Law: Duties of loyalty

Conrad Black and his associates had to decide whether to stick together or go each man for himself.

To the uninformed observer, it resembled an encounter between long-lost associates making a polite but half-hearted effort to catch up. Conrad Black, his 24-year-old daughter, Alana, and Peter Atkinson had a brief but pleasant conversation inside a wood-panelled courtroom in downtown Chicago. Atkinson commented that Alana had been much smaller when he’d last seen her.

Beneath the forced smiles and casual banter lay a complicated back story, understood by all participants, but left unmentioned. The first time Atkinson saw Alana, she was very small indeed. He’d been in the expectant father’s room at Toronto’s Wellesley Hospital on June 28, 1982, when she was first presented to her dad. As Black’s longtime lawyer, Atkinson helped him wiggle out of legal quandaries for decades. He also assisted and encouraged Black’s pursuit of a favourite pastime: suing journalists for libel. They became close, and Atkinson gained admission into Black’s inner circle — a group of executives sometimes known collectively by the name of a private company they controlled, Ravelston.

But those halcyon days were gone. The regal offices they once shared in downtown Toronto had been sold, as had Ravelston’s Muskoka launches and Rolls-Royce. The companies they built and governed lay in receivership. There was little reason to exchange letters, phone calls and e-mails, or chat idly at the watercooler during recesses — which, in any case, was surrounded by watchful journalists. All the pair shared now was a courtroom, in which both stood trial on a host of fraud and related charges.

By the time U.S.A. v. Conrad Black et al. commenced in mid-March, Atkinson wore an expression of gloom and shame. John (Jack) Boultbee, Ravelston’s former chief accountant, sat serenely at the opposite side of the same table, like a strangely contented Buddha, his pronounced belly spilling out over his belt. Mark Kipnis, an American lawyer who never counted for much in Black’s inner circle, gathered with his team in a row along the courtroom’s left-hand wall — which, combined with his mild personality, had observers calling him the trial’s “invisible man.”

They all might have been invisible to U.S. prosecutors, had it not been for their former boss’s presence. Black wore a stoic, inscrutable expression as he leaned back in his chair, taking in the proceedings. He’d encouraged the media to turn out in numbers to witness his final standoff against those who had dared to smear his name. He occasionally disparaged the prosecutors to journalists, but rarely acknowledged his former Ravelston colleagues. Black had scores to settle — not least of which was with David Radler, his longtime friend and former business partner who had turned state’s evidence.

On its face, it was a straightforward case of alleged corporate looting. The four men stood accused of conspiring to divert US$60 million from Hollinger International Inc. (a Chicago-based newspaper company they controlled) into the pockets of Ravelston execs and companies in their empire. “We know what street crime looks like,” assistant U.S. attorney Jeffrey Cramer told the jury. “A man knocks you down and takes your money. This is what crime looks like in corporate law.”

Ravelston’s story was more complicated. It entailed loyalties strained to the limits, and the inevitable betrayals that resulted. In the months and years leading up to the trial, Black and his colleagues had to decide whether they would stick together as they had for such a long, lucrative period — or whether they would betray one another for individual advantage. Their choices, as much as the legal arguments, heaps of documents and testimony that consumed four months, helped shape the trial’s outcome. Anyone who knew the story understood why Black and Atkinson weren’t exactly chumming around.

Those seeking to understand Conrad Black’s attitude toward loyalty could do worse than to read an anecdote he wrote about Bud McDougald. In his 1993 autobiography, A Life In Progress, Black cast the legendary businessman as a charlatan who diverted corporate assets to himself at every opportunity. But he also recounted how in 1964 a Quebec politician had urged McDougald to dump a Dominion Stores director who’d been indicted for dispensing patronage. Remembering the director’s services in happier times, McDougald refused. “Bud McDougald’s most attractive characteristic was his loyalty,” Black wrote. To Black, loyalty meant standing by your friends, no matter the dire straits they found themselves in.

