Tonight's episode of The Verdict had a segment planned on a discussion of the 13 boxes removed by Conrad Black back in May 2005, but it was pre-empted, and should be shown tomorrow. Instead, two of today's trial events were briefly mentioned: the release of those boxes and Csr. Genson's mistrial motion.
Here's a CBC News report, last updated on May 26, 2005, which describes the legal and publicity consequences of Mr. Black's removal of the boxes from 10 Toronto Street after an Ontario court had found out about it. According to that report, Hollinger Inc. wanted Mr. Black cited for contempt of court for removing them, even though he insisted (and still insists) that the items in them were personal. The Globe and Mail has a much more recent background report, written by Jacquie McNish and Paul Waldie, that details the legal hoops the U.S. Department of Justice had to go through to get their impoundment-authorized hands on the boxes, including having to re-submit a bounced Mutual Legal Assistance Treaty application. In the initial application that the prosecutors had submitted, they had asked for five boxes instead of thirteen.
Ms. McNish and Mr. Waldie also note that, as of about a month ago, the contempt-of-court matter had yet to be adjudicated.
Tuesday, April 10, 2007
Review of a Conrad Black Speech at "Idea City '06"
Thanks to an anonymous post in the comments section of this entry, I've viewed a recent speech by Conrad Black, given at the Toronto seminar "Idea City '06." The speech has been broken into three parts and webbed at Youtube: Part 1 is here, Part 2 is here and Part 3 is here. The following is a review of it; all quotes are from what Mr. Black said during it.
What was most noticeable about this speech is a change from Mr. Black's delivery, from a chair he sat on: he used gestures that, generally, are appropriate for a political speech. The first part of his speech broached his current troubles with the law; he massaged the palm part of his hand with the other when referring to the Hollinger International special-committee investigation. The context in which he referred to it was a declaration that his thirty-year career as a businessman-proprietor is effectively over. He also reaffirmed his innocence, flatly, when describing the trial as an "inexorable" event. He then described his, to he largely new, experience as a genuine underdog, when he has had to remain silent despite continual media "villification;" the latter is also new to him. What he has gained from this experience is cultivating a sense of perspective, and realizing that it is "fulfilling" to fight to restore his reputation. This battle is not a "noble" cause, but a "just cause," and one more absorbing than "mere commerce." (He used the word "fulfilling" to describe it five times in this part.) The last phrase he softened, by saying that he meant neither offense nor disrespect by it, as he was (of course) a "fairly unambiguous capitalist" until recently. The first part ends with a disparaging reference to the Ontario securities regulators, which he cast as camp-followers of their American equivalent. In Canada, especially as of the last few years, this disparagement is a potent one.
In the second part, he characterized America, to Canadians, as a quick-fix culture, which at times leads to "anomalous" political or legal outcomes; he described this facet as a consequence of American optimism as based in the U.S. becoming "unprecedentedly successful" as a nation. The three examples he cited were Prohibition, American isolationism just prior to World War 2, and McCarthyism. (He credited President Roosevelt for putting an end to isolationism and, later in his speech, for ending Prohibition.) Presently, he ascribes his own legal troubles to "overreaction" to corporate earnings-manipulation scandals, as well as to a habit, not confined to American democracy, of "deferring things that are unpleasant - in this case, politically unpleasant." The ultimate source of the stigmatizing he's endured is the largely all-American redistribution-of-wealth question; he was singled out for "being rich," even though he's not that wealthy compared to the habituants of the Fortune 500. This point is actually an interesting one, because it suggests that looking, or acting, rich - being "easy to caricature" as rich - is more of a dynamite pile, which sets off the redistribution crowd, than actually being rich is. (The fuse, he noted, is lit when someone who makes a plausible "totem" of this sort gets investigated by the relevant authorities.) He ended this part by affirming that this totemization will come to an end relatively soon, as did the other anomalies in American culturo-politics.
