The most anticipated betrayal of modern Canadian commerce began with a perfunctory announcement: “The government calls David Radler.”
All heads turned to the doors along Courtroom 1241’s west wall. As they parted, curious jurors craned their necks to get a view of the unnaturally tanned man, wearing a black suit and striking pink tie, whom they’d been hearing about for weeks. The main act of the U.S.A. v. Conrad Black et al. trial in Chicago was at hand.
Radler’s face creased into an unsettled expression as he walked to the witness stand. He passed just metres from Conrad Black, his business partner of nearly four decades and the former chairman and CEO of Hollinger International Inc., the newspaper company both had been accused of defrauding. Black, maintaining his stoic trademark scowl, pretended to ignore him. Their former colleagues, accountant John (Jack) Boultbee and corporate lawyer Peter Atkinson, sat at nearby tables cluttered with legal papers and LCD computer screens, each surrounded by his own team of attorneys. It was an unhappy reunion they all had dreaded.
The four men (along with a fifth, lawyer Mark Kipnis) stood accused of conspiring to steal money from International and divert it to Black, Radler, Atkinson and Boultbee, and two companies they controlled, Ravelston Corp. Ltd. and Hollinger Inc. They faced a slew of federal charges, including mail and wire fraud, tax evasion and—in Black’s case—racketeering, obstruction of justice and money laundering. (Ravelston’s other shareholders, Peter White and Dan Colson, were not accused of any wrongdoing.) By signing a plea agreement with the prosecutors and agreeing to testify against his comrades, Radler escaped the spectre of spending the rest of his life behind bars.
Even schoolchildren know it: there’s something wicked about ratting out your peers. Judas. Brutus. Benedict Arnold. Some of the most despised characters in history and lore were turncoats. In his Divine Comedy, Dante reserved for them the lowest ring of hell—beneath the thieves bitten by snakes, the corrupt politicians boiling in pitch, the lustful tossed about by storms, and the flatterers steeped in human excrement. For betraying his lord and benefactor, Dante would have Radler spend the afterlife immersed in Cocytus, a lake of ice.
Radler’s perfidy provoked widespread condemnation. The National Post dubbed him “a modern-day Brutus.” Maclean’s “The Stool Pigeon.” As he took the stand, David Radler was, for some, the most reviled figure in Canadian commerce. But there was something lost in this wave of collective abhorrence: he wasn’t the only traitor in Ravelston’s midst.
The Ravelston story was not supposed to end this way. Back in the late 1990s, Radler, Boultbee and Atkinson held memberships in Black’s exclusive club. Ravelston, a private holding company they owned, presided over a global newspaper empire by way of an unwieldy corporate structure designed to take advantage of public capital yet leave them in unassailable control. The clique attended numerous meetings, exchanged memos, ate dinners together, executed gutsy corporate manoeuvres, worked through occasional disputes and grew wealthy. They held executive titles not only at Ravelston but also its Toronto-based publicly traded subsidiary Hollinger Inc., which in turn owned a controlling minority stake in Hollinger International, a publicly traded American newspaper company.
Along the way, this edifice became saddled with debt. Between 1998 and 2001, International sold most of its newspapers in a series of transactions. The four men—along with Ravelston and Hollinger Inc.—received millions of dollars, ostensibly to secure their promises not to re-enter the newspaper business near the publications they were selling. But buyers generally didn’t insist Ravelston and its principals receive this money; rather, the executives had devised a clever scheme to skim off some of the proceeds. International’s independent directors were less than fully informed about these so-called non-competition payments, and shareholders were told little or nothing.
Once International’s shareholders got wind of the scheme, they became mutinous. A theory promptly emerged that Ravelston had “looted” International. Ravelston’s principals were punted from International during 2003 and 2004, and relations among the men were strained. Among them, Atkinson alone appreciated how Ravelston’s practices might upset shareholders, and pressed for change. When his entreaties fell on deaf ears, he attempted to resign in early 2003. Black wrote to a friend that Atkinson, who had once been his confidant, “left me hanging out to dry on the non-competition agreements. In the end, he was untrustworthy and I won’t miss him.”
No longer able to extract income from International, Ravelston entered receivership in 2005. The fellowship parted ways. Boultbee retired to Victoria, where he could indulge a ravenous appetite for golf. Atkinson joined Toronto law firm Miller Thompson. Black wrote a biography of former U.S. president Richard Nixon. From Vancouver, Radler quietly attended to his nascent mini-empire of community newspapers, some of which he’d bought from International years before. Life went on.
