If Jim Thompson, former governor of Illinois, were on trial himself in the Dirksen Building for — let’s say for failure to satisfy Hollinger International stockholders’ intangible right to his honest services — this would have been a bad week for him. Even though he’s not, his three days on the witness stand couldn’t have been much fun. He was trying to explain why as the chairman of the audit committee of Hollinger International he saw nothing and said nothing as Conrad Black, David Radler, and other execs allegedly got away with murder. At least one person in Judge Amy St. Eve’s courtroom thought Thompson should have been indicted too. That’s real estate broker Anton Kerner , whose thoughts wandered back to 1973, when Thompson, then the brash young U.S. attorney, sent Kerner’s father Otto, also a former governor, to prison. Otto Kerner’s crime, as argued by Thompson then, had been to acquire while governor some compromising racetrack stock, thereby denying the people of Illinois their intangible right to his honest service (as overseer of the state’s tracks). Fair is fair, Anton Kerner believes, and the Hollinger shareholders deserved much better from Thompson.
No one in court was accusing Thompson of dishonesty as the board of director’s fiscal watchdog, but no one was accusing him of competence either. Black and Radler were charged with pocketing millions of dollars — in noncompete payments — that should have gone to shareholders when Hollinger began selling off papers in the late 90s. Thompson testified that his committee often didn’t approve these payments and didn’t even know about them. But sometimes Thompson’s committee did know, or should have known, or at the very least their noses should have twitched. Thompson said in direct testimony that he usually “skimmed” the financial documents Hollinger sent him. But Black’s attorney, Edward Greenspan, later showed Thompson a Hollinger filing to the SEC in 2002 that reported that Black, Radler, and other indicted execs had received a total of $15.6 million from noncompete agreements over the previous two years. The filing was 17 pages long and Thompson had signed it. When he “skimmed” the text he’d missed the reference.
“Whether they are very, very long or very, very short,” said Greenspan of the financial documents that came to Thompson, “you skimmed them. . . . Hollinger International didn’t pay you $60,000 [a year] to skim financial documents.”
“No,” Thompson replied stiffly, “they paid me for other things.”
Greenspan asked if Thompson had attended “some kind of skimming school.” He baited Thompson on the nature of skimming. “So skimming doesn’t mean you read quickly. . . . It means some things you don’t see at all.” He brought out documents that not only referred to the $15.6 million in payments but also to board approval of those payments. Somehow, Greenspan marveled, Thompson had missed 11 references in various documents to the $15.6 million in payments and to board approval of them. “From the chairman of the board [his client, Black] to the everyday shareholder, these people relied on you,” he told the former governor, choosing language close enough to an invocation of the intangible right to honest service that Anton Kerner must have appreciated it.
“Do you agree it’s a remarkable coincidence that you missed reading these passages 11 times?” Greenspan asked. But he wanted to leave the jury with the thought that Thompson had read the passages, had found them unexceptional, and now wanted to disassociate himself from the board’s endorsement of the payments. “I am going to suggest,” Greenspan said, “that you read all these things, you approved all these things — you thought they were right — and when there was criticism you conveniently forgot.”
“That is false,” said Thompson. And Greenspan sat down.
Later in the afternoon, Ron Safer, the lawyer for defendant Mark Kipnis, who was the corporate counsel, toted up some figures projected on the courtroom screen and calculated that from 1997 through 2003 Thompson’s audit committee had approved more than $216 million in management fees. You didn’t consult an outside adviser about all this money? Safer wondered. You didn’t discuss it with Hollinger’s accounting firm? You didn’t ask Radler — the COO based in Chicago whom Thompson normally dealt with — for backup materials? No, said Thompson every time. “So without a single piece of paper in support . . . you voted for every single dollar?” Yes, said Thompson.
On redirect Thursday, federal prosecutor Eric Sussman gave Thompson a chance to assert that whatever Hollinger filings to the SEC might have said to the contrary, he didn’t know about and never approved the noncompetes. But then he had to face Greenspan again, who got him to concede that, yes, he’d signed his name to financial statements containing language he hadn’t read and that no doubt his signature persuaded other board members to sign them too.
But it’s Lord Black of Crossharbour who’s on trial (along with three smaller fish), and what good does it do Black if Thompson looks like a mope? If Thompson was putty in Black and Radler’s hands, then they were schemers — which Radler, who pleaded guilty to fraud charges and will testify for the state, probably starting Monday — already has admitted he was. Fortunately for Black, the former governor clearly isn’t putty. He looks his age, 70, and he’s a little stooped, but his voice booms, he seethes impressively, and he seems impervious to embarrassment. Plus, he’s Jim Thompson — the first witness some of the jurors in this Canada-centric trial will have ever heard of, the guy the state office building a couple of blocks up Dearborn is named after. Jurors are so likely to want our guy to do well that I wonder if it was a mistake for Greenspan, a Canadian, to have cross-examined him. The jury might have warmed more to Greenspan’s cocounsel, Ed Genson, an old-time Chicagoan.
When this confusing, document-driven trial finally ends — it began in March and St. Eve told the jury Thursday to expect to be serving at least till the end of June — jurors casting about for a way to approach the evidence might wish they could simply put their faith in whatever Big Jim said. After this week, that won’t be as easy. I think Black needs to take the stand himself and scapegoat his audit committee chairman. The living was large at Hollinger, and Black has to be able to say he trusted Thompson — former prosecutor, former governor — to keep Radler and the company within the law, and his watchdog let him down. It might fly. People understand “skimming.” It’s what you do if you’re busy and you’ve got stuff to read that isn’t interesting and isn’t that important to you. Thompson told the court he’s been on a dozen or so boards. While he chaired Hollinger’s, he was even head of another audit committee at another company. And of course, all along his real job was running Winston & Strawn. As described in court, Hollinger sounds like it was a good gig for the fancy hotels and Concordes to London. The jury might forgive Thompson but conclude nonetheless that to Black’s detriment he didn’t do his job.
After Judge St. Eve adjourned for the day Wednesday, I asked Kerner what he thought. He said he had three questions. The first was about Thompson’s skimming. “Is that due diligence? Is that fiduciary duty? Is that honest service to the shareholder?” Second, “If it isn’t honest service, is this selective prosecution? Why Black et al and not Thompson?” And third, “Did Thompson engage in willful blindness? Or willful indifference? If he did, that’s a crime. He’s the guy who invented the theory of honest service to hold against my dad. Why isn’t he being held up to that standard?”
The Internet is rich in interpretations of the Black trial. Check out Steve Sturka’s blog The Crime Sheet, my pal Scott Jacobs writing in Slate, and Susan Berger’s blog Blacksjustice.com. Plus there’s always a rich packet of stories in Canada’s Globe and Mail.