The third part concentrates upon Canada. He said that his recent troubles have bestowed a special kind of homecoming for him. He also stated that Canada is at the cusp of vaulting above its status as a middle power, where the Canadian government has been "tugging at the trouser leg of the United States," though for "incredible" causes. Times are now quite good for a country that's long been pegged as populated by "hewers of wood and drawers of water," as the price of resources are high and Canada's "treasure chest" can't be outsourced. In addition, Canada's population is quite educated. Canada is now one of the most ten important countries in the world, although Canadians (and foreigners) are not quite used to this newly won status. In addition, Quebec "independence," as a viable political force, is through; also, federally, Canada now has a full two-party system. He closes the entire speech by saying that his struggle has led to a real "re-acquaintance" with his country.
Peter C. Newman closed his 1982 biography of Conrad Black, which I have reviewed in this entry, with relayed forecasts that Conrad Black would eventually seek the Prime Ministership of Canada. At the end of my review, I judged this to be unintentionally (a quarter century's worth of retrospect had seemingly made it) inane, but that recent speech of his has left me feeling somewhat silly for thinking that this side of him had vanished. I note that, despite his long-term residence in London U.K., Conrad Black still has the Torontonian accent he was born and raised with.
Also of note: the transplanted American science-fiction writer Spider Robinson was another speaker at the conference; he spoke previous to Mr. Black. In his write-up on his experiences as a presenter there, Mr. Robinson refers to Conrad Black as both "notorious" and a "most gracious gentleman."
----------
FYI: Richard Breeden was appointed SEC commissioner by President Bush - Senior. He served in that slot from 1989 to 1993.
What was most noticeable about this speech is a change from Mr. Black's delivery, from a chair he sat on: he used gestures that, generally, are appropriate for a political speech. The first part of his speech broached his current troubles with the law; he massaged the palm part of his hand with the other when referring to the Hollinger International special-committee investigation. The context in which he referred to it was a declaration that his thirty-year career as a businessman-proprietor is effectively over. He also reaffirmed his innocence, flatly, when describing the trial as an "inexorable" event. He then described his, to he largely new, experience as a genuine underdog, when he has had to remain silent despite continual media "villification;" the latter is also new to him. What he has gained from this experience is cultivating a sense of perspective, and realizing that it is "fulfilling" to fight to restore his reputation. This battle is not a "noble" cause, but a "just cause," and one more absorbing than "mere commerce." (He used the word "fulfilling" to describe it five times in this part.) The last phrase he softened, by saying that he meant neither offense nor disrespect by it, as he was (of course) a "fairly unambiguous capitalist" until recently. The first part ends with a disparaging reference to the Ontario securities regulators, which he cast as camp-followers of their American equivalent. In Canada, especially as of the last few years, this disparagement is a potent one.
In the second part, he characterized America, to Canadians, as a quick-fix culture, which at times leads to "anomalous" political or legal outcomes; he described this facet as a consequence of American optimism as based in the U.S. becoming "unprecedentedly successful" as a nation. The three examples he cited were Prohibition, American isolationism just prior to World War 2, and McCarthyism. (He credited President Roosevelt for putting an end to isolationism and, later in his speech, for ending Prohibition.) Presently, he ascribes his own legal troubles to "overreaction" to corporate earnings-manipulation scandals, as well as to a habit, not confined to American democracy, of "deferring things that are unpleasant - in this case, politically unpleasant." The ultimate source of the stigmatizing he's endured is the largely all-American redistribution-of-wealth question; he was singled out for "being rich," even though he's not that wealthy compared to the habituants of the Fortune 500. This point is actually an interesting one, because it suggests that looking, or acting, rich - being "easy to caricature" as rich - is more of a dynamite pile, which sets off the redistribution crowd, than actually being rich is. (The fuse, he noted, is lit when someone who makes a plausible "totem" of this sort gets investigated by the relevant authorities.) He ended this part by affirming that this totemization will come to an end relatively soon, as did the other anomalies in American culturo-politics.
