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Conrad Black: Of that OSC ruling…

……and the “sordid American Justice system”

March 7, 2015

The Ontario Securities Commission’s recent decision to ban my service as an officer or director of a company in its jurisdiction, a ban I had imposed on myself for the last 12 years and undertook to continue, was an attempted cover-up.

It sandbagged my final effort in 2005 to salvage the Hollinger group from court-supported saprophytes with a proposal to privatize the Canadian Hollinger at a good historic price, and a litigation trust should any shareholder wanted to sue us. A media frenzy instantly arose when there were allegations in 2003 of the improper payment of non-compete fees to my associates and me in newspaper asset sales made as we exited that business in contemplation of Internet competition. Our independent local bench and regulators slavishly bought the media line.

I had welcomed a special committee to examine the company and made a so-called restructuring agreement with the counsel of the special committee (Richard Breeden, former head of the Securities and Exchange Commission). Breeden and the others immediately violated all its terms, and caused the company my associates and I built to sue us for over $1-billion U.S. I negotiated the sale of the group to British interests but Breeden was able to intervene to stop it in Delaware, where our American company was incorporated. A Special Committee (Breeden) Report was published that accused us of conducting a “$500-million corporate kleptocracy” and many other inflammatory charges. We counter-sued and I sued Breeden and the co-authors for libel. In the report, Breeden and the others promised unheard-of levels of profitability for our companies. They delivered, but not quite as foreseen.

The staff of the OSC strongly supported us in public hearings on our privatization plan and the minority shareholders voted 87% in favour of it. Breeden was milking our American company, which would have come back under our control, for a million dollars a week, and he “lectured” the OSC (as he said to the Globe and Mail) that it must stop our privatization.

In Canada, the compulsive, twitching fit of copy-cat, me-too, branch-plant emulations of the sordid American justice system had already begun. Canadian judges established fawning protegés and cronies in rich sinecures in our companies, from which we were barred from exercising any influence, and they took another immense lawsuit against us. Court protected bloodsuckers and charlatans took $100,000 a month in directors’ fees each, the highest in the known world, as they rifled through the treasury of the prosperous company we had left behind, and bought luxury condos and speculated with their windfall incomes, the gift of Canada’s judges and regulators. A “restructuring officer” took over $800,000 a year for many years to restructure up his own lifestyle.

In obedient submission to Breeden, the OSC crumpled like rag dolls, launched yet  another large lawsuit against us, on top of those of the SEC, Breeden et al., and the usurpatory regime at the Canadian Hollinger. The OSC dutifully killed our offer. The companies all cascaded into bankruptcy under the avarice and incompetence of the officially-supported replacements of those who had built the companies. Thus did the OSC, guardian of the stakeholders’ interest, vaporize $300-million of shareholder value in the Canadian company and nearly $2-billion in the U.S. company. It never can be said to have had clean hands in this matter after that, and its holy self-righteousness now is a monstrous irony.

  

Breeden’s report brought the much-sought criminal indictment in Chicago a few months after the rejection of our privatization attempt, in my case 17 fantastic counts (racketeering, money-laundering, etc.). In the scandalous operation of the U.S. plea bargain system, the testimony of a “co-operating witness” with immunity from perjury charges (whom the prosecutors eventually accused of perjury, as if anyone else had extorted and rewarded it) helped produce four convictions against me. I was sent to prison, ultimately for three years and two months. I found it quite interesting, got on well with everyone, and as a tutor I was able to help over 100 inmates matriculate from secondary school. As I told the London Daily Mail, in the compound of my prison there was a “more interesting and intelligent group than the management committee of the Toronto Club.”

The U.S. Supreme Court unanimously vacated the four convictions, but in the perversity of the American system, remanded back to the lower courts it had excoriated the assessment of “the gravity of their errors.” The era had already begun of trying to keep a fig-leaf of seriousness for this failed prosecution, an impulse that made its final appearance at the OSC last week. Two counts were spuriously retrieved: the receipt of $285,000 that was approved by directors and published in the company’s public filings, but incompletely documented by the company secretary in what the trial judge concluded was a clerical error; and the removal of boxes from my office which did not contain any material the SEC did not already have, were not selected or packed by me, were not covered by document retention orders, and which we carried out under security cameras I had had installed to be sure that I could not be accused of covert activity — all with the approval of the acting president of the company and the representative of the court-appointed inspector. I completed my much-reduced sentence.

All of the lawsuits against me collapsed. Breeden’s lawsuit for over a billion dollars and my counter-suit were settled for six million dollars, net to me; the Canadian litigation committee’s lawsuit was settled for five million dollars, a fraction of what its authors received for claiming to have a serious case for nine years. The SEC lawsuit was settled for four million dollars, because I was stuck with the Delaware decision and, as in the litigation committee’s suit, I could not have recovered enough of my legal expenses to reduce the net cost below the settlement amount even if I won in court. I admitted no liability. The U.S. tax issue was resolved for less than 3% of the original much-publicized claim.

My libel suit, greeted at first as a matter of hilarity, was settled for five million dollars to me, by far the largest such payment in Canadian history, after Breeden and the others had gone all the way to the Supreme Court of Canada to try to prevent it being heard in this country. None of them could face examination under oath. On all of this litigation combined, I netted a slight gain (though legal costs were considerable). The libel settlement was effectively the death of the allegations, as the special committee report was the source of the farrago of civil and criminal actions, but the media lynch-mob of the early years rarely mentions that outcome.

 The OSC claim was abandoned too, except the nonsense of the ban I had already voluntarily conceded. I disputed that the U.S. proceedings conferred that right on them. The U.S. actions would never have got off the ground in Canada or any other juridically serious country. I had an unblemished compliance record for 30 years as one of the most active people in Canadian financial markets. To paraphrase Groucho Marx, I would not now be associated with a company that reported to a regulator that has performed so contemptibly as the OSC has in this matter. This episode shows again that Canada must not allow the OSC to become a national regulator.

With both the Order of Canada, from which I was removed last year in a misleading press release from the governor-general (as I had already retired from it in a letter to him because I regarded the whole review process as a kangaroo court), and at the OSC last week, I was accused of seeking to “relitigate,” when all I sought was a hearing by Canadian criteria, not a retrial of facts at all. In both places there was an irresistible urge to prostrate Canada before this fraudulent American miscarriage, apparently from an infelicitous combination of national timidity, offended amour propre at the failure of the onslaught against me, and personal animus (which is only requited by me with a few individuals).

 As I wrote in my recent history of Canada, this country has a more distinguished history than most of its people realize, and a brilliant future, if it can purge the reflex to the false comity of subservience. We must have civilized relations with the United States, but that does not mean government by frightened, priggish servitors of even America’s least salubrious foibles. (And no sane American is asking for that.)

Given the evil nature of the American system and the odds against me there (a 99.5% conviction rate), together with the fact that Breeden had torqued the rabid Chicago prosecutors up to demanding life imprisonment and the complete impoverishment of my family and myself, it has worked out well, despite these irritating local after-tremors. All fair-minded people knowledgeable of the case, in both countries, are aware that I broke no laws. Now it is over.

Conrad Black

National Post

March 7, 2015

 

REPLY FROM MR. CONRAD BLACK

Conrad Black

To

me

Mar 12 at 11:32 PM

 

Dear Mr. Zwicker,

 

    Many thanks for your generous message. Your gracious words were very gratefully received. American life is rotting almost everywhere except in the military, but it remains a great country capable of reversing its current and recent decline. I have the satisfaction, at least, of having won the public relations war, which is pretty much all the law is now.

My very best wishes to you.

 Yours,

 

Conrad Black

 

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