Conrad Black: Beyond Competition, Conscience and Poverty

By Lee Russ

Thursday, May 10, 2007 at 07:20 AM

Conrad Black, on trial in Chicago for fraud against the company he controlled, Hollinger International, is accused of bilking his own company out of many millions of dollars. From the court proceedings today, it appears that Lord Black has both a strong class awareness and a great fear that the jury may have the same awareness.

The crux of the case is that when Black sold off certain of Hollinger's properties, he artificially built in clauses that would prevent him and some of his senior executives from competing with the buyers. The buyers paid specific sums of money for these clauses, which they apparently did not really request or need. The money went directly to Black and the others who had "foregone" their right to compete, rather than to Hollinger itself, effectively cutting the other owners of Hollinger out. The total amount of money allegedly siphoned off exceeds $80 million.

Today, the jury was read a 2002 memo from Black to his fellow Hollinger directors which stated Black's belief that he and those like him were, well, kind of entitled to certain things. An excerpt from the story in the UK's The Telegraph:

Recognising that many shareholders had been angry over the payments, he said that the company should adopt a conciliatory tone towards investors but insisted there was little need to change the fundamental way it operated.

"We have a certain style that shareholders were aware of when they came in," he wrote in one document shown to the court.

"We should fine-tune that style," he said, "not revolutionalize it with a Damascene conversion to vows of poverty."

He added that while it was important not to "degenerate into decadence, it would also be wrong to "appease the lust for authority of the more aggressive institutional investors." He pledged not to wear "the corporate equivalent of sackcloth and ashes."

In particular, he said, Hollinger should continue to pay for his chauffeur and for half the costs of the cook employed at his London home.

Followers of Mr. Black's career and lifestyle know that he was very successful in avoiding that vow of poverty.

As bad as that blatant claim to privilege may be, it's not as bad as the fact that his lawyer objected to the jury hearing it on the ground that:

"This is inappropriate and appeals to class prejudice and I move for a mistrial," defence attorney Edward Genson told Judge Amy St Eve, who denied the motion.

So allowing the jury to hear Black's sense of privilege in his own words would improperly appeal to the jury's class prejudice. No class, no conscience, and little competition when it comes to gall.

And I can't help but relate this to the past story about wealth and inequality. Mr. Black is one of a growing number of extremely rich CEOs discovered to have been ripping off their own stockholders. From Enron-type games with the financial statements to the pervasive stock option games, there are thousands of CEOs and other executives who have displayed the same sense of privilege and the same lack of principle and conscience as Lord Black.

Are these the guys to whom Cavuto and Lowry write odes? Are these the guys with the special abilities, courage and initiative that Ayn Rand lauded? Or are these the guys who demonstrate why the corporate form of business is particularly susceptible to fraud, self-dealing, and, ultimately, a sense of privilege in its management?