Black and David Radler were introduced by a mutual acquaintance, Peter White, in 1968. Aristocratic and ambitious, Black was finishing up a law degree at Laval University. White was embarking on what would become a lengthy political and business career. Radler was a business school graduate who acted as a consultant to the Department of Indian Affairs.

Black and White wanted to buy the Sherbrooke Record, a small-town English newspaper in Quebec’s Eastern Townships. Their initial bid was trumped by the paper’s general manager, Ivan Saunders. Things hadn’t gone well, however, and within months Saunders was ready to sell. Black, Radler and White paid $6,666 each, and assumed $30,000 in liabilities. They embarked on a classic Radler restructuring, firing nearly half the employees and imposing what Black called “draconian cost controls.” Black and Radler worked side-by-side, often late into the evening. At one point, they, along with White, would find themselves selling ads or delivering newspapers. The Record turned a profit within three months — an auspicious beginning that convinced the trio the newspaper business offered considerable opportunity.

This intense period lasted less than a year. White moved to Toronto in 1970 after he ran unsuccessfully in a provincial election for the Union Nationale. Soon, Radler skipped across Canada acquiring and managing new papers. Black returned to Toronto in 1974, where he later seized control of Ravelston, which would serve as the senior entity in his ever-shifting corporate flowchart. But it was the dawn of decades-long friendships. Black and Radler socialized. They attended each other’s nuptials, and Radler was in Black’s 1978 wedding party. Occupied by an involved political career, White returned only intermittently to managerial roles in the Ravelston empire, but remained a shareholder.

Together, Black and Radler forged what by the mid-1990s would be described as the world’s fastest-growing newspaper empire. At its zenith, it encompassed hundreds of small community papers across North America, but also well-known titles including London’s Daily Telegraph, Canada’s National Post and the Chicago Sun-Times. Radler focused on circulations of less than 10,000; Black deemed him “undoubtably the world’s greatest authority on newspapers of this size.” Black gravitated toward larger publications. Radler settled in Chicago and Vancouver, while Black had homes in Toronto, New York, London and Palm Beach.

Black owned most of Ravelston, leaving White and Radler significant minority stakes. As the empire grew, however, it began bringing lawyers and accountants in-house. In 1986, Hollinger Inc.’s financial vice-president was nearing retirement, and Black cast about for a replacement. White suggested Boultbee, a chartered accountant with Coopers & Lybrand and his longtime tax adviser. Boultbee was an awkward communicator who sometimes baffled his audience, but few doubted his genius. “An aggressive tax planner, he was as bold and imaginative an accountant as I had ever met,” Black later wrote. “His appointment was doubtless one of the smartest moves I have made at Hollinger.”

Black persuaded Dan Colson, a Laval chum and Stikeman Elliott LLP lawyer, to assist at the Telegraph. Atkinson, a gentlemanly lawyer at Toronto’s Aird & Berlis LLP, signed on as International’s top counsel in 1996. Over Radler’s protestations, all became Ravelston shareholders.

Ravelston was infected by a disdain for public shareholders of companies further down the chain. Black sent periodic memos he called “musings” to his associates on the state of the empire. “We have said for some time that [International] served no other purpose as a listed company other than the relatively cheap use of other people’s capital,” he wrote in one. It was that kind of attitude that would later assure Ravelston’s destruction. Such was the insularity of Black’s circle, though, that such utterances passed without comment.

Tractability is a form of loyalty, albeit a fairly shallow one. The Ravelston group’s real commitment to each other would be severely tested in the coming disaster.

Michael Reed, Ralph Martin and Tom Henson had seen a lot during their careers, but they’d never met anyone quite like David Radler.

Their company, Community Newspaper Holdings Inc. (CNHI) of Birmingham, Ala., made an offer to buy some of Hollinger International’s titles in 1998. Their first bid was rebuffed. Months later, one of Radler’s minions suggested CNHI make another offer. That resulted in CNHI meeting him at his offices in Chicago. Henson, a lawyer, presented it. At trial, he recalled that Radler stood nose-to-nose with him and shouted, “You’re wasting my fill-in-the-blank time, and you have wasted your fill-in-the-blank time,” before storming off.

