Witness for the Prosecution — Page 3

Black spared no expense at the new paper he christened the National Post, hiring top journalists away from rival Canadian papers, from overseas, even from regional papers also owned by Southam. While Radler was scrimping at the local papers, Black gave his lieutenants at the Post free rein. Executive Editor Kirk LaPointe (now managing editor at The Vancouver Sun) was put in charge of building the newsroom. “There was no sense that we had a limited budget,” he said in 2003. “It was ‘get what you need.’” It was the opposite of what Radler believed in.

The National Post hemorrhaged money from the start. Black reassured shareholders that losses were temporary, but Radler saw that the Post would never make a profit. Black convinced Radler that they needed to sell all of Hollinger’s U.S. community papers to help ease Hollinger’s debt load and fund the money-losing Post. It was the beginning of the end for Radler and Black.

Having spent 30 years building a company that, at its peak, was the world’s third-largest newspaper publisher, they sold off assets to shore up Hollinger. In 1999 and 2000 they unloaded virtually all 300 U.S. community newspapers. Millions from the sale proceeds went directly to Radler and Black as so-called “non-compete” payments. Some of Hollinger’s papers were sold to two companies, Horizon Publications and Bradford Publishing, set up by Radler and co-owned by himself, Black, and other Hollinger executives. The prices paid by Horizon and Bradford, according to a 2004 lawsuit, were sweetheart deals. Moreover, Horizon and Bradford borrowed money interest-free from Hollinger to finance the purchases. It was a great deal for Horizon and Bradford, both controlled by Radler; not so great for Hollinger’s shareholders, whose interests he and Black were supposed to be representing.

The pair’s biggest deal came in 2000, when Black sold the Southam chain, including 50 percent of the National Post, to CanWest Communications for $3.2 billion. Of that, $80 million was a “non-compete fee” and paid directly to Black, Radler, their holding company Ravelston, and two other executives. Radler’s share amounted to $24.1 million. From the sale of the U.S. community newspapers, $56 million went to non-compete payments. These payments are now at the heart of Black’s fraud trial in Chicago.

Not at issue in the criminal trial, but raised in a 2004 report by a Special Committee of Hollinger directors, were the “management fees” paid to Ravelston. “Hollinger was systematically manipulated and used by its controlling shareholders for their sole benefit,” the committee stated, “and in a manner that violated every concept of fiduciary duty. Not once or twice, but on dozens of occasions, Hollinger was victimized by its controlling shareholders as they transferred to themselves and their affiliates more than $400 million in the last seven years.”

In 2004 Hollinger International launched a lawsuit against Black, Radler, Ravelston and others, seeking the return of the nearly $400 million (U.S.) paid to them between 1997 and 2003. The amount represented 95 percent of Hollinger’s net income over the period. (By comparison, in those years The New York Times and The Washington Post paid their top five officers 4.4 percent and 1.8 percent of net income respectively.)

Like Black, Radler initially contested all the allegations, calling them “sensational and without merit.” More recently, though—the day before Black’s trial began in Chicago—he settled by agreeing to pay back $63.4 million (U.S.). He also made a deal with the U.S. Securities Exchange Commission, paying $29 million (U.S.) to settle civil fraud charges. Add the $7.2 million (U.S.) he’d paid back to Hollinger in 2004, and he’s repaid almost $100 million (U.S.) to settle charges against him.

There’s no indication that the $100 million has wiped him out. His stake in Hollinger is gone and Ravelston is in bankruptcy protection, but he still has the house on South West Marine Drive as well as interests in Horizon Publications and Bradford Publishing. He’s bought a chain of papers in Rhode Island (which daughter Melissa runs). And he owns a stake in Alberta Newspaper Group LP. Ironically, in addition to publications in Canada, Alberta Newspaper Group now owns The Sherbrooke Record, the first paper he and Black bought.

Black is also a shareholder in Alberta Newspaper Group, but that’s about all the two have left in common. While Black is on trial in Chicago—with civil lawsuits awaiting the criminal outcome—Radler’s putting his troubles behind him. After he testifies, he’ll go to jail—how he performs on the stand will help determine the length of his sentence. If he successfully applies for a transfer to Canada, he may serve less than 10 months.

In a year’s time, Conrad Black may well be peeling potatoes in a U.S. prison. And Radler may well be back home in Vancouver, cutting deals and cutting costs.

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