minority shareholders who believe their statutory or regulatory rights have been infringed. In practice, it is a fishing expedition for the complainants to go after anything they can find.
Later the same day, May 27, Hollinger International announced that it was rolling back the Strategic Process to just the British assets. Breeden either had had no real intention of seeking a bid for all the shares, contrary to everything he said as they attacked our transaction with the Barclays, or else had never taken on board my repeated advice to Wasserstein, Zachary, and the board that selling the Telegraph alone would make it very difficult to sell the remaining company. My own conclusion was that he wanted to continue billing International millions of dollars while using it as a platform from which to vanquish those who created the company he and his team were now dismantling.*
We had a class of Hollinger Inc. shares that were convertible into Hollinger International shares. We sold them all (plus a chunk out of treasury) at more than $17 per single voting share on the very morning of the day that International threw in the towel and announced there would be no bid for all the shares. Nelson Peltz generously phoned to tell me that he had never seen such timing. The stock closed that day between $14 and $15 and went steadily down from there, taking the Hollinger Inc. stock price with it.
In musings in teleconferences with lawyers, Strine rambled on, in his discursive, chipper manner, about subjects he was not called upon to adjudicate nor qualified to judge. Strine criticized Breeden for enjoying his position too much and staying too long. He warned them that eventually the company would revert to its shareholders and that Paris and the rest would not then be re-elected. Even he understood that we could not continue forever as a controlling shareholder that could neither exercise nor sell control, but he underestimated Breeden and Paris. It was only four months since, peering like Mr. Peepers from his provincial high chair, he had found “no improper motive” that Paris, Seitz, and Breeden may have had at any time to testify other than truthfully. It was still not too late to change sides (or optometrists). But it again revealed Strine’s naïve inability to grasp the nature of the war that he had aggressively declined to bring to a swift and happy end with his mad and unjust verdict. This was corporate Armageddon, Götterdämmerung, not another Delaware commercial law tiddly-winks match.
He then said that if the Telegraph were sold, he thought that that would require a shareholders vote as the Telegraph comprised most of the company’s asset value. This was a small beam of light in the darkness: if a sale of the Telegraph required a vote of all the shareholders, we could defeat it.
Meanwhile, Strine, in loco parentis as self-inserted co-managing director of International with Breeden, urged that the independent directors of both companies meet to try to reduce the gap between the companies because of the bad feelings between Breeden and me. He recommended arbitration for the financial elements of disagreement. We accepted this and Breeden rejected it without bothering to refer his decision to International’s board. His view of corporate governance did not extend so far as to allow anyone but himself to participate in such decisions.
Indeed, when I mentioned these overtures to the directors at one of our farcical telephone board meetings, Thompson and Burt expressed surprise and pleasure, while their lawyer, Martin Flumenbaum of Paul, Weiss, hissed his usual claptrap about violating the Strategic Process clause of the Restructuring Agreement. For once, a sharp rejoinder (from me) shut him down. Brian Mulroney, who knew Rick Burt from the Archer Daniels Midland board, helpfully tried to generate settlement talks. Burt was willing, but he was shortly slapped into silence by his former protegé, Breeden.
Next, I was informed that the Telegraph board of directors, now subjected to the crowning infamy of including Paul Healy, had removed me as chairman and accused me of bringing the newspaper into disrepute. That my career at the Telegraph would be ended in this tawdry manner was an appropriate bow to tie around this phase of the drama: a British national institution, which Dan Colson and I had made strong and influential, was now a football frolicked over by an American careerist and a self-inflating balloon of a Chancery judge in a state with fewer people than Nottingham. Sally Griffiths, the capable and very gracious Telegraph company secretary, followed this information with a most generous private note. (Shortly after, she left the Telegraph for another company.)
There was a cascade of these shabby events. Barbara was let go by Maclean’s magazine after twenty-seven years as a columnist. Her dismissal was a particularly loathsome performance: not a word from the editor, only a simpering telephone call followed by an email from a senior section editor who had often asked me for a job but had never passed an interview.