Henson began packing his briefcase. Radler had set up in a nearby office. “It was all an act,” Henson thought. “The way he stationed himself in the next room, he was trying to get the upper hand in the negotiations.” Henson suggested Martin, CNHI’s CEO, speak with Radler privately. He did — and the offer was accepted.

CNHI wanted assurances International would not start up or purchase other publications nearby the 45 papers it was buying across the U.S. In such small communities, it wouldn’t take much competition to make a paper unprofitable. So the parties hammered out a non-competition agreement.

Commonly signed when newspapers change owners, non-competes are promises by the seller not to operate in a geographic area for a specified period, typically several years. CNHI agreed to allocate $50 million of the purchase price in exchange for International’s promise to keep out of town for three years.

Then a funny thing happened. In early 1999, International’s in-house lawyer, Mark Kipnis, requested that a holding company, Toronto-based Hollinger Inc., be added to the non-competition agreement. Henson, who’d negotiated about 100 transactions, couldn’t recall a seller ever nominating additional non-compete covenantors. Hollinger Inc., he’d learned, owned a sizable minority stake in International — but because its shares had exclusive multiple-voting rights, it effectively controlled International. CNHI couldn’t have cared less about Hollinger Inc. “We did not consider these people to be potential competitors in these small towns,” Reed testified.

Henson vaguely understood that Kipnis’s request was motivated by tax considerations. Hollinger Inc.’s inclusion would not affect the price, so Henson agreed.

This transaction (later known as CNHI No. 1) was among the earliest in a series of asset sales that left Black’s global news empire greatly diminished. The reason for the sell-off, quite simply, was that the empire had been built on borrowed money. “We were both concerned with a debt problem at Ravelston,” Radler testified in Chicago. “We had bank commitments and salary commitments, and one had to have sufficient income to handle both.” The solution was to divest assets. Between 1998 and 2000, International sold off the bulk of its newspapers in a series of transactions. As they had their entire careers, Black and Radler proved formidable negotiators.

The devil lay in the details. Early on, it was decided that Hollinger Inc. would receive one-quarter of the non-compete money. According to Radler, at one meeting Black opined that as International’s parent company, Hollinger Inc. deserved a portion of non-competition fees paid to International. “I certainly didn’t say no,” Radler recalled on the stand. It would be one thing if buyers feared competition from Hollinger Inc. But Radler, who was the company’s president and COO, confirmed in Chicago that it had no newspaper operations at the time, and that he knew of no justification for the payments.

In later transactions, large sums of money went directly to Black, Radler, Boultbee and Atkinson. Individuals often receive non-compete money directly — buyers sometimes fear talented execs more than the companies they work for. But buyers of International’s papers often weren’t requesting non-competes with the Ravelston gang.

The Ravelston clique decided how much its members would receive. In 2000, for example, International sold a large collection of Canadian newspapers (including the Ottawa Citizen, Vancouver Sun, Montreal Gazette and a 50% stake in the National Post) to CanWest Global Communications Corp. Fearing that they might buy the rival Sun chain, CanWest demanded non-competes with Black and Radler. But late in the negotiations, Atkinson and Boultbee were added. In August 2000, Atkinson wrote in an e-mail to Black: “David has consistently suggested $19 million for you and $19 million for him in regard to these covenants. Jack and I suggest $2 million for each of us in regard to these covenants with the balance to the companies.” It wasn’t explicit, but Boultbee and Atkinson later claimed their payments were really bonuses.

The most dubious of all non-competes didn’t even involve a sale of assets. In February 2001, Black, Radler, Boultbee and Atkinson arranged to pay themselves $5.5 million by way of a non-compete with American Publishing Co., a subsidiary of International. This was styled as an agreement that prevented the recipients from competing with APC for three years after they left the company’s employ — a mechanism that could be viewed as a retention tool. Curiously, though, APC had but one small publication in California. They’d agreed not to compete with an empty shell.

