Tuesday, July 17, 2007

Catching Up with Conrad Black

The Globe and Mail had one of those “chat online with our reporters” today at noon (EDT) to go over readers’ unanswered questions in the Conrad Black affair.

Having not followed the trial that closely, I learned quite a bit from the transcript, which you can find here. The two reporters on the hot seat today were Jacquie McNish (a National Newspaper Award winner with whom I worked years ago at the Financial Times of Canada), and Paul Waldie.

1. The Surly Secretary
Question: How can Black be convicted of obstruction of justice in the U.S. for an act that he committed in Canada?
Paul Waldie: The issue came down to whether Lord Black was obstructing investigations by U.S. authorities. That included a grand jury probe, an investigation by the U.S. Attorney's office and an investigation by the Securities and Exchange Commission. All three were underway when Lord Black took the boxes.
The real problem for Lord Black was that his secretary, Joan Maida, did not give any compelling testimony during the trial as to why the boxes were taken. She was contradictory, vague and combative.
Her testimony, the fact that there were three U.S. investigations and the security camera video hurt Lord Black on this count.

Undone by Arrogance
Question: Do you believe that Black's unbounded arrogance proved to be his own undoing?
Jacquie McNish: Yes…. The same single-minded sense of destiny that drove Lord Black to build the remains of the old Argus conglomerate into one of the world's largest newspaper companies, also blinded him to the corporate governance movement that eventually overpowered him.
I truly believe that if he had bowed to his rebelling shareholders in 2002, he could have avoided this criminal trial and verdict.

The Directors’ Dilemma
Question: Do you not think that more people now will think twice before accepting directorships, particularly if they are financially well-endowed?
Jacquie McNish: Conrad Black and his executives were not the only people on trial in this case. The spotlight was also on the conduct of Black's directors, lawyers and auditors who failed on several occasions to question or sound the alarm about a number of transactions that were at the heart of the case.
The Black trial painted a picture of a dysfunctional board of directors who "skimmed" key documents and never questioned deals that screamed for scrutiny… The embarrassment and lawsuits they have suffered as a result of this case is the final nail in the coffin to compliant boards…
As result of these consequences, only strong-minded directors who understand their legal obligations are going to be inclined to take directorships on public companies.

Two other points I learned:

* Conrad and his cronies weren’t just lining their pockets with those “non-compete” payments. At the time, non-compete bonuses were tax-free! So their strategem was nearly twice as profitable as using additional salary or performance bonuses out of the company.

* While Conrad already has lawyers working on his appeal, Waldie notes that the track record of success on appeals in the U.S. is very poor for defendants in criminal cases. One reason: “George Bush has stacked these appeal courts with judges who are generally tough on crime.”

It's the final irony: Conrad Black hoisted on the petard of the neo-cons.

Read the full story here.

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