After the verdicts were in Friday convicting Conrad Black and three of his executives of fraud, Jim Thompson showed up on WBBM radio and was asked if he felt vindicated. “I wasn’t on trial so I don’t have to feel vindicated,” Thompson replied. It was a smart reply to a sloppy question. Even though Thompson testified three days for the prosecution at the Black trial, acquittals all around might have been better for him: Thompson couldn’t be blamed for not seeing criminal behavior going on around him if there was none. But the jury said something criminal did happen–and Thompson hadn’t noticed.
Thompson explained, “You can’t go on a corporate board with the assumption management is going to be dishonest. . . . Unless you went on there believing that Conrad Black and David Radler and Mark Kipnis and Boultbee and Atkinson were all out to deceive shareholders from the beginning, you wouldn’t have found it until we did our own investigation after the clues piled up.” He has a point. But Thompson was chairman of the audit committee. That’s the outsider who is supposed to guarantee on behalf of the shareholders that everything management does is on the up and up.
Let me make a comparison with the business I know: the audit committee chairman does roughly what a good editor does. Let’s say the editor oversees a group of writers she considers professional and upright. In a word, she admires them. Does this mean she takes it easy? No, because everyone makes mistakes, and her duty is to catch those mistakes and keep them out of the paper. In Thompson’s case, he was paid $60,000 of the shareholders’ money every year to be the board’s worrywart: his job was to save his good friends Conrad Black and David Radler from some silly error in judgment that could eventually bring down the company–like, oh, selling off newspapers and making millions in noncompete payments they had no business getting.
Black and Radler are now felons facing prison and Hollinger International is the Sun-Times Media Group, a wisp of its former self. Thompson said on WBBM that Black and Radler deceived him. He joined their board in 1994, and they deceived him until 2003, when some minority shareholders made a stink. For almost a decade Black and Radler deceived a guy who back in the day had such a sharp nose for malefactors that he was U.S. attorney. Black knows how to charm and impress, but as audit committee chairman Thompson dealt mostly with Radler, whose personal style is generally described as toxic. Yet he deceived Thompson; it never occurred to him that Radler might not be totally on the up and up.
Thompson said on the radio that the jury had found Black and the others guilty on counts “where it was clear the noncompete transactions were hidden from the audit committee,” and acquitted them on “some other counts based on transactions that went to the audit committee but with a false explanation.” In other words, where Black and Radler hid their scheming in plain sight in documents Thompson “skimmed,” they got off. Vindication?
Thompson told WBBM those documents were filed a year or two after the fact and it didn’t matter if he only skimmed them because in the end it all came out the same: “We later sued and got the money back, so we were in the same position.” Does he think that notwithstanding the collapse of the company, and notwithstanding the millions of dollars Hollinger has paid out in legal fees, it’s all the same to the Hollinger shareholders whether they got the millions of dollars Black and Radler siphoned off when the deals were made or years later? And what about the $50 million settlement two years ago after shareholders sued Hollinger on grounds that its board of directors had been asleep at the switch? Should Thompson take credit for that windfall?