Though each man wished to put this sad episode behind him, another, darker chapter lay ahead. Lawsuits and regulatory actions piled up, and the U.S. Justice Department was in hot pursuit. The Ravelston accused signed a joint defence agreement, an arrangement that allows for the sharing of confidential information and the co-ordinated construction of legal fortifications. If they manned the ramparts together, they might fight their enemies to an acceptable standstill.
American prosecutors, though, make formidable foes. They often build cases from the bottom up, seeking co-operation from subordinates to target their superiors. Tactics can include pressuring spouses and associates, as former Enron Corp. chief financial officer Andy Fastow discovered. And in the wake of major corporate scandals like that and the one at WorldCom, white-collar sentences got stiffer. The pressure would be enormous.
Plea bargaining helps prosecutors break bonds of loyalty and expose the inner workings of criminal organizations. Salvatore (Sammy the Bull) Gravano, for instance, famously turned on John Gotti and New York’s Gambino crime family. Former WorldCom CFO Scott Sullivan pleaded guilty and agreed to a sentence of five years in exchange for his testimony against CEO Bernie Ebbers, who received a quarter century in the Big House. But critics say the practice increases the chances that innocent defendants will plead guilty and accept lesser sentences rather than risk substantially harsher post-trial punishments. It also raises the possibility that the accused will invent testimony against others to save themselves.
Radler seemed to hold fast against the mounting legal onslaught. Under questioning by a special committee of International’s board of directors in 2003, he’d been dishonest and evasive. He hired a Vancouver public relations firm to help him protest his innocence. He claimed International’s directors approved payments he’d received. After a minor legal victory in October 2004, his spokesman, Josh Pekarsky, wrote: “We expect Mr. Radler will be fully vindicated.”
You can pay PR reps to say any number of things; believing, for Radler, proved the tricky part. Just months later, on Dec. 9, 2004, he visited the offices of his law firm, Jenner & Block, in Chicago. Across the table sat federal officials. It was the first of about a dozen such sessions, during which he spoke with prosecutors, FBI agents, U.S. postal inspectors and the Internal Revenue Service. Radler fibbed and rationalized his actions. He likely sought a sense of how far he’d have to go to satisfy his pursuers. Gradually, his story changed—and the U.S. authorities began hearing what they wanted to hear.
Radler’s colleagues knew things would get nasty after his attorneys stopped appearing at joint defence meetings. On Aug. 18, 2005, the U.S. Attorney’s Office for the Northern District of Illinois indicted Ravelston, Radler and Kipnis on seven counts of fraud. Black and the others were nowhere mentioned, but a government press release contained a bombshell: Radler was co-operating and planned to plead guilty. To nobody’s surprise, indictments came down on Black, Atkinson and Boultbee in November 2005.
Kipnis’s inclusion demonstrated that prosecutors had no mercy. A minor figure in the alleged scheme, he had no stake in Ravelston and received not one cent of non-compete money from International. Unlike Radler, he’d co-operated extensively during the special committee investigation. He seemed an honest, straightforward man. None of that stayed U.S. Attorney Patrick Fitzgerald’s hand. Asked by Canadian Business how Kipnis’s co-operation influenced the decision to indict, Fitzgerald declined comment.
Few believed Radler’s mea culpa marked a sudden desire to walk a virtuous path. He’d already built a reputation as a ruthless cost-cutter who cared for little beyond the bottom line. “Loyalty became another commodity to sell at the best available price,” journalist Ken MacQueen wrote in Maclean’s of Radler’s decision to cop a plea. Fair enough. But if Radler paid attention to the actions of his Ravelston colleagues, he might have questioned their loyalty as well.
On Nov. 18, 2003, just after resigning as chief executive of Hollinger International, Black appeared at an Indigo bookstore in downtown Toronto to promote his biography of former U.S. President Franklin Roosevelt. “Up to a point, the buck stops here,” he told the throng of assembled reporters. “I’m taking some responsibility.” He pledged to pay back US$7 million in non-compete money International accused him of receiving improperly. “So don’t call me a shirker. I can’t stand evasion.”
Those who knew Black’s character understood the moment’s significance. What he said next, though, was more consistent with his temperament. “I take my responsibility,” Black continued, “but so must others, including those who produced filings for years that said all these things had been approved.”
The shirking had begun.
Earlier that month, Black wrote a letter to International’s special committee. In effect, he admitted that the non-compete payments were related-party transactions that should have been approved by independent directors and disclosed to shareholders. The problem, he argued, was that Kipnis—whom he barely knew—had been negligent. Black castigated his in-house lawyer “for being so unenterprising and lacking in thoroughness.”
Ravelston executives weren’t exempt. When he testified at a civil trial before the Delaware Chancery Court in February 2004, he was asked whom among his management team failed to do their jobs properly. “Mr. Kipnis and Mr. Atkinson,” he responded. Atkinson, who’d accused Black of dishonesty and worse, could not have been surprised.