My next disembarkation was signalled in a note from Martin Taylor, the general secretary of the Bilderberg Group, asking me to “quietly drop off the Steering Committee” and not attend the 2004 meetings, though I had been invited, had accepted, and had even aided in organizing and financing the Canadian delegation. This was a man whom I had helped install as Secretary General. He had been dismissed from the chair of Barclays Bank, then from W.H. Smith, and had recently had a nervous breakdown because of the complexities of his corporate and romantic life, none of which detracted from his intellectual merit but may have played a role in his emotional responses. It was also deeply wounding, almost more so for the fact that it was apparently unintentional. Taylor wrote back regretting the “infelicities” of his previous letter.
After twenty years, I was tired of Bilderberg, tired of raising polite opposition to the endless smug togetherness of Euro-federalists and American liberal Democrats exchanging timetables as they proceeded on their wrong-headed policies. And I was tired of patronizing tribalism, the bright Young boys, the Winston Lords, Andrew Knights, Jim Wolfensohns, were patted on the head by the David Rockefeller–Eric Roll elder sages. In later years, especially when I was in prison, I was amused by stories of Bilderberg’s world influence, but the sense of entitlement that pervaded it, especially among the precocious, was often almost impenetrable. A few more or less amiable scoundrels like Vernon Jordan and Victor Halberstadt played the associations for all they were worth.
The group-think was almost always wrong; George Will, Richard Pipes (and they never returned), and I were a voice in the wilderness about Reagan. Bilderberg missed the rise and then the fall of Japan, the end of the Cold War (except for my Hollinger colleague Dwayne Andreas), the problems of Euro-federalism, almost anything to do with Islam, and the current economic debacle. They all but waved the incense pot before Bob Rubin and Alan Greenspan.
Yet the discussions and social conviviality were of high quality. And it was the closest I had had to a sort of fraternal association and it had been my initial window on the world, where I had made the contacts that had enabled me to buy the Telegraph. I would be happy to see many of the Bilderbergers again, including some of those just mentioned, but not, I think, at Bilderberg.
I had gone from being a person of prominence in some circles to a negative ex-presence, someone it was desired and enjoyable to humiliate, if not deliberately, by cavalier demonstration of my new insignificance. So many aspects of my life crashed simultaneously. It was discouraging, hateful in fact, but, in the abstract, paradoxically, as a historian and someone who once considered pursuing psychoanalysis as a career, I found it interesting.
There was no such problem at the Trilateral Commission. I was invited to remain by the European chairman, Peter Sutherland of Ireland, whom I had often debated on his Euro-federalist views. The Telegraph had often called him a “mellifluous Euro-fanatic,” so it was generous of him to be so broadminded. As I had discovered in previous, lesser crises of my life, pretended friends are the most lethal dangers to a person’s security.
It was eerie moving between our houses, which were now like mausoleums. Most of my telephone calls were with lawyers and merchant bankers, and I had learned not to believe much of what was said. I would not allow myself to become self-conscious about my shattered status, though obviously I was constantly aware of it. But I countered my rejections eventually with the knowledge that at least I knew how unjust all this was and that most of my critics could not have endured such a strain themselves for a month.
STRINE FLIPPANTLY DECIDED, without even being asked, to make me jointly responsible for Hollinger Inc.’s repayment to Hollinger International of the $21 million non-compete fees and accumulated interest Inc. had received, and also required me to pay back to Hollinger International for the contested non-compete payments I received, with interest, a total of $8 million. I paid personally $23 million as a result of this; Hollinger Inc. paid the rest. This precipitated another financial crisis. Obviously a legal default would be a disastrous state of affairs. Eventually the U.S. government would claim in criminal charges that these non-compete payments were illegal. A jury would decide otherwise, and the trial judge would determine that they were not even improper by the civil law standard of proof of balance of probabilities. But by then Hollinger Inc. would be in receivership and unable to pay me back the millions that Strine extorted from me. This provides a piercing glimpse into Strine’s grasp both of law and of equity.