The third part concentrates upon Canada. He said that his recent troubles have bestowed a special kind of homecoming for him. He also stated that Canada is at the cusp of vaulting above its status as a middle power, where the Canadian government has been "tugging at the trouser leg of the United States," though for "incredible" causes. Times are now quite good for a country that's long been pegged as populated by "hewers of wood and drawers of water," as the price of resources are high and Canada's "treasure chest" can't be outsourced. In addition, Canada's population is quite educated. Canada is now one of the most ten important countries in the world, although Canadians (and foreigners) are not quite used to this newly won status. In addition, Quebec "independence," as a viable political force, is through; also, federally, Canada now has a full two-party system. He closes the entire speech by saying that his struggle has led to a real "re-acquaintance" with his country.
Peter C. Newman closed his 1982 biography of Conrad Black, which I have reviewed in this entry, with relayed forecasts that Conrad Black would eventually seek the Prime Ministership of Canada. At the end of my review, I judged this to be unintentionally (a quarter century's worth of retrospect had seemingly made it) inane, but that recent speech of his has left me feeling somewhat silly for thinking that this side of him had vanished. I note that, despite his long-term residence in London U.K., Conrad Black still has the Torontonian accent he was born and raised with.
Also of note: the transplanted American science-fiction writer Spider Robinson was another speaker at the conference; he spoke previous to Mr. Black. In his write-up on his experiences as a presenter there, Mr. Robinson refers to Conrad Black as both "notorious" and a "most gracious gentleman."
----------
FYI: Richard Breeden was appointed SEC commissioner by President Bush - Senior. He served in that slot from 1989 to 1993.
Tuesday's trial action
A new article, by the Globe and Mail's Paul Waldie, starts off with prosecutor Julie Ruder asking Fred Creasey to clarify his cost calculations of the Bora Bora trip, and got him to disclose that Conrad Black didn't object to the original costing at the time that he agreed to pay half of the calculated cost. Mr. Creasey also said that there was no corporate policy that required Mr. Black to use the corporate plane.
The article also mentions a motion made by Edward Genson for a mistrial early today, which was "quickly denied" by Judge St. Eve. The 12 PM BNN headline report noted that the question which triggered that mistrial motion referred to a report that Judge St. Eve earlier ruled to be inadmissible.
Another article from Reuters covers the motion for a mistrial, including the subject of the question Csr. Ruder asked that triggered it, but doesn't refer to any inadmissible report.
A more recent article, by Romina Maurino and webbed by 680 News, elaborates upon the line of questioning that Csr. Ruder used in her redirect examination of Mr. Creasey about the Bora Bora trip. Csr. Ruder tried to debunk the basis of the 50/50 split of the cost by mentioning a trip to Disneyland. She also asked if there "'[w]as...anything that prevented him (Black) from looking online for a better' price or calling United Airlines to ask if that was the right price,...[which drew] laughter from the court before St. Eve" sustained an objection to the question.
Mr. Waldie appeared on a later interview with BNN, aired at about 1:50 PM ET, in which both he and co-host Lisa Oake mentioned lawyers' "gamesmanship" in the trial. He disclosed that the Breeden Report was the inadmissible one that prompted the mistrial motion. (A copy of it, courtesy of the Chicago Tribune.) When asked by Pat Bolland when the taped testimony by Torys LLP partner Darren Sukonick was to be played, Mr. Waldie answered "this afternoon." He added that Torys has already settled with Hollinger Int'l for $30 million. Csr. Sukonick should disclose details on what happened to prompt the Hollinger Int'l lawsuit against his law firm.
[Immediately after the interview ended, Mr. Bolland announced that the directors-and-insiders trading ban on Hollinger Inc. stock has now been lifted; a report on this lifting has been webbed by Bloomberg. Those Hollinger worthies, found at the bottom of the original ban order, can now buy and sell shares in Inc.]