It was a tax dodge. Due to a series of court rulings during the 1990s, non-competes became tax-exempt in Canada for several years. Radler learned this from a newspaper article in 2000. He phoned his Vancouver accountant, Barry Tyner, who confirmed it. Radler, Boultbee, and Atkinson were all Canadians — and until Black abandoned his citizenship in 2001 to take a seat in Britain’s House of Lords, so was he. They’d discovered a grey area that allowed them tax-free compensation. Even better, they’d receive this on top of their regular salaries and bonuses. Black liked the idea; in a letter to Radler, he praised “the splendid conveyance of the non-competition agreements from which you and I profited so well (and deservedly).”

There were flaws in the scheme, however. The greatest was that it had to be concealed. Every time non-compete money went to other parties, International’s shareholders lost. Ravelston execs already received compensation by way of an unusual consulting arrangement that saw International pay it large management fees for ill-defined services — in effect, International outsourced its senior management to Ravelston. If Ravelston execs received bonuses directly from International, shareholders should have been informed. (Public companies are supposed to disclose all compensation paid to their top five executives in proxy statements.) But given the onerous management services arrangement, bonuses from International to Ravelston executives might draw fire.

There were also tax authorities to consider. The Canada Revenue Agency knew about the non-compete loophole and fought in court to close it. If International declared that non-competes were really just tax-free bonuses in disguise, the CRA might challenge their legitimacy.

The Ravelston group elected to obfuscate. Believing his CanWest non-compete agreement was really a bonus, Boultbee nevertheless wrote on a proxy questionnaire that he received no compensation at all from International in 2000. And in 2002, Atkinson provided some information about non-competes he received the previous year, but concealed their true nature. “I do not consider such payments as constituting compensation,” he wrote.

He could not honestly believe that.

Mark Kipnis, International’s inside lawyer, faced a dilemma.

On Nov. 1, 2000, he attended the closing of a second sale of newspapers to Community Newspaper Holdings Inc. (which came to be known as the CNHI No. 2 transaction). He asked CNHI to wire US$9.5 million of the non-compete payment directly to Black, Radler, Atkinson and Boultbee. This surprised Michael Reed (now CNHI’s CEO) and his lawyer, Tom Henson. No such thing had been discussed in negotiations, and they didn’t know who Atkinson and Boultbee were.

It was plain Kipnis wanted to create a record of the payments. But after conferring with Reed, Henson told Kipnis he wouldn’t do it. “It just didn’t seem like the right thing to do,” Reed testified. Kipnis dutifully penned in the names of his four superiors on the wire transfer himself.

Kipnis was, as his attorneys would later argue, an “outsider.” Based in Chicago, he had no stake in Ravelston, and little interaction with most of its principals; he had perhaps five conversations with Black, and fewer with Boultbee, during his life. And though they both worked in Chicago, he and Radler weren’t close. Kipnis received not one dime of non-compete money.

So why did he uncap his pen? Prosecutors pointed to two cash bonuses he received totalling US$150,000, and suggested these bought his complicity. This theory was discredited; Radler’s testimony confirmed Kipnis’s bonuses rewarded job performance. Prosecutors also speculated that Kipnis hoped to replace Atkinson one day as International’s senior counsel, but evidence was unpersuasive. The best theory was that Kipnis may have merely “wanted to fit in” at International.

He would not be alone in bending to the will of the Ravelston gang. Ravelston required the co-operation of International’s board of directors — and more importantly a branch of it, the audit committee. Whenever a proposed transaction stood to benefit Ravelston or Black personally, independent directors were supposed to keep a watchful eye to ensure fairness.

Fortunately for Black, his voting control meant that he alone decided who sat on the board. As he privately told Atkinson, he sought “loyalists, by which I mean conscientious, responsible, thorough, but well-disposed.” That meant stacking the board with friends and associates.

Many of International’s directors had obvious Ravelston ties, including Radler, Atkinson, Colson, Black and his wife, columnist Barbara Amiel. The rest were notionally outsiders, but were hardly strangers. Former U.S. secretary of state Henry Kissinger, whom Black viewed as a “helpful and reliable” friend, joined International as a director in 1996; Richard Perle, another friend and Pentagon adviser, in 1994.

