A former Hollinger International Inc. executive testified that media mogul Conrad Black angrily reprimanded him for trying to warn a member of the board of directors that a rebellion was brewing among the company’s shareholders.
Paul Healy, former vice president of investor relations of the newspaper holding company, said Tuesday that he urged two executives to tell former Illinois Gov. James R. Thompson how shareholder displeasure with Black’s management decisions flared up at a May 2002 shareholders meeting.
Black was upset about his efforts, Healy testified in his second day on the witness stand at the millionaire media baron’s federal fraud trial.
“Mr. Black was angry at me,” Healy said. “He said that I had overstepped my bounds, that ‘this is my company. I am the controlling shareholder and I’ll decide what the governor needs to know and when.'”
Healy said the shareholders? meeting was the most contentious in his experience at the company. But he said that when Black met that afternoon with Thompson, the chairman of the audit committee of the board of directors, the Hollinger CEO mentioned nothing about the morning’s uproar.
Black, 62, and three other men are charged with swindling the big media holding company out of $60 million by pocketing payments from purchasers in a large-scale selloff of hundreds of Hollinger community newspapers across the United States and Canada.
The payments were in exchange for promises not to compete with the new owners. Prosecutors say the money should have gone to the shareholders.
Black and his co-defendants say they did nothing illegal.
But major investors such as executives of the Tweedy Browne mutual fund company questioned Black in strong terms at the shareholders meeting about both the so-called non-compete payments and sizable management fees paid by Hollinger to Ravelston, a small, Toronto-based company.
Top Hollinger executives when Black was chairman, including Black himself, were not actually employed by Hollinger but by Ravelston. Ravelston was largely owned by Black and provided management services to Hollinger International in return for the fees.
While jurors heard a tape of the May 2002 meeting where shareholders intensely questioned Black about the payments, U.S. District Judge Amy J. St. Eve ruled they could not hear the toughest criticisms, which came from investor Edward Shuffro, who warned the Hollinger chairman that investors “consider you a thief.”
“Sell your shares and get out,” Black told Shuffro. “If you think I’m a thief, go. I’m not going anywhere.” Jurors didn’t hear that either but the exchange was quoted in court papers filed in pre-trial skirmishing.
Healy’s testimony was spiced with colorful Black remarks. In a pre-meeting memo, Black called the unrest “an epidemic of shareholder idiocy.”
After the meeting, Healy said, he and Black met with a group of prospective investors who asked about the payments as well as executive perquisites such as use of the corporate jet.
“I can have a 747 if I want,” Healy quoted Black as telling them. The investors decided against buying shares in Hollinger, Healy testified.
Healy said after the meeting he brought Hollinger No. 2 executive F. David Radler and corporate counsel Mark Kipnis into his office, shut the door and urged them to “please have a conversation with Gov. Thompson.”
“Please tell the governor what happened at the shareholders meeting,” Healy recalled saying. He said he checked with Kipnis later to find out if Thompson had been informed and was told “Radler had chickened out.”
Radler later was charged in the case, pleaded guilty and testified against Black as the government’s star witness in return for a light 29-month sentence. Kipnis is one of three Black co-defendants now on trial.
Jurors later heard a tape of a 2003 shareholder meeting at which the rebellion among major investors in the company went much further.
Before the meeting, Black announced that he had formed a special committee of the board of directors with fresh outside directors, including financial expert Gordon Paris, to look into all the controversies.
At the meeting, Christopher Browne of Tweedy Browne quoted Black as telling people the special committee could not review the non-compete and management fees and that he would not tolerate “an antagonistic forensic scavenger hunt through our company.”
Browne termed that “completely unacceptable.” He said the non-compete payments and management fees had to be investigated. The special committee did investigate the fees and in November its findings forced Black out as CEO and replaced him with Paris.