In late 2003, Black granted an interview to Fortune. Asked how International’s audit committee approved controversial management fees paid to Ravelston, he said he wasn’t involved; the fees were negotiated by Radler and audit committee chair James Thompson. Radler could only have found this statement ominous; it was true he’d interacted more directly with the audit committee than Black had. Early in 2004, Black sent a letter to International’s board claiming (among other things) he’d asked Radler whether the audit committee had approved a US$4.3-million non-compete payment he’d received, and that Radler assured him it had.
In short, Ravelston’s tight inner circle had already been compromised. What bearing this had on Radler’s decision to plea bargain, we cannot know. But last year, as the Chicago trial approached, Black’s willingness to inculpate anyone and everyone cast his co-defendants into panic.
Atkinson, Boultbee and Kipnis filed pre-trial “motions for severance” last November. In these documents, each argued why he should be tried separately from Black. They all predicted he would blame them to save himself.
Atkinson believed his old pal would claim he’d relied on his legal advice when receiving the non-compete payments. Similarly, Kipnis’s lawyers wrote: “Black will almost certainly seek to shift the blame for any alleged wrongdoing to Mr. Kipnis…Black will assert that it was Mr. Kipnis’ job, and not his, to identify, raise, seek approval of, and disclose all so-called ‘related party transactions.’” Even Boultbee, who’d cast no stones at anyone, expected Black to condemn his “minions.”
This, the defendants argued, could not be allowed. If they turned on each other at trial, the argument went, prosecutors would be relieved of their constitutional burden to prove each defendant guilty beyond a reasonable doubt. “The government will have the terribly unfair advantage of being able to luxuriate in the cat’s cradle of finger pointing that is likely to pervade the defence camp,” Boultbee’s lawyers complained. Judge Amy St. Eve was unmoved. She denied the severance motions.
There were other compelling reasons for the defendants to fear one another. Each said things that would prove unhelpful at trial. Last December, the government published a document revealing that they planned to introduce “co-schemers’ statements” in court. Many of these were made during—or uncovered by—the internal investigation at International during 2003 and 2004. Kipnis, for example, told International’s investor-relations officer that Ravelston’s leadership had become “pigs” around 1998—the same year the first non-competes surfaced. By one account, he’d also told another lawyer that non-compete payments were kept quiet for tax reasons.
Atkinson told a fellow executive that he felt “awful” about receiving certain non-compete payments and intended to pay the money back. He admitted that he and the other accused Ravelston principals disguised compensation to themselves as non-competes for tax reasons, and that he’d actively concealed that from International’s audit committee. Most damningly, at a 2002 annual meeting, he told a fellow International executive that Black lied to shareholders. (Responding to a question, Black announced that CanWest demanded non-competition agreements with each of Black, Radler, Atkinson and Boultbee; in truth, it requested only Black and Radler.)
Even Boultbee, more cautious than the rest, provided ammunition. During special committee interviews, he admitted he hadn’t read non-compete agreements he’d signed, nor did he know the parties he was entering into those contracts with. Such facts would undermine attempts to make the non-competes seem legitimate.
Black, though, was the ultimate weapon of mass legal annihilation.
Convicting people and companies on the vagaries of non-compete agreements is difficult; prosecutors know that juries respond better to evidence of personal enrichment. Black had luxury homes in three countries, ate at the best restaurants, flew aboard private jets and bought expensive jewelry for his wife, columnist Barbara Amiel. Boultbee feared an “avalanche of highly prejudicial evidence” about Black’s extravagant lifestyle would harm his chances of acquittal. Atkinson felt it might “inflame the jury.”
And then there were Black’s inflammatory internal memos. For years, his supplicant colleagues dutifully listened while he roundly disparaged shareholders in bloated prose. Now, prosecutors sought to trundle out these missives for the jury. Atkinson worried Black’s “pompous rhetoric” would distract the jurors. Pointing to one hubristic passage, he opined that “the language arouses a general disdain for the speaker.” Moreover, “words he exchanged with shareholders are hateful and could unfairly trigger emotional responses in others.”
Anything admitted in a U.S. trial must conform to the Federal Rules of Evidence. They restrict the use of hearsay and prejudicial material. In addition, the Sixth Amendment of the U.S. Constitution states that defendants have the right to confront their accusers. Citing such rules, the defendants successfully expunged some of the damaging evidence. Black pointed out that he couldn’t grill Atkinson—who had an absolute right not to testify—about why he’d accused Black of lying at the 2002 meeting. And the jury wouldn’t hear that Kipnis called his colleagues “pigs,” because St. Eve deemed the comment unfairly prejudicial. Plenty more, though, got through.