On the audit committee sat Marie-Josée Kravis, a Canadian-born economist who sat on the boards of such companies as Ford Motor Co. and Vivendi. Black and Kravis had been friends in Toronto, and both were active with the Hudson Institute, a Washington think-tank. Black had met audit committee member Richard Burt, a former arms negotiator and U.S. ambassador to Germany, through a mutual friend in diplomatic circles. The committee’s chairman was former four-term Illinois governor James Thompson, who also had an extensive collection of directorships. Thompson never developed friendships with Black or Radler, but trusted both.

Evidence at trial revealed that the audit committee seldom, if ever, challenged management’s proposals. Asked in court about its approval of hundreds of millions of dollars in management fees to Ravelston between 1997 to 2003, Radler replied: “They asked very few questions.” A 2004 report by a special committee of International’s board scathed the Black-era directors. “The consistent inaction of the Hollinger Board also resulted in squandering opportunities for stopping abusive acts before the damage was too great,” it read. But the audit committee’s ill-considered approvals would prove a daunting roadblock for anyone who later sought to criticize Ravelston for misconduct.

Even so, Black did not rely entirely on his independent directors. Rather than convene the audit committee to ratify CNHI No. 2 and two other transactions, he instead turned to an “executive committee” that included Radler, Perle and himself. Months later, he then asked the audit committee to approve the asset sales, with any references to the non-competes obscured by legalese. Kravis testified that she had no explanation as to why she was not asked to review the transactions.

Directors benefited from Black’s unconventional take on loyalty. Alfred Taubman, a shopping mall magnate, joined International’s board in 1996. In 2000, he became embroiled in a price-fixing scandal involving his auction house, Sotheby’s, and its competitor, Christie’s. (Convicted in late 2001, he served a one-year sentence in prison.) Taubman moved to resign from all corporate boards he sat on. “The last thing I wanted to do was put them in an awkward position,” he wrote in his recent autobiography, Threshold Resistance. “All accepted my resignations, reluctantly and graciously.”

Though he didn’t mention it in his book, there was one exception. At the 2002 annual meeting, Black told shareholders Taubman offered to retire, but said he saw no legal or moral obligation to accept. “We do not desert our friends,” he declared, echoing Bud McDougald’s generosity of nearly four decades earlier.

It was a remarkable gesture. But what would Black do if his directors ever did their jobs and decided to stand up to him?

The truth about the non-competition payments might have remained safely concealed had it not been for International’s need for cash. In 2001, company executives hatched a plan to raise money by taking one of its subsidiaries public. International hired Salomon Smith Barney as lead underwriter, which in turn retained Cravath, Swaine & Moore LLP, a highly respected law firm with offices in New York and London, to perform due diligence.

Cravath knew International well; it had represented the company previously, including on several earlier asset sales. Bud Rogers, a senior Cravath partner based in New York, assumed the non-competes from those transactions went entirely to International. But as they reviewed minutes from International’s board meetings and other documents, Cravath lawyers realized that the CanWest non-compete payments had gone to Ravelston and its executives — and shareholders hadn’t been told.

Rogers called Atkinson. “May have been breach,” Atkinson scribbled in his notes as he listened. “Not a defensible position.” Cravath made it clear that International had exposed itself to potential lawsuits from shareholders.

Atkinson earlier had obtained conflicting advice from another law firm, Torys LLP, that International didn’t need to disclose the payments. That provided an alibi. Rather than sticking with Torys’ more convenient advice, though, he hired Cravath to help International draft new disclosure. On its face, it seemed a good-faith attempt to clean up the record.

But was it? Atkinson never told Cravath that his CanWest non-compete was really a bonus. And he kept quiet about other non-competes he’d received, one of which arrived in his bank account just weeks before. Kipnis, who also worked to solve International’s disclosure problems, similarly volunteered nothing.