The Associated Press has its report out now, webbed by the Belleville News-Democrat. It also mentions Csr. Genson's mistrial motion and Csr. Ruder's Disneyland-and-United-Airlines pair of questions, and has a reminder that only two of the defendants, John Boultbee and Conrad Black, are indicted for the charge relating to the Bora Bora trip. (This charge is count 10 of the indictment; thanks to the Financial Post for the name correction.) The same report has also been webbed by the Chicago Sun-Times, and WQAD.com of Moline, Illinois has an abridged summary of it.
Bloomberg has one out also, written by Andrew Harris and Thom Weidlich. From its opener: "Peter Atkinson, a codefendant at the fraud trial of ex-Hollinger International...Chairman Conrad Black, knew fees he received were under investigation when he sought to have them publicly disclosed, a witness said." That witness was Mr. Creasey, and he presumably disclosed it on redirect.
An unusual item from the re-cross examination opens the Telegraph's webbed report, written by David Litterick. "Conrad Black was urged by the board of his newspaper empire to use the company plane at all times because he was considered at risk from terrorist attacks, his fraud trial has heard." The defense justified this claim by bringing up Mr. Black's long-time support for Israel.
[This claim is also covered in the latest report from Romina Maurino, as webbed by 680 News, along with an identification of who deployed it. "As far as the Bora Bora trip to the South Pacific island was concerned, Hollinger International's policy did not differentiate between personal and business travel and the company decided in 2003 to pay for its executives' trips, Eddie Greenspan, Black's Canadian lawyer, told a Chicago court." Her report also quotes a long-time observer of the trial, Steve Skurka, who offered the assessment that Csr. Greenspan's cross-examination technique really clicked in today.
[There's also an update from Reuter's James B. Kelleher, which adds details on the Bora Bora matter, including an E-mail by Mr. Atkinson expressing concern about it. Also, "[o]n Black's U.S. customs declaration, which was introduced as evidence, he reported the purpose of the trip as 'personal.' Three friends who accompanied him declared the trip was for 'business'...Whatever its purpose, the trip was later described by Black as a 'shambles' in a note to friend Seth Lipsky, a journalist." A quote from Conrad Black himself ends it.
[In addition, the updated AP report has other details on the re-cross, which relays the emphasis Csr. Greenspan had put on the audit committee taking seriously "'security and terrorism concerns.'"]
An even more unusual development has been picked up by the Toronto Star's Rick Westhead: a juror has been excused. "The female juror was dismissed after citing extenuating personal reasons, said several people familiar with the matter." There are now twelve jurors and five alternates; the latter have not been identified.
----------
There are two media blog entries, posted today, that discuss aspects of courtroom procedure: Mark Steyn complains about the number of permissible objections in the trial, which he claims gives the prosecution a relative advantage, and Peter Brieger, on the "Black Board," comments upon Judge St. Eve's Blackberry and cellphone policies; the latter policy got Dominick Dunne landed on.
Finally, here's a trivia item, also courtesy of BNN's Paul Bagnell, mentioned while reporting on an unrelated item: the difference between the well-known Form 13-D and the lesser-known Form 13-G. The latter form is sent to the Securities and Exchange Commission when the filler-outer has no intention of influencing the management of the company. In an earlier legal tussle, which aborted a takeover of Hanna Inc., Conrad Black sent the SEC a 13-D, but not a 13-G, on behalf of Norcen, a company he controlled. That 13-D disclosed Norcen's 8.8% interest in Hanna "for investment purposes," and it became pivotal to Mr. Black losing an injunction case, in Delaware Chancery Court, where Hanna management received a block of the takeover. Lesson administered: if you intend to "ultimately" take over a company, but not as of yet, you refraining from filing a 13-G while putting "investment purposes" in a 13-D won't suffice as disclosure. (For details on the "Hanna Brawl," see Shades of Black, Chapter Seven, pp. 73-98.)