In the meantime, Inc. needed money to meet its obligations. Inc.’s income had been severely reduced when International stopped the management payments to Ravelston in favour of “managing” the newspapers themselves. This made payment of the Wachovia notes Inc. had issued too onerous. Cerberus, a robust fund that ranged from the vulture level up to reasonable quality private equity, came forward to offer to refinance Hollinger Inc. They had been to see me before, on Richard Perle’s and former vice-president Dan Quayle’s invitation, in December. Their proposal then had consisted of such a dilution of our interest in Hollinger International (to about 7 per cent) that I did not respond and closed with the Barclays instead. (Barbara particularly disliked the Cerberus visitors. She had hopped out of her workroom at my request to make coffee for them and was wearing one of her writing outfits of a T-shirt and leggings when she brought the tray in and left. Within days of the meeting, a nasty squib appeared in the press about how she pranced in front of the prospective financiers in a tight leotard.)
Cerberus had come back several times after the massacre of innocents in Delaware, but their proposals were much less interesting than our own financing based on the inflated International stock price. Now they were back again, proclaiming, as they had on their previous forays, that they had a good relationship with Richard Breeden (whom they professed to find as nauseating a personality as I did) through their large shareholding and board position at WorldCom-MCI.
Breeden had been appointed special monitor of WorldCom after the Bernie Ebbers $11 billion accounting scandal. He represented “the eyes and ears of the court,” according to his testimony in Delaware. (The thought of his piscine eyes and porcine ears representing the American judiciary would have been more horrifying to me if my chief encounter with that bench had not been the myopic and scrawny Leo Strine.) On WorldCom’s board of directors with him was the president of Cerberus, Mark Neporent. Cerberus said that as a courtesy they would have to tell Breeden that they were thinking of lending to Hollinger Inc. but given their good relationship this shouldn’t present any problem. I had the sinking feeling that Breeden was about to do another turn. My suspicions were heightened by the habit of my Cerberus contacts, Robert Warden and Bret Ingersoll, both solemn men, of regularly launching into obviously rehearsed recitations of the peerless virtue and high ethical standards of their company. (If this wasn’t enough, I should have been warned off by their online home page: “Cerberus believes that strong corporate governance is the cornerstone of our business.”) Dan Quayle, who is not quite the moron the liberal press portrayed him as, but is no financier either, kept assuring me of Cerberus’s goodwill. I thought him honest, but as his role was to bring in business, I wasn’t sure how conversant he was with what was really afoot.
Sensing an opportunity at least for disinformation, I described to the Cerberus emissaries a grander deal, which consisted of taking both Hollinger International and Hollinger Inc. private. They professed interest and requested the information package from Lazard. While this was in train, the regime at Hollinger International produced a new plan that they hoped would be a replication of the November defamation of us. They called a special directors meeting to report a circulation scandal at the Chicago Sun-Times. Dan Colson and I pointed out that virtually everything they cited was common practice in the industry and that if they were uncomfortable with any of it, they should just discontinue the practice. But they had already hopefully informed the SEC and the Department of Justice, on the thin reed of an excuse that the Justice Department was looking at circulation irregularities at Newsday, a Chicago Tribune newspaper on Long Island.
I dampened their fun somewhat by pointing out that if they contrived to get the Sun-Times suspended from the Audit Bureau of Circulation, there would be no more advertising of any kind except for incontinence garments, pornography, and artificial limbs and zimmer frames, as had happened to the New York Post in 1992 (when Peter Kalikow owned it). This would not endear them to the shareholders. The real story was that, contrary to my advice, they had instituted a 60 per cent cover price increase at the Sun-Times and had lost fifty thousand circulation. This decline came at the very moment they were supposedly trying to maximize value for shareholders; they tried to mask their ineptitude by blaming (and magnifying) Radler’s alleged fiddling with an overstated circulation. Ultimately, this “confessional” designed to smear us further would cost shareholders $20 million in repayments to advertisers by International after a court settlement. The antics of the Paris Keystone Kops took my breath away, even after many months of exposure to it.