If Atkinson and Kipnis were trying to contain the situation, it didn’t work. The more information that leaked out about the payments, the angrier shareholders became. Discontent erupted at International’s annual meeting in New York in 2002. Taking the microphone during a question-and-answer session, investor Lee Cooperman reminded Black: “The corporation is owed your full faith and fidelity.”

Cooperman was talking about fiduciary duty. In both law and theory, Black’s fiduciary obligation to shareholders trumped that of his loyalty to friends, fellow executives and even himself.

Black shot back: “I think you’re verging on excessive flamboyance in…inciting the impression that you think that we are anything less than completely faithful to the company.” One particularly vocal shareholder, Ed Shuffro, doubted it. He stood up and called Black a “thief.”

Confronted by accusations, Black pulled out his trump card. “In all of the circumstances, the independent directors felt this was the fair thing to do and I must say, I agree,” he said. “You’re dealing with a best-efforts attempt to accommodate to industry practice and do what’s equitable as determined by independent directors who are…a distinguished group.”

The growing scandal exacerbated existing fissures within Ravelston. Were it not for Black’s prominence, Radler believed, nobody would bother him. “He [Black] took the glory on the way up, so he can take the shit on the way down,” he told Paul Healy, the company’s vice-president of investor relations.

Black, for his part, discovered in 2002 that Radler had deceived him in connection with their supposedly equal ownership interests in a side venture called Horizon Publications Inc., a firm based in Marion, Ill., that purchased newspapers from International. Radler had used a straw man to secretly acquire more Horizon shares. In a letter to Radler, Black wrote: “I don’t think this entire subject has been handled with the candour and openness that has been the most distinguished characteristic of our relations for 33 years.”

During 2002, Atkinson made a number of unpopular suggestions aimed at placating shareholders. “Bandaids won’t do it,” he wrote Black, adding, “Announce a cut in dividends and management fees and the problems will largely evaporate. I would be perfectly happy to take a compensation cut provided we all suffered proportionately.…Cut all the useless clubs, the unnecessary tables, the investments that are fun to be in but useless to the bottom line.” Black, however, was lukewarm. Radler, too, resisted making concessions.

What was Atkinson doing? He may have been a man of conscience who realized he’d done something wrong. Or perhaps, as an experienced lawyer, he had the foresight to begin accumulating an inventory of “good acts” to produce in later legal proceedings. Whatever his motives, Atkinson was drifting from Ravelston’s script.

Black tried to allay fears. In a September 2002 “musing” to his fellow Ravelston shareholders, he predicted that the worst was over. “We have pretty well won the great battle over the non-competition agreements and a decent interval has passed,” he wrote. He advised the Ravelston group to stand together against mounting criticism of their perks, such as the use of two corporate jets by him and Radler.

“We have nothing to be ashamed of,” Black wrote, “and must guard against tittle-tattle and not fall to back-bighting [sic].”

Black had good reason to fear infighting. Frustrated by his unwillingness to change practices at International, Atkinson abruptly quit in February 2003. “I now find myself in a position where I completely disagree with your view that the old Hollinger philosophy and methods are an appropriate vehicle to deal with our problems and deal fairly with our shareholders,” he wrote in his resignation letter.

It was too late. His pockets brimming with non-compete money, Atkinson became wealthy thanks to the Ravelston Way. There was little hope that he could follow in the footsteps of Lou Pai, an Enron executive who cashed out and departed before that company’s spectacular collapse and was not targeted in any of the subsequent prosecutions. In any case, Atkinson rescinded his resignation the following day. Hollinger Inc. was then in the midst of an attempt to raise financing, which a sudden unexplained departure might scuttle.

Returning to the fold, Atkinson resumed worrying about Ravelston’s slipping control. Fearing embarrassment, existing directors were wavering. Just before the 2003 shareholder meeting, Kravis pleaded with Black by phone to adopt a less confrontational approach. “My advice to Mr. Black was to be a little bit more humble,” she told the Chicago jury. “I suggested he take a more quiet tone.” Disillusioned investors, meanwhile, pressed for the appointment of new independent directors and an investigation into the non-competes and other matters.

