Global Journalist

Fading to Black

By Chris Cobb Posted Oct 1 2004

Home / Recent Stories / Fading to Black

Conrad Black was in an affable, chatty mood when we spoke in mid-August last year. He reflected on the successes and failings of Canada’s National Post, the only newspaper in his once-vast empire that he had created from scratch. “My baby” was how he described it. We discussed the Post’s right-wing political bent, his company’s debt and why, in a culmination of frustration with Canada’s ruling Liberal party and after a vicious legal battle with its leader, Jean Chretien, he had renounced his Canadian citizenship to become an English peer.

There was no hint, in either mood or word during that interview, to suggest that 60-year-old Lord Black of Crossharbour had a clue of the ruinous fate about to befall him.

A couple of months later, at the beginning of a publicity tour for his biography of Franklin D. Roosevelt, and exactly five years after launching the Post, Black’s empire began to collapse under the weight of allegations that he and his closest associates had, in the words of one accuser, treated his publicly traded Hollinger International as “personal piggy banks.”

One lawsuit accused Black of loading the board of Hollinger International with personal friends, who willingly did his bidding, and of systematically siphoning grossly inflated management fees out of the company to support a lifestyle that included a private corporate jet and luxury homes in London, New York and Florida.

A more damning report issued by a Hollinger International special committee. which was released at the end of August, delivered another major blow to Black and his small circle of associates. It detailed a litany of financial abuses that included the transfer of US$400 million to themselves between 1997 and 2003. The $400 million represented 95 percent of the company’s profit during that period.

“The evidence reviewed by the committee establishes an overwhelming record of abuse, overreaching, and violations of fiduciary duties by Black and [former president David] Radler, the two controlling shareholders,” the report said. “To fully gauge the level of Black and Radler’s disregard for shareholder interests, one must step back from individual transactions and note the myriad of schemes, fiduciary abuses and fraudulent acts that were used to transfer essentially the entire earnings output of Hollinger over a seven-year period to the controlling shareholders.”

The protracted, expensive legal wrangle that continues still saw Black ousted as chief executive of Hollinger International, and his coveted London Daily and Sunday Telegraph titles sold to the Barclay twins, a pair of wealthy United Kingdom businessmen.

Leo Strine, a U.S. judge asked to rule on several aspects of Black’s business collapse,was stinging in his judgments, accusing Black of “misconduct” and of using “Orwellian maneuvers” to protect himself. Two of his Canadian directors had agreed to amend minutes of a meeting they had not attended, Strine noted.

It was a tired-looking Black who had spent six hours on the stand at Delaware chancery court on Feb. 20, denying wrongdoing and claiming to have been “horribly defamed.”Selling his newspaper empire, he told the court, was a prospect that saddened him: “It is my life’s work, but I have to do what I have to do.”

The Chicago Sun-Times and Jerusalem Post, Hollinger’s other main titles, are unlikely to be sold in the near future, largely because interest from seriousbuyers has waned. But Lord Black’s myriad of legal problems is far from over. The U.S. Securities Exchange Commission continues to investigate him and, at the last count, he had 10 lawsuits to contend with. Among them is a US$1.3 billion suit launched earlier this year by the new officers of Hollinger International.

In one countersuit, Black said malicious media coverage had left him a “social leper,” a “loathsome laughingstock pilloried and mocked mercilessly in the media throughout the world.” He also claimed to have been “spurned by and shunned by persons who had personally accepted his hospitality in London, New York and Palm Beach.”

Power and Prestige

Lord Black was at the height of his power and prestige when he launched the National Post in the face of huge skepticism on Oct. 27, 1998, and he clearlyloved every minute of it.

He owned scores of newspapers large and small across the world, moved in the very best of circles and had the ear of political leaders. Ownership of TheDaily Telegraph carries special cache among the British ruling class and brought Black his seat in the House of Lords.