A final indignity arrived on the eve of trial. RSM Richter, Ravelston’s court-appointed receiver, decided it was in the best interests of creditors if the company pleaded guilty and agreed to pay a US$7-million fine—over strenuous objections from Conrad Black and Peter White.
Two worlds collided in the Chicago courtroom this March. One was the privileged realm of multimillion-dollar homes, diamonds, private jets, exotic vacations, elephant relief carvings, towel warmers and shaving stands formerly owned by Napoleon. Even the least affluent among the defendants, Kipnis, paid a single expert witness US$800,000 to review evidence and testify. The other world was that of the jury: modest jobs or unemployment, Wal-Mart fashions and US$40 a day for performing their civic duty.
Assistant U.S. attorney Jeffrey Cramer acquainted the jurors of this divide. “I’m not prepared to re-enact the French Revolutionary renunciation of the rights of nobility,” he recited, reading from a now particularly infamous memo. “We are proprietors, after all, beleaguered though we may be.” Cramer paused to glower accusingly at the comment’s undisputed author. Atkinson was too gentlemanly to pen such a condescending phrase, Kipnis too humble. Boultbee, intelligent but inarticulate, sometimes had difficulty stringing together comprehensible sentences. The passage, brimming with Black’s arrogance, contained two words that struck near the trial’s heart: “I” and “we.”
What did those words really mean? For Cramer, “we” meant a band of sophisticated executives in cahoots to steal US$60 million. But for the defendants, the trial became an exercise in divorcing themselves from one another—to deny their friendships, their close working relationships—indeed, to deny all that they had once been. They preferred the “I.”
“They inserted themselves in the agreements and took the money,” Cramer said of the accused. Not once, he continued, did they provide International’s audit committee with sufficient information to determine whether the non-competes were fair to other shareholders. When challenged, he added, the defendants claimed buyers requested the non-compete agreements. A necessary part of this scheme, he posited, was that “you have to lie to people who trust you.” International’s outside auditing firm, its lawyers, its directors all were deceived. “After the lies, money ends up at these tables,” Cramer said, pointing to the defendants.
It was not, jurors would soon learn, quite that simple.
Black was represented by “the two Eddies”—famed Canadian defence lawyer Edward Greenspan and Edward Genson, a storied Chicago criminal attorney. Both rotund, accomplished veterans in their 60s suffering the infirmities of their years, they stood in stark contrast to the youthful prosecutors. The marathon trial took its toll; both occasionally fell asleep in their chairs. They didn’t always get along. But they faithfully stuck to the script their client had authored—one that cast Black as a noble man betrayed by the ungrateful, cowardly and unaccomplished.
In his opening arguments, Genson admitted his client sounded “snotty” in his missives. “It just shows he has an arrogant attitude when he writes in the middle of the night,” Genson said. “Other than having a bad attitude, he didn’t do a single thing wrong.” That cleared up, Genson set out to prove Ravelston was not a cohesive partnership. Black and Radler were not close, he said; rather, a gulf between them widened as Black ran publications in Britain and Eastern Canada, while Radler tended to properties in Western Canada and the United States.
The importance of this putative division soon became apparent. The non-compete agreements weren’t identical. During the sale of newspapers to CanWest, CEO Izzy Asper insisted on non-competes with Black and Radler. International’s audit committee knew a fair amount about those non-competes and approved them not once, but twice. Genson promised to show that CanWest was Black’s transaction. “I want you to remember how he did that deal,” Genson told the jury. And the others? They mostly involved sales of International’s U.S. community newspapers—Radler’s domain. “Radler did these deals, Radler is responsible for them,” Genson said.
Boultbee’s lead counsel was an octogenarian New Yorker, Gustave Newman. He, too, sought to distance his client from Ravelston. Boultbee owned less than 1% of the company, he pointed out. Such a small piece of the pie, he argued, “wouldn’t fill a filling in your teeth.” He made it clear that while Boultbee was a tax expert, Radler first uncovered the favourable tax treatment of non-competes from his personal accountant, Barry Tyner. “It’s Radler who wanted to know,” Newman said. “It’s Radler who solicited the opinion.”
Atkinson’s attorney, Benito Romano, portrayed his client as a cautious man who deferred to independent outsiders—the sort of guy the villain Radler would never conspire with. Atkinson, whose later actions suggested a conscience, emerged as the trial’s most complicated figure. “Peter told the truth,” Romano claimed. “That’s what innocent people do. Radler lied. That’s what guilty people do.” A hard-nosed businessman, Radler had ample motive to lie again on the stand. “He sold a story, and the government bought it,” Romano warned. “They want you to buy it, too.”