The Cerberus discussions had been broadened to include some bridging financing for the repayment of the $30 million by Hollinger Inc. and me to Hollinger International, in accordance with Strine’s order. This was putting a lot of freight on a wagon I expected to careen out of control at any moment. By this time rumours were rife that the Telegraph was about to be sold by International. My old friends the Barclays were likely buyers, but Strine had effectively invited us to attack such a transaction as requiring a shareholder’s vote. I was thus in a position that caused me acute discomfort on two counts. First, I would be relying on a company that was in close contact with Breeden to spare Hollinger Inc. and me, both personally and as a guarantor of Hollinger Inc., a default on a court-ordered payment. Second, I would be going back to the court of the pugnacious, flippant judge who had savaged me and ordered (wrongly, again as a jury determined years later) the $30 million payment I was negotiating to have Breeden’s friends at Cerberus finance. Yet Strine professed apparent readiness to interrupt the sale of the Telegraph. Given my attachment to that newspaper, there would be no alternative but to try to do so when the deal came.
In their chronic inefficiency, the staff in our New York office had not changed the list of emailed recipients of the schedules of people working in that office, so Joan Maida in my Toronto office received regular reports of what they were all up to. It was like observing mischievous children who do not know they are being watched. Frequently the purpose of an upcoming meeting was stated frankly, for example, “to discuss CMB’s finances.” (Fortunately, I was the only person, then and subsequently, except perhaps for Jack Boultbee, who knew anything about my finances, a subject of which Healy, who was supposedly rendering the tutorial, was sublimely ignorant.) By this means, as well as the oppressive rumour-mongering of the ever-narcissistic British press, we had a good idea of when the Telegraph sale would come.
This was on June 22, shortly after we had delivered to Paris, as securities laws required, a notice that we believed Cerberus was interested in bidding for all the Hollinger International A (single-voting) shares. On June 24, we filed an SEC form 13D that revealed that there was a possibility of a bid for those shares. The Telegraph sale announcement caused the stock price to fall slightly, while our 13D raised it modestly. We filed for injunctive action against the Telegraph sale as Strine had effectively advised us to do, and International started public allegations that we were in violation of Strine’s injunction and of the obligation not to tamper with the Lazard process. A few weeks before, they had accused me of violating the confidentiality agreement when a London Times reporter – the very pleasant and professional Madeleine Rainer – called me at my home in New York to ask about the possible sale and I said, “I really don’t know anything, I doubt if it will be resolved today. We’re chasing a bouncing football, goodbye.” Even Strine, who fancies himself a sports fan, dismissed their claim and said that this was an accurate description.
There were a number of simultaneous deals being discussed, some real and some designed to hold me up so both Inc. and I would default on the payments. The Barclays were genuinely trying to buy the Telegraph for cash from Hollinger International. Lazard was spinning hard that they had achieved a miraculous price for the Telegraph, which was at first claimed to be $1.327 billion. This included $117 million of paid-for cash in the Telegraph’s bank account. Because they had taken no tax-avoidance precautions, they would pay $190 million of capital gains tax, so the net proceeds to Hollinger International were $1.03 billion, certainly no more than the imputable value I had negotiated from the Barclays in January, or than was implicit in their bruited offer of $18 per Hollinger International share.
I assumed Cerberus was in cahoots with Breeden, in trying to force a default and pick up the post-Telegraph assets of Hollinger International cheaply, and that Strine had kindly set up the ambush for them. They said Breeden was expressing concern that Strine would block the Telegraph sale. To return the disinformation, I told the Cerberus contacts I dealt with that I would collapse financially if this deal didn’t go through. I assumed that Cerberus (a major private equity fund), Breeden (America’s leading corporate governance advocate), Glassman (a Cerberus alumnus as well as a slavering public admirer of Tweedy Browne), and Strine (an aggressive and somewhat publicized corporate law vice chancellor) were all jubilating at this prospect.
Cerberus was at first delighted by the Telegraph sale, as they would much rather have the cash in Hollinger International than own the Telegraph. They indicated that Neporent was continuing his discussions about privatizing the company with Breeden. Paris, acting always in concert with Breeden, told Lazard (who were acting as the sales agent for Hollinger International) that Cerberus could have the Lazard deal material only if Cerberus signed a confidentiality agreement that precluded any financing arrangements with Hollinger Inc. It wasn’t immediately clear whether Breeden intended this to discourage an offer for all the shares of Hollinger International, since clearly privatization would be the end of his sinecure, or whether it was understood between Cerberus and Breeden that the effect would be to spin me along and then toss out any Inc. refinancing.