The article also mentions a motion made by Edward Genson for a mistrial early today, which was "quickly denied" by Judge St. Eve. The 12 PM BNN headline report noted that the question which triggered that mistrial motion referred to a report that Judge St. Eve earlier ruled to be inadmissible.
Another article from Reuters covers the motion for a mistrial, including the subject of the question Csr. Ruder asked that triggered it, but doesn't refer to any inadmissible report.
A more recent article, by Romina Maurino and webbed by 680 News, elaborates upon the line of questioning that Csr. Ruder used in her redirect examination of Mr. Creasey about the Bora Bora trip. Csr. Ruder tried to debunk the basis of the 50/50 split of the cost by mentioning a trip to Disneyland. She also asked if there "'[w]as...anything that prevented him (Black) from looking online for a better' price or calling United Airlines to ask if that was the right price,...[which drew] laughter from the court before St. Eve" sustained an objection to the question.
Mr. Waldie appeared on a later interview with BNN, aired at about 1:50 PM ET, in which both he and co-host Lisa Oake mentioned lawyers' "gamesmanship" in the trial. He disclosed that the Breeden Report was the inadmissible one that prompted the mistrial motion. (A copy of it, courtesy of the Chicago Tribune.) When asked by Pat Bolland when the taped testimony by Torys LLP partner Darren Sukonick was to be played, Mr. Waldie answered "this afternoon." He added that Torys has already settled with Hollinger Int'l for $30 million. Csr. Sukonick should disclose details on what happened to prompt the Hollinger Int'l lawsuit against his law firm.
[Immediately after the interview ended, Mr. Bolland announced that the directors-and-insiders trading ban on Hollinger Inc. stock has now been lifted; a report on this lifting has been webbed by Bloomberg. Those Hollinger worthies, found at the bottom of the original ban order, can now buy and sell shares in Inc.]
The Associated Press has its report out now, webbed by the Belleville News-Democrat. It also mentions Csr. Genson's mistrial motion and Csr. Ruder's Disneyland-and-United-Airlines pair of questions, and has a reminder that only two of the defendants, John Boultbee and Conrad Black, are indicted for the charge relating to the Bora Bora trip. (This charge is count 10 of the indictment; thanks to the Financial Post for the name correction.) The same report has also been webbed by the Chicago Sun-Times, and WQAD.com of Moline, Illinois has an abridged summary of it.
Bloomberg has one out also, written by Andrew Harris and Thom Weidlich. From its opener: "Peter Atkinson, a codefendant at the fraud trial of ex-Hollinger International...Chairman Conrad Black, knew fees he received were under investigation when he sought to have them publicly disclosed, a witness said." That witness was Mr. Creasey, and he presumably disclosed it on redirect.
An unusual item from the re-cross examination opens the Telegraph's webbed report, written by David Litterick. "Conrad Black was urged by the board of his newspaper empire to use the company plane at all times because he was considered at risk from terrorist attacks, his fraud trial has heard." The defense justified this claim by bringing up Mr. Black's long-time support for Israel.
[This claim is also covered in the latest report from Romina Maurino, as webbed by 680 News, along with an identification of who deployed it. "As far as the Bora Bora trip to the South Pacific island was concerned, Hollinger International's policy did not differentiate between personal and business travel and the company decided in 2003 to pay for its executives' trips, Eddie Greenspan, Black's Canadian lawyer, told a Chicago court." Her report also quotes a long-time observer of the trial, Steve Skurka, who offered the assessment that Csr. Greenspan's cross-examination technique really clicked in today.
[There's also an update from Reuter's James B. Kelleher, which adds details on the Bora Bora matter, including an E-mail by Mr. Atkinson expressing concern about it. Also, "[o]n Black's U.S. customs declaration, which was introduced as evidence, he reported the purpose of the trip as 'personal.' Three friends who accompanied him declared the trip was for 'business'...Whatever its purpose, the trip was later described by Black as a 'shambles' in a note to friend Seth Lipsky, a journalist." A quote from Conrad Black himself ends it.
