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A governor tumbles headlong into embarrassment

Globe and Mail Update

CHICAGO — At one point yesterday, Judge Amy St. Eve leaned over to her left and warned Big Jim Thompson that his chair was getting perilously close to the edge of the elevated witness stand.

"Governor," she said, "watch your chair - there's a stair there."

Thus did the little judge, who, as one of my colleagues says, most resembles Peppermint Patty of the old Peanuts cartoon strip, save the former Illinois governor from physically going arse over teakettle.

Nothing and no one, alas, could prevent Mr. Thompson from a similar metaphorical fate. Take your pick: By the words out of his own upside-down U of a mouth, he fell on his prat, self-destructed and/or burst into flames.

A former hard-nosed prosecutor and head of the very office now leading the charge in the Conrad Black fraud case, Mr. Thompson is also the former chair of the Hollinger International audit committee, a former member of the compensation and stock options committee, and a former board member - and a practiced board member at that, gathering up directorships as former politicians tend to do with the comfort that the less well-connected here move about on the marvellous elevated trains called the El.

In theory, especially at an outfit like Hollinger, which appears in its heyday to have been run like an inbred hillbilly family, with much sister-company shagging going on 'round the still in the back forty, Mr. Thompson and his audit-committee fellows in particular had lots of clout.

They could have cried, at any time, "No! Enough!" They could have hired (as indeed ultimately they did, once the public shareholders were howling and the dogs of the press were at the gates) outside experts to come on in and have a gander at the books. They could have asked questions or called management on the carpet. They could have shouted "Thieves!" from the rooftops or quietly resigned.

Instead, what they did over the course of seven years was gaily approve Hollinger paying out $216.7-million in management fees to Lord Black's private company, Ravelston, and its executives, without asking to see a single backup document or, by Mr. Thompson's account, asking a single question.

(It isn't alleged here that these management fees were improper. They form no part of the criminal charges.)

As lawyer Ron Safer, who represents the former Hollinger vice-president and senior counsel Mark Kipnis, who was not among the financially favoured executives, put it, "You voted for every single dollar without a single piece of paper?"

"Yes," said Mr. Thompson.

It was Mr. Thompson and the former U.S. ambassador and arms negotiator Richard Burt, who were the compensation committee, who approved Hollinger paying out another $13-million, in the same period, to Lord Black and the executives. At the same time, the stock-options committee, where Mr. Thompson was also a member, was dishing out 5.4 million stock options to the executives.

More germane to the trial, it was Mr. Thompson, Mr. Burt and Marie-Josée Kravis -- the audit committee -- who at the same time either cheerfully endorsed the controversial non-compete payments at the heart of the case or, as they all now claim, never saw them or even heard of them, Lord no, despite the presence of their signatures on various documents to the contrary.

Ms. Kravis, for instance, admitted here she had missed the disclosure of these payments 11 times in various documents, including five publicly available filings to the U.S. Securities and Exchange Commission.

And Mr. Thompson, who was led to the brink of destruction by Lord Black's Canadian lawyer, Eddie Greenspan, yesterday fessed up to the same omissions, all the while sturdily protesting, as did Ms. Kravis, that although his signature is there plain as day, approving the non-competes and even reapproving some, the transactions were never presented to him or the committee for approval.

The bottom line, however, was that because Mr. Thompson admits he has no independent memory of most of the critical meetings, memos and phone calls that led to him signing these documents, his evidence is largely meaningless.

His only worthy testimony came in the tutorial he snappishly offered about his practice of "skimming."

The very day before, when asked how he could have missed the disclosures contained in the documents, Mr. Thompson gave prosecutor Eric Sussman two explanations. One was that since much of the disclosure was late - and it was - he hadn't expected new information to be found in aged transactions.

But his primary explanation was that because documents such as annual reports and financial statements are burdensome, lengthy documents sometimes running well over a hundred pages, Mr. Thompson skimmed them.

Peevishly, he told Mr. Greenspan that when he said he skimmed a document, "I didn't say I didn't read it. I said I skimmed it ... skimming is a form of reading. I missed it because I was skimming that document."

Mr. Greenspan promptly took him to another document, all of 17 pages long. "You skimmed the document?"

"Yes sir," said Mr. Thompson. "As I said before, I skimmed documents. I can't tell you, five years later, which paragraphs I read and which paragraphs I didn't." A few minutes later, he added, "I skimmed the entire document. Sir, if you skim a document, by its terms, you don't exhibit preference for one part or another."

"Did you not think you had to read the related-party section of financials?" Mr. Greenspan asked.

"I read the documents by skimming them," Mr. Thompson said. "I paid very close attention to the committee's approval of these transactions ... they were never presented to us. We never approved [these] non-competes to individuals ...."

At this point, Mr. Greenspan put it baldly to him that, in effect, he'd been lying for two days: "You read all these things, approved all these things and thought they were right, and when some criticism came, all of the three of you [on the committee] conveniently forgot."

"That is false," Mr. Thompson said.

It reminded me of what an acquaintance, who has sat on boards and who breathes the same rarefied air that Lord Black breathed in those heady days and from whose ranks he recruited his board members, wrote me yesterday.

"Breaking the law never hurt anyone's position in this circle," my acquaintance said, "but hurting the amour propre of others does."

At best, amour propre is self-regard, at worst, self-love. The crime here is alleged to be fraud, but Lord Black's sin may be that by incurring the wrath of shareholder and press and regulatory authority, he caused his directors embarrassment.

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