Strine’s judgment requiring payment of $30 million from Inc. and myself had a deadline of July 15. On July 7, Cerberus abruptly informed me that they were pulling out altogether, from everything. As a matter of principle, I accepted the unsurprising news without comment or even a change of intonation; I was having to dance like Muhammad Ali in order to respond to all the financial games and cross-deals designed in good part to bankrupt me and being carried on by the courts and regulators with the companies I had built. It was a mess of eels. Cerberus claimed great outrage at Breeden and acknowledged I had been right about him. It only confirmed my assumption that all of this was a setup, that the fix was probably in in Delaware again, and that Strine’s placatory words had precipitated a form of judicial sting operation that enticed us into another of his pseudo-judicious Venus flytrap ambushes.
It was with real delight that I saw, in 2009, Cerberus parted from nearly $2 billion that they had invested in buying Chrysler Corporation from Daimler-Benz, especially as Gianni Agnelli’s heirs at Fiat were the beneficiaries of it. In the newspaper columns I was then writing, I proclaimed this to be the new Obama administration’s most morally uplifting act. This was followed by the implosion of their main fund, as the company founder claimed that he had bought Chrysler out of patriotism. (Perhaps Dr. Johnson was right about patriotic scoundrels.) The New York Times reported this unlikely freshet of muscular Americanism from one of Wall Street’s weediest vultures, defoliated of feathers, credibility, and investors, with becoming and wry amusement.
In this fast-moving kaleidoscope of men and events, some secondary players stepped up to play strong roles. With the vital help of Lionel Conacher and his colleagues at Westwind Capital Partners, I scrambled to shore up an arrangement to pay Hollinger International $23 million of the contested money, directed by Strine’s February judgment. Nelson Peltz made his usual usurious proposal.
Murray Sinclair, of Quest Capital Corp. in Vancouver, was a specialist in this form of financing and the son of a man who had frequently been an investor of ours, always successfully. I partially mortgaged my London and Toronto homes to Quest and brought in the money to meet the Hollinger International payment on deadline just before it was due. So eager and confident of a default were Paris and Breeden that they instituted seizure proceedings against the company’s famous offices at 10 Toronto Street and my home in New York. Healy confessed in emails he inadvertently copied to us that he had been almost sure I would default. These premature sallies were abandoned. It was the beginning of a very satisfactory relationship with Quest.
IT WAS ON TO DELAWARE AGAIN, to argue the case of the Telegraph sale. The main point at issue, again, was whether selling the Telegraph was such a large sale of assets that it required a Hollinger International shareholder’s vote. I gave a nine-hour deposition to Martin Flumenbaum in New York. This time I was well prepared, and he got nowhere. The case was heard by Leo Strine in Wilmington on July 23. Because Strine and shareholder Newton Glassman had placed such emphasis on independent directors Gordon Walker and Richard Rohmer, we had given them authority to constitute a litigation committee and hire their own lawyer.* Rohmer, Walker, and their new lawyer, Harvey Strosberg, along with Eddie Greenspan, John Warden, and a Williams & Connolly lawyer representing my interest, attended upon Strine on July 23. It was clear at the end of the day that we had lost the case. We seemed to have done well on a couple of minor matters. On the main point, of whether this sale crossed the threshold of “substantially all of the assets” of the company, Strine was clearly applying the conventional meaning of the words, which was a higher hurdle than the jurisprudential one. Our contention was that since the pre-tax proceeds of the Telegraph sale were $1.2 billion and the entire stock market value and net debt of the company was about $1.7 billion, a shareholders vote was required.