[In addition, the updated AP report has other details on the re-cross, which relays the emphasis Csr. Greenspan had put on the audit committee taking seriously "'security and terrorism concerns.'"]
An even more unusual development has been picked up by the Toronto Star's Rick Westhead: a juror has been excused. "The female juror was dismissed after citing extenuating personal reasons, said several people familiar with the matter." There are now twelve jurors and five alternates; the latter have not been identified.
----------
There are two media blog entries, posted today, that discuss aspects of courtroom procedure: Mark Steyn complains about the number of permissible objections in the trial, which he claims gives the prosecution a relative advantage, and Peter Brieger, on the "Black Board," comments upon Judge St. Eve's Blackberry and cellphone policies; the latter policy got Dominick Dunne landed on.
Finally, here's a trivia item, also courtesy of BNN's Paul Bagnell, mentioned while reporting on an unrelated item: the difference between the well-known Form 13-D and the lesser-known Form 13-G. The latter form is sent to the Securities and Exchange Commission when the filler-outer has no intention of influencing the management of the company. In an earlier legal tussle, which aborted a takeover of Hanna Inc., Conrad Black sent the SEC a 13-D, but not a 13-G, on behalf of Norcen, a company he controlled. That 13-D disclosed Norcen's 8.8% interest in Hanna "for investment purposes," and it became pivotal to Mr. Black losing an injunction case, in Delaware Chancery Court, where Hanna management received a block of the takeover. Lesson administered: if you intend to "ultimately" take over a company, but not as of yet, you refraining from filing a 13-G while putting "investment purposes" in a 13-D won't suffice as disclosure. (For details on the "Hanna Brawl," see Shades of Black, Chapter Seven, pp. 73-98.)
Media Roundup: Pushed Back
Here are the overnight reports on the Conrad Black trial:
1. The latest report by Romina Maurino, webbed by the Ottawa Citizen, recounts the cross-examination of Fred Creasey by Peter Atkinson's counsel Michael Schachter, which got so vigorous that counsel for Jack Boultbee registered an 'objection' to it by petitioning for a mistrial. It ends with a brief description of the redirect examination by prosecutor Judie Ruder.
2. Peter Brieger, writing for CanWest News, relates that the defense theory regarding the non-compete payments is that they were disclosed in a timely fashion, while Csr. Ruder entered the claim that there wasn't sufficient detail in the disclosure, through her redirect.
3. The Jurist has a brief note, centred on the mistrial motion.
4. Another brief write-up comes courtesy of Accountancy Age, which compresses all of Mr. Creasey's testimony into four paragraphs.
5. CanoeMoney has a preview of what the taped testimony of Darren Sukonick will reveal.
6. Paul Waldie of the Globe and Mail goes into detail about Csr. Ruder's "theatrics" in her redirect.
7. The National Post's Shinan Govani mentions the arrival of Dominick Dunne at the trial as the second item in his latest piece. "When [Mr.] Dunne finally showed up at the Conrad Black trial last week, there was a huge sigh of relief among all the other journos. Finally! Validation!" It's item 2 in "Putting Clout Into Out."
8. Mr. Waldie also has a report on the Department of Justice's now-successful impoundment of those 13 boxes from 10 Toronto Street, which includes the hoops that the prosecutors had to go through in order to get them. There's a hint that revealing the contents of them may prove to be anticlimactic. This item was mentioned on BNN's 9 AM ET headline report, which noted that the boxes have not been released quite yet.
Also: a South African editorial in Fin24.co.za, written by a former employee of one of Conrad Black's companies, compares the South African government to the prosecution's picture of Mr. Black.