Kipnis had the most effective team, which included ex-federal prosecutor Ronald Safer. His attorneys cast the meek former real-estate lawyer as an unspectacular but honest man who didn’t realize the non-competes were related party transactions that needed to be brought to the attention of the audit committee. Of the defendants, only Kipnis accepted any responsibility; Safer conceded that Kipnis made mistakes and may even have been negligent, but that his intentions had always been pure.
Each defendant argued a distinct case, which sometimes contradicted those of his former colleagues. But pragmatism prevailed; the “cat’s cradle of finger pointing” never materialized. Any blame was to be directed outward—and David Radler would be the prime target.
In a trial that revolved around alleged corporate looting, one of U.S.A. v. Black et al.’s central ironies was that the most controversial manner in which the Ravelston group enriched itself—management fees—was not charged as an offence.
Hollinger International paid Ravelston large fees in exchange for management services, and Ravelston provided a sizable staff (including Black and his colleagues) who ran International. Between 1997 and 2003, it had charged International hundreds of millions of dollars. After Ravelston decamped, International’s special committee hired a compensation consultant. “Our analysis shows that aggregate compensation paid to Black, Radler, Colson, Boultbee and Atkinson is well beyond what could be rationally defended to shareholders under any reasonable set of circumstances,” noted Frederic W. Cook & Co. in its written assessment. “The Ravelston management fee structure appears to have been used to shield unreasonable compensation from scrutiny.”
Nobody, Sussman told the jury, was saying the management fees were improper. He could not assert otherwise: International’s audit committee, a sub-unit of the board of directors charged with reviewing related-party transactions, approved those fees. It never consulted International’s outside auditors or hired a compensation consultant. It never asked Radler to provide a written explanation justifying the fees. Its three members—Marie-Josée Kravis, Richart Burt and chairman James Thompson—had been useful idiots.
Trundled out in Chicago as government witnesses, the ineffectual trio proved the prosecution’s greatest obstacle. They could not plead absolute ignorance about the non-competes. Rather, the audit committee’s line was that International’s management never provided them enough information about them—and in some cases kept them entirely hidden.
All three resisted efforts to drive a wedge between Black and Radler. The two worked as a team, Burt maintained. “I don’t see this division you keep describing.” The two were “very close,” Thompson testified. “They seemed to know what the other was doing, and would comment on it.”
Burt emerged from cross-examination largely unscathed. Next up was Kravis. She’d been a close friend of Black’s—both were involved in the Hudson Institute (a conservative Washington think-tank) and had often dined together with their spouses. British journalist Tom Bower even claimed that Black’s friends thought he once considered Kravis a potential wife. That was then. Kravis attempted to distance herself from Black during the scandal, and Black hadn’t forgotten.
Polite and mild-mannered outside court, Greenspan brutalized his targets with such viciousness that jurors came to despise him. At times, his cross-examinations seemed to serve more than purely legal purposes—as if he actively sought to avenge his client. Kravis became the first victim. He pressed her to admit she could have asked questions on numerous occasions, but didn’t. He observed that she seemed to have little difficulty recalling facts for the prosecution, but was less forthcoming for the defence. “We just can’t rely on your memory for anything, can we?” Greenspan said. He forced Kravis to admit that the audit committee lacked the necessary financial expertise required by its own charter. At times, she appeared visibly wounded. Black’s habitually inscrutable visage shifted. During a break, his mood seemed almost jovial.
Greenspan’s finest hour arrived during Thompson’s cross-examination. Thompson was senior chairman of Winston & Strawn, a massive Chicago firm with 900 lawyers. He had been a four-term Illinois governor, and just blocks away from the courthouse stood a massive building named after him. He sat on a dozen boards. He’d been the senior prosecutor for Illinois. His ego was nearly as voluminous as Black’s.
The audit committee reviewed and signed off on International’s financial statements. From 2001, those statements often contained brief mentions of certain non-compete payments, which included the claim that the audit committee approved them. But the committee’s members consistently missed these disclosures. Thompson kept saying he’d “skimmed” the financials. “Is there a skimming school?” Greenspan inquired, spawning one of the trial’s most popular witticisms. Even Boultbee attorney Patrick Tuite, a personal friend of Thompson, got in on the action. Handing the former governor a document, he quipped: “You can read it word for word, or you can just skim it.” By the time he stepped down, Thompson had been reduced to village vice-doofus. His evisceration made big news in Chicago, where he’d been a public figure for decades.
Former International director Henry Kissinger, an erstwhile friend of Black’s who turned on him during the scandal, did not testify. Black found an alternative channel to exact revenge. His biography of fallen U.S. president Richard Nixon, published mid-trial, accused Kissinger (who had been Nixon’s secretary of state) of abandoning the president during the Watergate scandal. Kissinger’s “propensity to run for cover when a friend was under attack was an irrepressible reflex (of which he never cured himself),” Black wrote.