The transaction was to close July 30, and Strine promised to render judgment before then. The only real suspense was whether he would have another try at provoking a criminal prosecution of me. He did not. He had three concerns: Does “substantially all” mean anything at all that was more than “approximately half” (which is not what we alleged)? It did not. Does a controlling shareholder involved in “misconduct” have a right to veto the good faith business decisions of the independent board? He/she did not. Should mere rules prevent directors who have broken them from selling an asset “after a full and fair auction” and an “ardent” and “serious exploration of other strategic alternatives?” They should not. How he was able to judge “misconduct” that had not been proved or even charged or how he could establish that Breeden was acting “in good faith” when there had been no “ardent” exploration of other strategic alternatives, and he and Breeden had locked arms to prevent the only alternative that could be found (by me), and how three-quarters of the value of a company vested in one property did not meet the “substantially all” bar is in the non-existent cordon sanitaire between Strine’s fragile ego and his powers of reasoning.
After accepting Breeden & Co.’s stock explanations of why the company was not sold (tax liabilities and the cratering of potential buyers for the whole company by my attempt to sell Hollinger Inc.), Strine confidently pointed out in his judgment that “it is clear that International will retain economic vitality even after the sale of the Telegraph because it is retaining other significant assets, one of which, the Chicago Group, has a strong record of past profitability and expectations of healthy profit growth.” Past profitability under us, yes. Future expectations, zero. Within less than three years, the Breeden-Paris-Seitz commercial miracle would render the Chicago Group worthless. The judgment was so threadbare in its reasoning, it revealed, if such revelation was necessary, stark commercial ignorance. This time he refrained from calling me devious and cunning. Now I was described “as an accomplished man … justifiably proud” of building the company that was so eagerly being dismantled. Lest this be too effusive, he made a few sideshots about integrity and said that Dan Colson and I had not tried to maximize profit at the Telegraph.
He revealed a juvenile fixation on the Queen. References to “dinner” with Her Majesty appeared several times in the judgment as part of Strine’s suggestion that being the Telegraph’s publisher is “cool.” He even managed to drag Barbara in: “It may be,” Strine speculated, “that there exists somewhere an International stockholder (other than Mrs. Black or perhaps some personal friends of the Blacks) who values the opportunities that Conrad Black had to dine with the Queen….” If anything, Strine himself seemed more closely to match his description of the stockholder with “aberrational sentiments…. who invests money to help fulfill the social ambitions of inside managers and to thereby enjoy (through the ownership of commonstock) vicariously extraordinary lives themselves.”
Thus, in a glib phrase, did this chirpy little Chancery judge recognize that the Barclays were paying thirty times the amount for the Telegraph that Hollinger had. The Telegraph Group, which was insolvent when we bought it, made from $50 million to $120 million annually, against Times Newspapers’ losses of $40 million. We had turned it into the finest newspaper in Europe and won the greatest metropolitan circulation war in a hundred years against the most formidable media owner in history – but Strine felt we could have done better. As we expected, Strine held up his verdict until the night before the closing, July 30 at 5 p.m. Eastern Time, so that no appeal was possible.
It wasn’t Strine’s fault that he got the case and that Delaware is the premier U.S. corporate jurisdiction, but he should have risen to the occasion. Instead, he compounded the indignity of it all. Judge Lance Ito did better at the circus of the original O.J. Simpson trial, when one of the leading U.S. late-night television shows opened for a month with five diminutive, berobed, apparently Asian men called the Flying Itos cart-wheeling across the stage.
The Canadian securities regulators should not have tolerated a foreign judge stopping the sale of Hollinger Inc. to the Barclays, nor Strine imposing an unelected regime on Hollinger International and empowering it to anaesthetize its Canadian parent, no matter what they thought of the controlling shareholder. Once Canada had abdicated, the U.K. should have intervened to be the determining official influence on the identity of the owners of the Telegraph Group. Strine should not have had any more influence on the destiny of Europe’s geatest newspaper than an opinionated Yorkshire magistrate would on the ownership of the New York Times.
