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This time, the odds of a second act are unlikely

Globe and Mail Update

Fallen bosses do their penance and sometimes bounce back with second acts. Conrad Black will not likely be among them.

The case against him is so serious, his track record with investors so abysmal, his allies now so few, that the lord seems all but finished. He is 61 and will spend the next several years either in litigation or avoiding litigation and certainly spending a fortune on lawyers, all in the name of protesting his innocence. At the end, he will either land in prison or win his case, by which time he could be an old man, and probably a pauper, too.

Martha Stewart went to prison and came back as strong as ever. Even Jeffrey Archer, a fellow lord who was imprisoned for perjury, is back on the party circuit and writing books.

Lord Black is different. The fraud indictments laid against him yesterday by the U.S. Department of Justice in Chicago are big, serious and present a compelling case for the prosecution. They came courtesy of Patrick Fitzgerald, probably the most feared and hard-working U.S. Attorney on the slate. This is the man who indicted Lewis (Scooter) Libby, the former chief of staff for U.S. Vice-President Dick Cheney, and is currently prosecuting a former Illinois governor, George Ryan, for corruption.

In the Black case, Mr. Fitzgerald is also equipped with the equivalent of a legal neutron bomb in the form of David Radler, Lord Black's right-hand man on this side of the Atlantic until August, when he was indicted for fraud and sentenced to 29 months. He was, and presumably still is, co-operating in the case against Lord Black.

Mr. Radler worked closely with Lord Black for 35 years and knows a thing or two about who got paid what in the publishing company.

What's more important, Lord Black does not know when to quit. His friends say the former CEO of the Hollinger International newspaper empire, whose titles once included The Daily Telegraph of London and the National Post, is utterly convinced he is the object of a monstrous legal injustice, that the money he and his ex-cronies allegedly skimmed from shareholders -- $51.8-million (U.S.) -- was done with the approval of company directors. "I'm just in awe of his state of denial," says an acquaintance. "It's like he thinks he walks on water."

In other words, he will keep fighting and the odds don't look good. If he loses, he potentially faces 40 years in prison and $2-million in fines. It's impossible to imagine, if convicted, that he will get anything less than Mr. Radler's 29 months.

There were several moments in the past decade or so when Lord Black and his group -- Mr. Radler, Jack Boultbee, Peter Atkinson and Mark Kipnis, all of them now among the Hollinger legion of the indicted -- could have made easy decisions to save their sorry hides. In the early 1990s, Lord Black and fellow indictees decided they would earn most of their income through management contracts that would be set by Ravelston, the private holding company at the top of the Hollinger ladder. (Ravelston itself was indicted at the same time as Mr. Radler.)

If the Ravelston boys had taken a more catholic approach by ditching the management contracts and tying their compensation entirely to salaries, share option plans, direct equity ownership and similar incentives, boosting the share price would have been the primary performance motivator.

Even if the performance merely matched the Dow newspaper index, Lord Black would have made a small fortune and he would have kept shareholders happy and at bay. When shareholders are unhappy, they demand answers and Lord Black could give none that satisfied them.

Don't forget that it was one institutional shareholder, New York's Tweedy Browne, that started the juggernaut that would eventually flatten Lord Black. Tweedy simply asked Lord Black to justify the lavish management contracts and non-compete fees, which were paid to him and his insiders instead of Hollinger International.

At that point, Lord Black had yet another opportunity to save himself. All he had to do was act contrite and pay back most or all of the money the shareholders argued he didn't deserve. He might have lost his job, but probably not his empire. Instead, he fought back like a mongoose.

Since then, he has lost battle after battle. Yet he keeps fighting, flinging lawsuits around like confetti, puffing himself up like a defiant general whose army is in tatters.

If Lord Black does penance, it will be a penance that is imposed upon him. The opportunities for a second act seem all but gone.

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