Conrad Black's Fall

After Conrad Black's career totalled last week, I looked back through the book I had written about him in 1982, when he was only 38. He was flying high then; I called him the Establishment Man, and his future appeared limitless. He had just completed his daring takeover of Argus Corp., multiplying the $7 million he inherited from his family into control over corporate assets worth $4 billion, using tactics that I recorded as requiring "the balls of a canal horse."

I had spent much of four years interviewing him, but I still remember the chill I felt late one evening, sitting in his splendid Argus headquarters, when we got on the subject of greed. "The darker side of Black's nature," I wrote later, "is governed by a brash certainty that he is somehow exempt from evil intent. There exists a mile-wide streak of righteousness in the man, a glut of self-confidence that transcends run-of-the-mill arrogance. Within his imperious bearing thrives a decisive inclination to avarice."

"Greed," he confessed, that long ago evening, "has been severely underestimated and denigrated, unfairly so, in my opinion ... It is a motive that has not failed to move me from time to time." Little did I realize how profound a foreshadowing of his own destiny that would turn out to be.

Rereading what I wrote two decades ago, I was particularly struck by the number and intensity of Black's quotations from his hero, Napoleon Bonaparte. The most telling comment appears near the end of the book. "I have always felt," said Black, "it was the compulsive element in Napoleon that drew him into greater and greater undertakings, until he was bound to fail."

That prediction came true for his own life last week as Conrad, by now Lord Black of Crossharbour, was forced to resign from his exalted perch at the summit of the Hollinger media conglomerate, after a special company committee found that US$32 million in non-compete payments were made to Black and others without proper approval or authorization. Black denies any wrong-doing, promises to repay the money, but regulators are investigating. His resignation comes less than a month after the dramatic credit review announced by Moody's debt-rating agency on Oct. 30 because of Hollinger's "questionable corporate governance practices," fuelling fears that the empire might default on its debts.

It seems difficult now to recall that as recently as 1995, Black was riding herd over the world's third largest media empire, publishing 500 newspapers with a total daily circulation of nearly five million. In 1997, Hollinger boasted revenues of more than $3 billion annually and net profit topping $1 million every two days. Black's corporate structure, then as now, was a convoluted pretzel, designed to make the internal money trail virtually impossible to follow. It ultimately led to Ravelston Corp. Ltd., Black's personal holding company, which took in most of his earnings while exercising stock control over the entire maze.

In retrospect, Hollinger's weakest link was the decorative but stunningly ineffective roster of independent directors and advisory board members Black recruited. They included Margaret Thatcher, Henry Kissinger, his eminence Emmett Cardinal Carter, Chaim Herzog, a former president of Israel, James Thompson, a former governor of Illinois, Lord Carrington, the former secretary general of NATO, Richard Perle, one of the architects of George W. Bush's Iraq policy, as well as half a dozen other British lords, plus the Italian industrialist, Giovanni Agnelli. They constituted Black's private court, or retinue that he used to dazzle visiting firemen, especially bankers willing to extend his credit. What's odd about these glitterati is that not a single one of them (except Agnelli, who ran Fiat into the ground) was trained to read a balance sheet well enough to spot some of the irregularities taking place. Even if they had, their average age left them winded playing chess, so that there was never enough disposable energy or political will around the boardroom to force Black to account.

While the carnival lasted, the Lord and his Lady, the former Barbara Amiel, lived on a scale that defies description. They commuted in the company's private Challenger jet among their sprawling villa in the most expensive oceanside section of Palm Beach, Fla., a luxurious Park Avenue apartment in New York, their Toronto mansion with its 18th-century cardinal's throne, and the four-storey, 11-bedroom London mansion Black purchased from the renegade Australian financier Alan Bond for $7 million. "I have an extravagance that knows no bounds," Lady Black admitted last year in an interview with Vogue. The couple became society dahlings on two continents, bestowing their exalted presence in the manner of latter-day royalty. Wherever Conrad and Babs went, a cook and a butler preceded them to assure their every comfort.

It was a life so much envied that it spawned a Web site set up by "The Friends of Conrad Black" (www.blackenvy.8m.com), which revelled in the golden couple's exploits. When it went on line, its anonymous authors boasted, mimicing their hero's convoluted prose: "Let us say that we are all inexpressibly proud to be envious of Mr. Black and his lovely wife Barbara Amiel Black. Indeed, who wouldn't be consumed with envy considering their prodigious political potency and polymorphous periphrastic pre-eminence!"

Conrad Black's corporate ascent has been frozen, if not permanently halted, but the Hollinger scandal is just beginning. One of the unresolved mysteries is how Hollinger International could justify paying him and his senior executives through Ravelston US$203 million from 1995 to 2002, a period when Hollinger's newspaper holdings dwindled to only three worthwhile titles. His compensation was more than the total of the CEOs of the New York Times, the Washington Post and the Chicago Tribune.

As well, when Black sold his Canadian papers to CanWest for $3.2 billion, he, Ravelston and three executives received $80 million as part of a non-compete deal. That arrangement prompted outrage from Hollinger International's biggest minority shareholder, New York investment dealer Tweedy Browne Co. LLC, which owns 18 per cent of the company. Hollinger received "no direct benefit" from the non-compete agreements even though the company "was the entity which owned and sold the assets," Tweedy Browne said in a securites filing. The clue to why Black and his associates wanted this money diverted into their own instead of corporate pockets is that such payments were tax exempt. (At some point investigators may also want to examine why Hollinger Inc. issued, without a readily explainable reason, a special cash dividend in 1997 that resulted in Black pocketing $70-million as his share.)

In this anguishing process, Black has had to suffer two ultimate insults: since Hollinger's troubles started and his investors began to suspect he might be forced out, the price of Hollinger International's shares has increased by 30 per cent. At the same time, while he is barely staying afloat, Rupert Murdoch, his chief competitor (and one-time equal) in Britain, reported a corporate earnings increase of 161 per cent in the last quarter.

Every once in a while the gene pools spits out a Conrad Black, and it's a tragedy, for him and for us, that he hasn't lived up to his potential as a model entrepreneur. Instead, Black must live with the verdict also pronounced on Jim Clark, one of Silicon Valley's most aggressive operators. "He has a clarity of vision," said one of Clark's engineers, "prompted by the purest form of greed."

Maclean's December 1, 2003