CHICAGO Any criminal trial is a bit of a shape-shifter.
What this day can look disastrous to one side can be turned on its head the next, and vice versa. The selective questioning of a witness, using carefully edited documents, can make the benign look sinister or the sinister appear benign.
But rarely is conduct painted as black on Wednesday rendered white on Thursday, and that's sort of what happened here Thursday, with the black in question being none other than Conrad Black.
The startling turnabout came at the hands of defence lawyers for Lord Black and Jack Boultbee, one of three former Hollinger International executives who with their former CEO are charged with fraud in connection with how they ran the company.
Patrick Tuite, for Mr. Boultbee, and Toronto's Edward Greenspan, for Lord Black, were cross-examining Fred Creasey, the former controller for the Hollinger group.
A chartered accountant by trade, Mr. Creasey was one of the company's top in-house financial guys and so, when he testified the day before, under questioning by U.S. District Attorney Julie Ruder, about the controversial non-compete payments, which in their millions went into the pockets of Lord Black and other senior officers, it seemed a given that Mr. Creasey knew whereof he spoke.
Ahh, but not so fast, my sweet: You might also have assumed that Mr. Creasey would know a thing or two about proxy statements and at least the basics of U.S. tax law, too — not his areas, as Mr. Creasey said — but you would be dead wrong.
Among the key things Mr. Creasey told Ms. Ruder was that it wasn't until May of 2002 that shareholders were informed about $80-million of non-compete payments that had gone to Lord Black and others as a result of the sale of Canadian newspapers, including the National Post, to CanWest Global Communications two years earlier.
The inference there for the jurors to draw of course was, “Those sneaky buggers were trying to hide the payments.”
But almost as soon as Mr. Tuite began questioning him, Mr. Creasey was forced to eat those words, and he was forced to eat them when the lawyer presented him a document signed by none other than Fred Creasey. It was what's called an 8K, an interim filing made to the U.S. Securities and Exchange Commission where a company reports unusual transactions that happen between quarters and regular reports to the SEC.
This one was dated Dec. 1, 2000 — just a few months after the CanWest deal — and mentioned, guess what? — $80-million in non-compete payments. It didn't go into much detail about them — it didn't specify the payments were made to individuals — but then, it wasn't meant as a detailed filing, but rather as a first mention.
It was just the beginning, too. Without getting into the minutiae, what became reasonably clear at the end of Mr. Tuite's and Mr. Greenspan's day-long grilling of poor Mr. Creasey is that for a bunch of fellows alleged to have been bent on hiding things from shareholders so that they could rob 'em blind, Lord Black, Mr. Boultbee and the others did some pretty curious things.
There was a whole lot of disclosure, for instance, about the CanWest non-competes and other such payments: to the board of directors; to the Hollinger audit committees; to the SEC and thus to nosy shareholders. It is beyond my ken (and I suspect Mr. Creasey's, too) whether these various disclosures met the letter of the various regulations or if they collectively should have come with block-letter warnings to the directors such as, “ALERT ALERT ALERT: LOOK AT THIS STUFF BECAUSE IT MIGHT BE BAD.”
But certainly, if as the U.S. government alleges, Lord Black et al were trying to sneak things by the whole world, they did a lousy job.
Another thing that doesn't jibe with the prosecution's picture of events: The accused men invited into their allegedly closed and secretive cabal a great whack of outsiders, all of them costing a pretty penny, to examine what they did.
Veritable SWAT teams of auditors from KPMG would regularly descend upon Mr. Creasey's office — as many as between eight and 10 whenever the annual report was being prepared — to comb through the books and sometimes make detailed presentations, which included briefings about the dread non-competes, to the board and audit committees.
Repeatedly, the auditors gave their approval, either to what had been done or what was being done, pronounced the level of co-operation they'd received to have been splendid, and sometimes appeared to have inserted language that made it plain that the board's independent directors had approved the executives' conduct.
As well, Lord Black had invited in a reputable law firm to advise the company about the intricacies of U.S. and Canadian tax and security laws, and it appears that at least two of these lawyers were also intimately involved in the preparation of disclosures and the like.
For Lord Black, the most compelling part of Mr. Creasey's evidence may have centred on the use of one of Hollinger's jets for a now-notorious trip to Bora Bora.
Abuse of perquisites such as the jet form part of the charges against Lord Black, and certainly have been used, in court and outside, to portray him as a grasping robber baron.
Where it once seemed, by Mr. Creasey's evidence, that Lord Black managed to avoid paying any price for the $565,000 cost of the flights himself — though he had in fact offered, in writing, to pay half from the get-go — and that the cost was split among arms of the company, Lord Black's Canadian T4, yesterday entered into evidence, spoke to the contrary.
He got dinged with the entire amount as a taxable benefit, even though he was then living in England where it would have been assigned on a proportionate basis. He nonetheless declared it and paid the tax required.
As well, Mr. Creasey acknowledged that in figuring out the cost — multiplying the flight hours by the per-hour cost of maintaining the plane — he had “rounded up” the final bill, not rounded it down as accountants usually do.
It meant Lord Black was charged an extra $7,000. It's far too soon to say, but the possibility is there that he may emerge as curious a robber baron as Mr. Creasy is an accountant.