Atkinson panicked. In May 2003, he wrote Black: “Our ability to control the vote at board meetings is crucial. If we do not, with a majority vote the board can go off on any direction and could, strictly speaking, fire all of us…I realize you would count on the loyalty of the current independents but that would be risky. They may come under intense pressure and some of them could turn against us.”

Boultbee, largely detached from the controversy, seemed oblivious. In a May 2003 e-mail to Black and Atkinson, he fretted that management fees paid by International to Ravelston were likely to fall. “Even if we cut head office costs to the bone, we would have little ability to withstand a large cut in management fees,” Boultbee wrote. “I think we should copncentrate [sic] on taking steps to keep the management fees as high as possible.”

Black had no intention of surrendering. By June 2003, however, he relented. New directors arrived and formed a special committee of the board, with investment banker Gordon Paris as its chair. He was joined by Raymond Seitz, an American diplomat. Atkinson persuaded a friend, Graham Savage, to sign up. Richard Breeden, a corporate governance consultant and former chair of the U.S. Securities and Exchange Commission, was hired as a consultant. Law firm O’Melveny & Myers LLP of New York signed on as counsel. Lots of unfamiliar faces now dominated International’s corridors.

That summer, the special committee began collecting documents, conducting interviews and probing for answers. And it selected a few “tour guides” that could steer it through the maze. Mark Kipnis, as corporate counsel, proved ideal.

Kipnis told the committee about many transactions he’d worked on and provided a large volume of documents. “We interviewed him many times,” testified Jonathan Rosenberg, who described him as “very co-operative.” Kipnis told the committee that the APC non-compete was really a way of recharacterizing management fees to obtain favourable tax treatment. “The whole thing was silly,” Rosenberg recalled Kipnis saying. Kipnis also revealed that the audit committee had not approved certain non-competes.

With Kipnis and others spilling the beans, Black, Radler, Atkinson and Boultbee now faced a crucial decision. Would they stick together, or cut loose and go each man for himself?

Radler had much to hide. After one of investor relations representative Paul Healy’s sessions with the special committee, Radler called him. “Did you rat on me?” he demanded. Radler himself spoke to the committee several times, but lied repeatedly. “I presupposed the consequences of truthfully answering the questions,” he explained to the Chicago court. “I lied because of the personal consequences to me and to the people I was then associated with.”

Atkinson flew to New York for a series of interviews in October 2003. He sang like a canary. He said he believed his CanWest non-compete was really a bonus. Certain payments he’d received were improper. He’d participated in a conspiracy and a cover-up. Black lied to shareholders at the 2002 shareholder meeting. (According to the special committee’s report, “Atkinson recalled that he warned Black before the meeting to speak truthfully, but Black rejected his advice.”) According to one account, he wept. “He was clearly a kind of broken man,” testified audit committee member Richard Burt, to whom Atkinson confessed. But some at Ravelston remained oblivious to this, and Atkinson continued to toe the company line at meetings.

All eyes turned to Black. Exploiting his voting control, he could remove the board. He’d already lost faith in the independent directors, whose services were no longer of any use to him. In an e-mail, he instructed International’s controller to “ignore everything [Kravis] and her superfluous committee says.” He viewed special committee members as villains out to steal his company and set conditions for speaking to them. When they were not met, he refused.

There was promise, though, that détente might still be reached. In mid-November 2003, Black struck a deal by which he stepped down as International’s CEO but remained its chairman. He promised to help the company examine strategic alternatives, including the sale of more assets.

Radler and Kipnis resigned from International. (Boultbee, who did not, was fired.) Black, Radler and Atkinson each agreed to repay a total of US$32 million in non-competes that the committee deemed unauthorized. Black, meanwhile, agreed to seek repayment from Hollinger Inc. It was the last hope that disaster might be averted.

It was a façade. Like Radler, Black could lie when it suited him. He repudiated the November agreement even before signing it. Exploiting the breathing room it provided, he clandestinely began negotiations to sell his stake in Hollinger Inc. — and thus control of International — to a pair of reclusive British tycoons Frederick and David Barclay. The idea was to spring a fait accompli on his enemies.