As I prayed in my chapel that night, I thought that this must be for the best. When current emotionalism subsided, no one would be able to dispute that I had been a positive and successful proprietor of the Telegraph and the Spectator. Because of the war conducted by News Corporation, our profit was effectively capped. No one knew how long the newspaper advertising revenue recession in the United Kingdom would last. (It proved to be permanent and the Barclays’ investment was a disaster.) Newspapers were not a growth industry, there were the problems of tabloidization (Murdoch had even turned the Times into a tabloid), and the journalists had rejoined the National Union of Journalists. And dealing with Desmond as co-owner of the London printing facility was not something I envied the Barclays.
I had often said to Barbara that owning the Telegraph was an addiction that could be dangerous, though not for the fatuous social reasons Strine envisioned. The economics of the newspaper industry were deteriorating, and the pleasures of owning the Telegraph could interfere, if allowed to, with best business judgment. It brought me deference, preferments, and a peerage, but I had loathed almost every minute of my job during the five years before the disaster of November 2003. If the asset were not cashed in, we seemed doomed to an endless sequence of crises and would run some risk of being spent to the mat by Murdoch, even after we had repulsed him in the price war.
It was shabby, and would have been humiliating if I were not now almost beyond humiliation, but it was not the worst fate commercially. As with the February judgment, he who seemed to lose could still win. Perhaps I could now do a better deal than I did with the Barclays. Strine wanted all the shares of Hollinger International sold, parting company with Breeden, for whom he obviously had a low regard but whose animosity toward me he shared, though apparently for socio-ideological reasons.
I put my house in Britain up for sale at once. My life in that country as I had known it was over. I had hugely enjoyed it, but I no longer had an occupation there, and the avalanche of hatred against me in the media, contradicted by only four or five pieces from supporters, showed that although I had some good and reliable British friends, my eighteen-year effort in that country, other than professionally and financially, had not been successful. Even then, the first was widely contested and the second would have to be retrieved from Breeden’s deviltry.
But if Jimmy Goldsmith could claim to have forced a referendum on the issue of Monetary Union, I had certainly played a role in keeping the Conservative Party out of the hands of Michael Heseltine in 1990 and of Kenneth Clarke in 1997 and 2001 – both of whom I liked and admired but who would have plunged headlong into Europe, mouthing anti-American shibboleths as they did – and delivering it to Michael Howard in 2003. (By now, I thought the anti-American shibboleths might have more merit than I had suspected, but Euro-immersion still wasn’t the answer.)
Strine claimed not to seek an offer for all the Hollinger International shares, and not just the super-voting shares owned by Hollinger Inc. (although he did nothing to enable the putative Barclay offer for all the shares in February 2004, to go forward). Now the Telegraph sale would facilitate that, as Hollinger International now had the resources to buy in and cancel its own shares. This would be the best antidote to the endless legal battles. The litigation would depart with the sale of the shares. A sale would, I believed, please the SEC and the Department of Justice with the sight of shareholders happy and prosperous. A double privatization, with practically no debt and the Chicago assets to build on, would make me stronger than ever before. I could then end the legal stigma and work toward becoming at least a modest figure in American finance, and make my peace, quietly, eventually, and on my own terms, with Britain and Canada.
Britain, where Barbara had been born, where she had lived for the past twenty-two years, and where almost all her much-missed friends were, was now my country too. I was proud of the nationality, whatever my lack of rapport with the more vocal of my new countrymen’s journalists. I would return to it some day quietly. Time would heal the wounds, and I would not miss Fleet Street. And so, with a sigh, at midnight on July 30, in my moonlit chapel at my parents’ home in Canada, from which I had gone forth to make my way in Fleet Street eighteen years before, the Telegraph era of my life ended.
* Needless to say, there was still not a peep from the little Grotius of Wilmington, who had claimed to be salvaging half a billion dollars of added value for the shareholders when he killed my deal with the Barclays.
* It will be remembered that Strine urged that Thompson and Paris try to work something out with Rohmer and Walker (though he did not at that point know their names). He was still unaware of the nature of the Breeden Monster he had wrought and empowered, but was already expressing misgivings about Breeden’s love of his well-paid position and ever-lengthening notion of the duration of his mandate. And Glassman had long been claiming that the independent directors were patsies of ours (a total misconception) and that he must replace them.