The downfall began in those giddy few years after “his baby” was born and during which Black sparked a wonderful, exciting period in the comfortable world of Canadian newspaper journalism, a period packed with new jobs, fat pay raisesand outrageous warlike propaganda.

The National Post, a beacon for right-wing thinkers in the predominantly liberal country of Canada, was a bright, brash journalistic innovation that knocked its main challenger, the Thomson Corporation-owned Globe and Mail, onto its heels and sparked an unprecedented Canadian newspaper war thatfeatured a remarkable, some say reckless, giveaway of millions of newspapers. For a period in 1999 through 2000, it was almost impossible to walk a couple of blocks through a major Canadian city without having a freedaily newspaper thrust into your hand. Free papers were seemingly everywhere the circulation battle could be fought for the small yet lucrative business traveler’s market, estimated by then-Globe publisher Roger Parkinson to be worth at more than US$3 million.

Papers for Pennies

Giveaways aside, Globes, Posts and Stars were being offered at knock-down prices to subscribers, many of whom were paying literally pennies for their daily newspaper fix. It added up to wild circulation claims on all sides and an enormous shared cost that will never be accurately calculated butwhich one Toronto newspaper industry analyst estimated to be at least $765 million.

Phillip Crawley, the English publisher brought to the Globe to replace Parkinson three weeks before the Post launched, put it succinctly: “If you expand the size of the produce and the size of your circulation, you add significantly to your costs,” Crawley said. “And if you don’t get the advertising to justify that, you are in a black hole.”

Newcastle-born Crawley, seasoned in the cut-throat newspaper markets of London and Hong Kong, was enticed to Toronto by Thomson’s then-chief newspaper executive Stuart Garner, a long-time colleague. Garner thought the Globe in its pre-war state was incapable of prevailing against the new Black daily and told Crawley it was his job to spend what it took to knock some competitive life into the newspaper by sharpening the editorial content and competing fiercely for advertising that for years had flowed in without any great effort.

So while Black’s Post was bright, brash and enjoying great notoriety in journalistic and political circles, it was spending significantly more than it was bringing in. In the other corner, The Globe and Mail had significantly deeper pockets and the gritty but quiet determination of its billionaire chairman Kenneth Thomson.

Black, who saw the war with the Globe as a mini-version of the earlier price war in London between his Daily Telegraph and Rupert Murdoch’s Times, dismissed the costs, and $92 million (approximately 120 million Canadian dollars) losses he incurred launching the Post, as an expected initial outlay. But by the spring of 2000, with the North American economy in a downturn and debts mounting, Black was clearly in trouble.

“Our company was $1.95 billion in debt,” he told me. “We had the assets, but we couldn’t get any upward movement on the stock price. It’s an American-listed company, and the Americans in the first place are not very impressed with Canada and in the second place, newspapers were out offashion.”

Black’s white knight came in the unlikely form of CanWest Global, a network TV company owned by the Asper family of Winnipeg, Manitoba, who sees the future in media convergence. At first, the Aspers wanted just a few of Black’s group of Canadian metro newspapers, but in summer 2000, bought them all, plus 50 percent of the Post, for $2.4 billion. After a year or so of uneasy partnership, Black turned the remaining 50 percent over to CanWest.

Conrad Black’s Post years will be remembered fondly by many Canadians and certainly by hundreds of Canadian journalists who benefited from the tidal wave of money that washed over the industry. It was a bubble destined to burst but nobody – not even his many enemies – would have predicted such abizarre and dramatic downfall.

Most of the more serious accusations against Black and his associates have yet to reach a courtroom, but it’s unlikely he will ever again be the force in newspapers he once was. The odds seem too grim, even for a man of such formidable intellect and fortitude. And if there’s one lesson to be learned, it may be a simple, unsurprising one: Launching and sustaining a new national daily newspaper in a competitive market such as Canada is demanding of much corporate patience and an almost inexhaustible supply of money. For reasons fair or foul, the companies controlled by Lord Black of Crossharbour didn’t have enough of either.