Black deployed his remaining Ravelston soldiers to assist. Dan Colson, who was not accused of any wrongdoing, had replaced Radler as COO and remained a director. Black had Colson provide the Barclays and other prospective buyers with privileged information, without telling International. Long absent from the business, Peter White arrived at company headquarters at 10 Toronto St. in January 2004 to begin damage control. (White was not involved in the non-compete debacle.) Black kept his colleagues informed of his progress. Thinking the Barclay arrangement a masterstroke, Ravelston insiders were jubilant.

Black was to appear before the Securities and Exchange Commission in late 2003 to answer questions. Instead, he declined, invoking the U.S. Constitution’s privilege against self-incrimination. And he failed to make the first scheduled repayment of non-compete money.

Then, in January 2004, Black announced he’d reached a deal to sell Hollinger Inc. to the Barclays. Any hope of escaping further scrutiny from the SEC and U.S. Justice Department had been squandered. The move also cost Black any remaining loyalty from International’s formerly complacent directors. In early 2004, during a teleconferenced board meeting, they voted in support of a motion to sue Black to recover management fees paid to Ravelston. It was a difficult moment for Henry Kissinger — his close friend’s behaviour had put him in an awkward position. Upon hearing Kissinger’s affirmative vote, a dumbfounded Black asked whether he was voting against him. Kissinger confirmed.

“Et tu, Brute,” Black replied.

International and Black faced off in a Delaware court (where the company was incorporated) in February 2004 over the Barclay transaction for an expedited, three-day trial. White testified on Black’s behalf. He believed his longtime associate had done nothing wrong, and that everyone would win from the Barclay transaction.

The court disagreed. In a written decision, Judge Leo Strine wrote that Black “repeatedly behaved in a manner inconsistent with the duty of loyalty he owed the company.” He noted the press baron’s dishonesty. “I found Black evasive and unreliable,” he wrote. “His explanations of key events and of his own motivations do not have the ring of truth.” And he disregarded White’s testimony; White “is so faithful to Black personally that it was difficult for him to be dispassionate,” Strine observed. He blocked the Barclay manoeuvre.

No one was listening to Ravelston now. Further attempts to avert disaster would be contaminated by chronic distrust. After a failed 2005 bid to privatize Hollinger Inc., Ravelston ran out of options. Boultbee and White met and agreed that there was nothing to do but shutter the company. In April 2005, White asked the Ontario Superior Court to place Ravelston in receivership.

Ravelston’s principals went their separate ways. Atkinson continued building goodwill with the special committee; he remained at International and worked as a consultant for much of 2004. He later returned to the legal profession, joining Toronto law firm Miller Thomson LLP. An avid golfer approaching retirement, Boultbee moved to Victoria. Black worked on a biography of former U.S. president Richard Nixon. Radler continued building another mini-empire of small community newspapers. The Ravelston story was over.

Over, that is, except for numerous legal challenges. Knowing that lawsuits or worse likely lay ahead, its principals hunkered down and hired lawyers. Black retained famed Canadian defence lawyer Edward Greenspan in November 2003. Radler hired Anton Valukas, a former U.S. attorney who specialized in white-collar crime. To a man, the Ravelston group vowed to stick together. They signed a joint defence agreement, and their lawyers began meeting to construct a united legal front.

But then, during the summer of 2005, Radler’s attorneys abruptly stopped attending joint defence meetings. Black knew it was a bad omen. In August, White phoned Radler and relayed some news: Ivan Saunders, the man who’d sold them the Sherbrooke Record in 1969, had died. He then inquired about Radler’s absence from joint defence meetings. The reply was not reassuring. Dodging the question, Radler said he merely followed his lawyer’s instructions. It was the last time the two spoke.

White relayed the ominous news to Black. So it was official, then. The last chapter of the Ravelston saga would be written in a U.S. criminal court. And the one-time colleagues would not be fighting shoulder to shoulder.