Christie Blatchford, who was covering the trial for the Globe and Mail, told me that my codename in her BlackBerry was the name of my hotel in Chicago. I was hereby to be known as InterContinental Steve. I was beginning to feel accepted as a fellow journalist. I even shook Dominick Dunne’s hand when he arrived at court. He had been following the beginning of the sensational Phil Spector murder trial in Los Angeles. It was clear to me that Dunne had some catching up to do at the Conrad Black trial. “Who is that?” he asked a reporter. The man he pointed to was Edward Genson, one of Black’s lead counsel.
One poignant observation from the press gallery was that we may be the only trial proceeding in the Dirksen courthouse. The frequency of draconian sentences meted out to the lonely defendants who brave the stormy winds of a trial and lose is likely encouraging a host of guilty pleas. The conviction rate has been cited to me at different times as being well over 90 percent. The Supreme Court of Canada once highlighted in a decision that 85 percent of offenders in America either pleaded guilty or pleaded no contest.[3]
The trial heard from a former controller at Hollinger International, Fred Creasey, who worked with Conrad Black and the other senior executives out of the ornate head office at 10 Toronto Street. In the years between 1998 and 2002, Creasey met Black, the CEO of Hollinger International, about four or five times a year. Now, either Conrad Black was extremely anti-social or he wasn’t present at the office very often. Surely they would have bumped into each other more than a handful of times in Hollinger’s catered lunchroom.
One defence lawyer in poor taste suggested privately that Creasey might have to undress to liven his testimony. However, it was Conrad Black who was being dressed down by the witness. Consider the following sample question posed to Creasey by the prosecutor: “Generally speaking, Mr. Creasey, does a 10-Q contain more or less information than a 10-K?” (These are quarterly and annual filings with the Securities and Exchange Commission, respectively.)
Creasey testified about the delayed and incomplete disclosure to the SEC of various non-compete agreements both in Canada and in the United States. For example, an approximately $12-million non-compete payment to Conrad Black in the $3.2-billion CanWest deal was not disclosed to the SEC in an annual report in a timely fashion. Creasey described a conversation with Black in which he complained that Black hadn’t done a very good job of explaining the non-compete payments in the CanWest deal to the public. Creasey professed not to understand the agreements.
I expect that Eddie Greenspan will start his cross-examination by asking Creasey if he understood the balance sheet that disclosed the enormous profits for the Hollinger International shareholders that resulted from the CanWest deal, which was personally engineered by Conrad Black.
There was also some issue as to whether the audit committee of Hollinger International approved all of the non-compete payments in the sales of the American community newspapers. The SEC filings for the year 2000 recorded that Lord Black and three other executives of the company received in total more than $15 million in payments deriving from the sale of newspaper properties in the United States. When related questions were raised by the audit committee a few years later, Black delivered an angry email to Creasey advising him to ignore anything the head of the superfluous committee said, as events were about to supersede them. Black clarified the matter the next day in a calmer email, but his crude outburst will likely linger with the jury. One astute journalist noted that perhaps a collection of Conrad Black’s erudite emails should be published. My suggestion for the title was Lord of the Web. It has a nice ring to it.
The evidence in Fred Creasey’s examination shifted from newspapers to airplanes. Creasey was an exacting man when he set his mind to a task (one worthy quote: “I was aware of what I was aware of”), and he was responsible for allocating costs to the two company airplanes with the exotic names of G-2 and G-4. They were primarily used by David Radler and Conrad Black. Black’s plane cost the company about $7 million every year, while Radler’s added up to a more conservative $2 to $3 million annually. I estimated that the cost of operating the planes, at $6,000 an hour, was comparable to the cost of Black’s seven-member defence team. For some of the disgruntled Hollinger International shareholders that may seem like poetic justice. However, it is the shareholders who are carrying the preponderance of the legal costs for the defence in the trial.
Creasey spotted a one-week trip to Bora Bora that Black took with Barbara in the summer of 2001, using the company jet at a cost of $565,326. “Bora Bora did not fit my allocation and methodology,” Creasey declared in the language that accountants use to dazzle friends at parties. When the matter was raised with Black, his swift reply came by email: “Fred, as these are mainly within the U.S. let’s charge to Hollinger International. I’m happy to pay, as to half, personally, if this causes difficulties.” There were in fact American stopovers on the trip. Following Black’s instructions and without any formulated policy, Creasey billed half of the trip to Ravelston and the remainder to Hollinger International.
The defence’s position was that Creasey had greatly overestimated the cost of the trip. Creasey agreed that the half share that was billed to Black far exceeded the actual cost to Hollinger International. Greenspan called it “the most expensive flight to Bora Bora in the history of mankind,” and suggested that its actual cost was closer to $75,000. How much does a trip to the moon cost? The prosecutors objected to the question, but I suspected that Greenspan didn’t care that the judge rescued them on this occasion. The point was established that the real profiteers at his client’s jet-setting expense were the shareholders of Hollinger International.
My mind wandered far from the courtroom as I entertained the notion of a half-a-million-dollar trip to a remote island in the Pacific Ocean. Were the serving plates on the plane made of gold? Did the fruit basket greeting the Blacks at their hotel room arrive with a string of pearls? Was Nelly Furtado hired to serenade the couple with “Maneater” in the bedroom? The possibilities were endless.
Greenspan asked Creasey, who had approved the trip’s expense, if he had any knowledge of the number of business calls Conrad Black made or emails he forwarded during the trip. In the absence of specific information, Creasey could only agree that Black was a hard worker and that his “life is his job.”
Patrick Fitzgerald, another person clearly dedicated to his job, observed some of the court proceedings the morning that Creasey’s cross-examination began. I watched as he spent almost the entire time scribbling notes on an unrelated matter and seemed to be a disinterested spectator. During the break, he was chuckling with Eric Sussman. I doubted that they were amused by the testimony in the courtroom. Despite some thirty-five hours and five separate meetings devoted by the prosecutors to preparing their witness, Creasey was evasive and appeared selectively forgetful during his cross-examination. I learned that one defence lawyer began to call him “Queasy.” On some of the SEC documents Creasey was described as the “principle accounting officer,” but a better title would have been “principle unaccountable officer.” For someone who acknowledged that his primary role at Hollinger was the co-ordination of financial reporting, he assumed very little responsibility when he testified.
It was a groundbreaking day at the Conrad Black trial. The jury was exposed to the incontrovertible fact that the non-compete payments to Black and other senior executives were disclosed to lawyers from the leading Canadian law firm of Torys, a team of auditors from the international accounting firm KPMG, and the audit committee at Hollinger International itself. Following a Hollinger Inc. audit committee meeting held on March 2, 2002, a KPMG report noted that “all such [non-compete] payments had been approved by an independent committee of the Board of Hollinger International and the Auditors had reviewed the relevant Minutes of the independent committee and were satisfied.”
The non-compete payments that were plainly disclosed in various public filings and financial statements included $80 million advanced in the CanWest sale and more than $15 million in connection with the sales of American community newspapers in 2000. When Pat Tuite suggested that the chair of the audit committee, James Thompson, was a very tall individual (and therefore less easily intimidated), Judge St. Eve interrupted and jokingly said, “Don’t start talking about height.” It was one moment in the trial when everyone in the courtroom