Et tu, Brute.
Had David Radler been a character in a Shakespearean tragedy, he might have paused before the jury on his way to the stand. “To hell, allegiance!” he might have cried. Alas, Radler wasn’t the literary type. “I plead guilty to fraud—” he stated, “to taking money from Hollinger International in circumstances that were not allowed.”
Under Sussman’s questioning, Radler fleshed out his long and close relationship with Black. He spoke of their early years in Sherbrooke, Que., their weddings, vacations and business dealings. They routinely discussed strategy, finances and possible asset sales, he affirmed; he would never make a major decision without consulting Black. A frowning Black listened intently but avoided eye contact.
Radler said he regretted not challenging the earliest non-competes. “I knew that the process of creating these non-competes was wrong,” he testified. Then, he implicated his former colleagues. He testified that inserting Hollinger Inc., Ravelston and its executives into the non-competes was Black’s idea, and explained how it became custom to allocate a quarter of any non-compete to Hollinger Inc. Radler claimed he kept Black informed about the progress of diverting money, such as a US$12-million non-compete to Hollinger Inc. in 1999. “He seemed to be aware of it,” Radler testified.
With each bit of testimony, Radler undermined Black’s veneer of plausible deniability. During a phone conversation in August 2000, Radler claimed, Black suggested that Ravelston executives arrange non-compete payments directly to themselves in upcoming sales of U.S. community newspapers. “We talked about the CanWest non-competes and the opportunity to extend the payments into the upcoming American deals,” he said. “He suggested we insert ourselves into the non-compete process, and I agreed.” Radler admitted he concealed such truths from the audit committee and the board, because he knew buyers hadn’t requested the non-competes.
Since the government could only introduce documents through a witness with personal knowledge of them, Radler alone could bring Black’s “musings” before the jury. Defendants raised numerous objections on relevance, prejudice and other grounds. Boultbee’s and Atkinson’s counsel objected to the word “we,” which seemed to implicate all recipients. Sussman said he offered the memo only to show Black’s state of mind. “Conrad Black believes these individuals were all together,” he said. “We’re entitled to show the nature of their business relationship.” St. Eve ultimately allowed most of the memos into evidence.
Greenspan’s cross-exam began badly. Intentionally or otherwise, he tried hard to make the witness uncomfortable. At one point, he coughed and sneezed while standing near the witness stand. “Sorry, I’ve got a bit of a cold,” he apologized. It must have disconcerted Radler, a notorious germophobe. But Radler’s lawyers had mock cross-examined their client. He periodically looked jurors in the eye as he spoke, and his occasional jokes got a better reception than Greenspan’s.
Greenspan tried putting more bricks in his client’s Chinese wall. He pointed out that in 37 years, Black and Radler vacationed together just twice. And he poked at Radler’s resentment at forever being confined to Black’s shadow. Greenspan produced a 1996 story from the Toronto Star in which Radler was quoted saying he was “nobody’s right-hand man.” Radler explained he thought that phrase might mean “flunky.” “You’re not a flunky, are you?” Greenspan asked.
Greenspan’s name-calling offended many. Safer pointedly stood up during a particularly onerous segment. “Objection,” he said, shaking his head in disgust. It was a rare break in the ceasefire among defendants; Greenspan wheeled around toward Safer, looking bewildered.
But gradually, the tidal wave of abuse began soaking through. Greenspan counted 24 people who’d attended the negotiations between Radler and the Feds. He asked how many of them Radler had lied to. When Radler had difficulty answering, Greenspan suggested all 24. Radler admitted he’d lied to “a fair number of them.” He’d lied to Sussman, the special committee, even his own lawyers. He’d fibbed so often, in fact, that he could not remember on what occasions he’d lied, nor to whom. Radler’s confidence became shaken, and his voice began trailing off.
Greenspan smelled blood. “Was it easy for you to lie?” he demanded.
“No, sir,” Radler claimed.
“Did you stutter when you lied?”
“I told lies.”
“Was there a long pause before you lied?”
“Sir, I told lies.”
His complexion reddening, Radler claimed he’d lied in part to protect his Ravelston colleagues. But Greenspan would have none of it. He painted the witness as an opportunistic man who’d say anything about anyone to save his own skin. “Isn’t that what you’re doing here?” Greenspan demanded of Radler. “Aren’t you lying to save yourself?”
