The witness was former Gov. James R. Thompson, the accused is press baron Conrad M. Black. But the battle waged in a federal courtroom Tuesday was as much about rehabilitating Thompson’s damaged reputation as a guardian of the public interest as it was about proving Black’s guilt.
Thompson testified amid questions about his diligence and independence as a Hollinger director, arising from federal prosecutors’ allegation that Black and his co-defendants looted the company in a series of self-dealing transactions beginning in 1998, a time when Thompson chaired Hollinger’s audit committee.
In a brief cross-examination late in the afternoon Tuesday, defense lawyer Edward Greenspan went after Thompson with a double-pronged attack, questioning his judgment while also implying that the former four-term governor was besotted with the heady lifestyle of Hollinger’s jet-setting board.
Calm and direct under questioning by prosecutors, Thompson at times came across as obstinate on cross-examination. Asked if his legal experience included corporate litigation, the former U.S. attorney in Chicago and chairman of the massive Winston & Strawn law firm requested a definition.
“You don’t understand what I mean by corporate litigation?” Greenspan asked in disbelief.
Thompson bristled when Greenspan implied that Thompson dominated the audit committee that approved the allegedly shady deals at the heart of the case.
“It was a pretty democratic committee,” Thompson said. “Everybody spoke up.”
Greenspan shot back: “Even in a democracy, someone has to be governor.”
Central to Thompson’s testimony — and the 7-week-old Black trial — is a series of payments made to Black and his partner David Radler, then Hollinger’s chief operating officer, in several major divestitures of Hollinger newspapers.
Radler, the former publisher of Hollinger’s Chicago Sun-Times, has pleaded guilty to his role in the alleged conspiracy in which Black and co-defendants Peter Atkinson and John Boultbee allegedly received millions of dollars for promising not to compete against the companies that bought Hollinger’s newspapers. Former Hollinger General Counsel Mark Kipnis is accused of keeping key information from board members in exchange for a $150,000 bonus.
Such payments should have gone to Hollinger and not Black and his fellow executives, the government alleges.
As Assistant U.S. Atty. Eric Sussman opened his questioning of Thompson, he sought to build on a case the government has tried to establish through earlier witnesses: That Black and Radler misled the board while secretively carrying out a scheme to enrich themselves. The executives failed to inform the board that they personally enriched themselves through the non-competition agreements, prosecutors allege.
Sussman reviewed Hollinger’s sale of newspapers in the late 1990s and 2000. In six transactions over a two-year period the company sold hundreds of community newspapers in the U.S. and Canada.
In case after case, Thompson asserted repeatedly that company officers withheld information that would have raised questions about the non-compete agreements.
Thompson also buttressed a government contention that Black and Radler schemed together. That line of argument contradicts the defense contention that Black, who had homes in Toronto, London and elsewhere, was far removed from the day-to-day concerns of his company while Radler was responsible for any fraud.
“They ran the business as a duo as far as I could tell,” Thompson said.
Thompson then began to testify about the series of allegedly fraudulent deals that ended with payments to Hollinger executives, as well as to Black’s private company, Ravelston, and Hollinger International’s parent company, Hollinger Inc.
As major investors in Hollinger Inc., Black and Radler benefited directly when Hollinger International made payments to that company.
Thompson also said the audit committee never approved a $12 million non-compete payment to Hollinger Inc. in the $472 million sale of newspapers to Community Newspapers.
“Hollinger International was being asked not to compete with the purchasers after the sale. Therefore Hollinger International should have received the non-compete payment. Part of it went to somebody else, and somebody else was a related party,” Thompson said.
While much of Thompson’s testimony supported the government’s case, one admission may have hurt his effort to portray himself as a knowledgeable and dutiful board member. While reviewing Hollinger’s biggest transaction, the $2.3 billion sale of newspapers to Canadian media giant CanWest, Thompson sought to establish the fairness of the non-compete payments to Black, Radler and others by asking executives to provide examples of non-competes at other media companies.
However, at the next audit committee meeting, Kipnis provided only an academic paper from Hollinger’s auditors, KPMG, which made only general comments about non-compete payments.
“I said, this is not really what I asked for,” Thompson said. Even so, Thompson voted for the deal and advised fellow board members that it was fair.
Shortly after Greenspan began cross-examination, he zeroed in on Thompson’s testimony that Hollinger’s board never approved paying for a December 2000 birthday party for Black’s wife, Barbara Amiel.
Prosecutors charge Black stuck Hollinger with a $40,000 bill for the $62,000 event attended by celebrities and socialites with no link to the company.
Greenspan noted that while Thompson was chairman of the audit committee, he and his wife, Jayne Thompson, flew first class to London where they stayed at one of the city’s finest hotels — all at Hollinger expense. Asked about the size of Thompson’s suite at Claridge’s, the former governor said: “I don’t have any recollection how big the room was. I don’t imagine it was small.”
Greenspan questioned whether “several hundred” people joined the Thompsons for the event at one of London’s top restaurants where Great Britain’s prime minister, Tony Blair, was the keynote speaker.
“This is about a $500,000, $600,000 event,” Greenspan said.
“Did your audit committee ever ask to approve [it]?” he asked. Thompson said it did not.
Greenspan also sought to emphasize that Thompson had a much closer relationship with Radler than with Black himself.
Thompson sought to distance himself from both men.
“I saw [Black] less frequently than I saw Radler, but I didn’t see Radler frequently,” he said.
Thus far, Thompson’s fellow members of the audit committee, former U.S. Ambassador to West Germany Richard Burt and economist Marie-Josee Kravis, have testified they were duped into signing off on deals that enriched Black, Radler, Boultbee and Atkinson.
Radler has pleaded guilty and is expected to testify against Black.
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rrbush@tribune.com
dgreising@tribune.com