There was no disguising the attractiveness of Radler’s plea agreement. In an age when white-collar defendants bunk for decades among murderers and rapists, 29 months seemed lenient. What’s more, because the U.S. Justice Department agreed not to oppose Radler’s application to serve his sentence in Canada, Greenspan argued that he might well be released after as little as six months. And he would likely do his time at either the William Head or Ferndale institutions in British Columbia—the latter of which offered a golf therapy program. “This is the best deal you ever got, in a lifetime of great deals,” Greenspan said. Radler’s professed ignorance of the details of the plea agreement rang hollow.
If Greenspan’s viciousness cost him the jury’s affection, his employer didn’t seem to mind. Black, leaning back in his chair, seemed to relish his former partner’s torment. At times, his lips curled into a slight smile. Outside court, he attacked his former partner. “I don’t think he has any credibility,” Black told Bloomberg News.
Ironically, Radler proved so ineffectual a witness that at least one juror thought he was actually trying to protect his former colleagues. “He really didn’t say much,” juror Monica Prince told the National Post after the trial. “He kept contradicting himself. He was trying to fool the jury.”
By the time the government rested its case in late May, the defendants seemed in a reasonable position. To all but Black’s most fervent supporters, the non-competes stank to high heaven. But prosecutors had difficulty linking their unsavoury character to specific defendants. There were no late-night meetings in smoky basements, with Black laying out a foul plot to cackling subordinates. There was only vague testimony from Radler, whose reliability had to be questioned. The Feds had obviously overcharged; they even voluntarily withdrew a money-laundering count against Black they hadn’t bothered to prove. And they hadn’t brought forth aggrieved investors.
Now, it was Black’s turn to tell a story. And some of his remaining loyalists would do the talking.
Former National Post editor Ken Whyte emphasized divisions between Black and Radler. His newspaper was Black’s project alone, he testified. He also told how his former boss once asked him to go to Chicago to convince Radler to turn the Chicago Sun-Times into a broadsheet from a tabloid. Whyte’s visit, though, was unsuccessful. Such anecdotes, however, seemed to support the image of Radler as an aloof, independent executive.
Asked about his relationship with Black, Whyte answered: “I suppose I am loyal to him.” Indeed, Maclean’s, the magazine for which Whyte now serves as editor and publisher, dispatched writer Mark Steyn (an open supporter and friend of Black’s) to cover the trial. Whyte, though, proved a liability. When he called Black “the proprietor” of the National Post, assistant U.S. attorney Julie Ruder pounced. Black did not own the paper, she pointed out, even though Black and Whyte behaved as though he did.
More damagingly, Whyte received a $100,000 payment from Black in 2003, years after the National Post’s sale to CanWest. Whyte claimed it was a belated “performance” bonus, but had previously said in a deposition that Black wanted to retain a relationship with him. It certainly smelled like a retainer—one that might have violated Black’s non-competition agreement with CanWest. If nothing else, it suggested Black may have taken the agreements he signed less than seriously.
The performance of Joan Maida, one of Black’s personal assistants, was most poignant. Like others who’d served the press baron, she adored her boss. Through her, Black’s team sought to show that he had not intended to thwart his American pursuers when he removed 13 boxes of documents from his Toronto headquarters in May 2005—an act that got him charged with obstruction. Security cameras captured him ferrying boxes out a back door in violation of a Canadian court order. Maida said it was her idea to relocate the boxes to her home office, but that Black had intervened when court-appointed inspectors of Hollinger Inc. blocked their removal.
Maida proved disastrous. She confessed that she knew the removal broke the rules and would cause trouble. Asked to explain video camera footage where Black points directly at a security camera, she bizarrely claimed he was actually pointing at her. And she couldn’t explain why she was unconcerned when Black took the boxes not to her home office, but to some other undisclosed location. Before the trial began, Maida had T-shirts made sporting an optimistic prediction: “Conrad will win.” Her testimony helped ensure that would never happen.
By the time Black’s defence team finished calling witnesses, his acquittal seemed far less certain. Having decried the “poverty” of the government’s case, he’d now revealed he had no plausible explanation of his own. Nor would Black provide one himself; he and his co-defendants exercised their rights not to testify.
What would jurors make of it all?
The government’s flawed case ended strongly. During Julie Ruder’s masterful closing arguments and Eric Sussman’s final rebuttal, the prosecution explained what an officer’s duty of loyalty means. He must act in the corporation’s best interest, Sussman said, and he must “refrain from taking actions that either conflict with the corporation’s best interests or that harm the corporation.” Ruder supplied the reason for Ravelston’s lack of fidelity to shareholders. “Their duty was to each other,” she said. “Their loyalty was to the scheme.”
Sussman produced two large black signs with white lettering. One read “Honesty,” the other “Loyalty.” He claimed that a “moment of truth” arrived in August 2000, when Ravelston’s executives decided how to divvy up the US$80-million non-competition payment attached to the CanWest deal. “Take a look at what they did,” Sussman urged. They sent US$38 million to Ravelston, US$19 million to each of Black and Radler, and Boultbee and Atkinson split the remaining US$4 million. “That is what these men thought of their fiduciary duties,” Sussman continued. “They made [International’s] shareholders get nothing.”
Prosecutors tried damage control. Ruder acknowledged that Burt, Kravis and Thompson failed International’s shareholders. Sussman, meanwhile, disavowed his star witness. “You don’t need to believe David Radler to convict these defendants,” he asserted. Black had exacted his revenge. He’d made the word of his former partner count for nothing.
Sussman did, however, hit on the defence’s incongruity. Black held himself forth as being of impeccable honesty. And yet he’d exposed his long-time business partner as a sleazebag. Radler, Sussman claimed, could not hide his nature from his longtime friends and associates. “These guys knew who David Radler was,” Sussman said. “He’s probably been like this for the last 30 years.”
Jurors agreed. On July 13, they found Black, Boultbee, Atkinson and Kipnis guilty of the same three counts of fraud in connection with non-compete moneys they received. Despite strenuous efforts to divorce themselves from Radler and one another, in the end they went down together. Additionally, Black was convicted of obstruction of justice.
The bulk of the government’s case collapsed in acquittals, but Ravelston’s destruction was near total. The company remains in receivership, its liabilities considerably greater than its assets. Weeks after the verdict, its major asset, Hollinger Inc., announced it was insolvent and applied for court protection from creditors. Hollinger International, which has been renamed Sun-Times Media Group Inc., is a shadow of its former self.
As the verdict was delivered, Black sat at his table, his habitual defiant expression compromised slightly by a slackened jaw. His conviction shattered any fanciful dreams of re-establishing control over his empire’s ruins, and also any faint hopes of repairing his crushed reputation. Boultbee, who once hoped to retire to a golfing community, could not afford to stay in Chicago to await sentencing in November. As convicts, Kipnis and Atkinson face disbarment and will likely never practice law again. Before trial, Kipnis and his wife bought a Sign-A-Rama store and put their two-storey house in Northbrook, Ill., up for sale. All of them are now appealing their convictions—but if that fails, Sun-Times may pursue them to recover legal costs the company paid toward their respective defences.
As partners in crime, the government argues, the defendants should be held “jointly and severally” liable for the entire proceeds of the fraud. Prosecutors seek forfeiture of Black’s mansion in Palm Beach, Fla., and US$8.5 million in proceeds from the October 2005 sale of his Manhattan co-op apartment, which the feds promptly seized during the transaction. Also in jeopardy is Atkinson’s luxury home in Napa, Calif.—which his lawyers say he and his wife treasure.
In Kipnis’s application for post-trial acquittal, his attorneys took a parting shot at the Ravelston gang. They wrote:
This case has many of the elements of a Greek tragedy. The record describes a rise to prosperity followed by hubris which, arguably, led to a reversal of fortune. Mark Kipnis was a foil in that play. Where there was bravado and conceit, Mark exemplified humility. Where there was lavish excess, Mark and his family lived a modest lifestyle. Where the government alleged that there was secrecy and plotting, Mark was an open book.
The real-life tragedy for Mark is that despite the vast differences that exist between his conduct, his knowledge, and his intent, and that of the others with whom he allegedly schemed, the jury delivered him the same fate.
David Radler’s fate, at least in a material sense, will doubtlessly prove kinder. On the eve of trial, he wiped the slate clean. Just days before opening arguments began, he settled an enforcement action against him by the U.S. Securities and Exchange Commission by agreeing to pay US$23.7 million in disgorgement and interest and a US$5-million fine. And he and several companies he controls paid US$63.4 million to settle lawsuits against them by Sun-Times Media.
Radler faces sentencing before Judge Amy St. Eve on Dec. 10, less than two weeks after his former colleagues receive theirs. The plea agreement makes St. Eve’s choice starkly simple: either she approves the deal or awards Radler a new trial. A small but viable newspaper empire awaits his return; of the Ravelston gang, only Radler can go back to what he does best. The miasma of betrayal will follow him to the grave.
Black held himself out as a victim of betrayal by Atkinson, Radler and countless others. It is a conceit to which he is not entitled. If the jury was correct in holding Black accountable for the non-compete scheme, then it follows that his own unseemly finger-pointing at colleagues was morally equivalent to Radler’s. And through his stalwart refusal to accept any responsibility, he, more than anyone else, dragged Ravelston insiders and plenty of bystanders into an abyss. Conrad Black and David Radler proved far more alike than they care to admit.