1. The latest report by Romina Maurino, webbed by the Ottawa Citizen, recounts the cross-examination of Fred Creasey by Peter Atkinson's counsel Michael Schachter, which got so vigorous that counsel for Jack Boultbee registered an 'objection' to it by petitioning for a mistrial. It ends with a brief description of the redirect examination by prosecutor Judie Ruder.
2. Peter Brieger, writing for CanWest News, relates that the defense theory regarding the non-compete payments is that they were disclosed in a timely fashion, while Csr. Ruder entered the claim that there wasn't sufficient detail in the disclosure, through her redirect.
3. The Jurist has a brief note, centred on the mistrial motion.
4. Another brief write-up comes courtesy of Accountancy Age, which compresses all of Mr. Creasey's testimony into four paragraphs.
5. CanoeMoney has a preview of what the taped testimony of Darren Sukonick will reveal.
6. Paul Waldie of the Globe and Mail goes into detail about Csr. Ruder's "theatrics" in her redirect.
7. The National Post's Shinan Govani mentions the arrival of Dominick Dunne at the trial as the second item in his latest piece. "When [Mr.] Dunne finally showed up at the Conrad Black trial last week, there was a huge sigh of relief among all the other journos. Finally! Validation!" It's item 2 in "Putting Clout Into Out."
8. Mr. Waldie also has a report on the Department of Justice's now-successful impoundment of those 13 boxes from 10 Toronto Street, which includes the hoops that the prosecutors had to go through in order to get them. There's a hint that revealing the contents of them may prove to be anticlimactic. This item was mentioned on BNN's 9 AM ET headline report, which noted that the boxes have not been released quite yet.
Also: a South African editorial in Fin24.co.za, written by a former employee of one of Conrad Black's companies, compares the South African government to the prosecution's picture of Mr. Black.
Monday, April 9, 2007
Easter special on value investing
Since it's Easter Monday up here in Canada, a statutory holiday for us Canadians, The Verdict wasn't shown tonight. So, I've prepared a brief intro to "value investing," the investment philosophy followed by the typical institution that invested in Hollinger International back in the days when Conrad Black was its CEO. (The same company, now named Sun-Times Media Group, is now a turnaround stock.)
Many institutional investors follow an investment model called "Modern Portfolio Theory" (MPT.) The Wikipedia explanation of it will probably seem like gobbledygook to anyone without a background in statistics, but its conceptual underpinnings are fairly straightforward. The two theories that underpin MPT are: the Random Walk hypothesis, which claims that stock prices do not move according to any predictable pattern because changes in those prices are random; and, the Efficient Market Hypothesis, which claims that the present price of a stock accurately reflects all that is presently known about its value. Put the two together, and you come up with the conclusion that it's impossible to predict a stock's future value by simply plowing through its, or perhaps the underlying company's, performance in the past. All that can be done is to rate a stock by the extent of a downturn (or upturn) in its price over a given time period, or its price-volatility over time, as compared with the price-volatility of the market in general. (This is called "the beta coefficient."). Before investing, the investor has to decide how much risk he or she is willing to put up with by investing in stocks at all, in exchange for a return higher than that offered by a risk-free investment like Treasury bills. The beta coefficient is then used to find stocks that are less risky, as risky, or riskier than the general stock market, with a corresponding damping, tracking or amplification of the expected gain when the stock in question increases in price. Once again, the investor's own risk tolerance determines what "beta-weighting" a portfolio will have, just as the investor's tolerance for overall "market risk" will determine how much of his or her portfolio is in stocks at all. An investor can also use diversification, or putting money in more than one stock, to ease the risk that has to be faced. This is MPT in a nutshell; the complexification largely involves specification of risk level and implementation of its principles, including the diversification principle. An MPT investor follows this three-stage procedure: first of all, deciding what percentage of funds should be in the equity market at all; secondly, deciding how much stock-specific risk to take on with the equity part of the portfolio; and finally, deciding how much diversification is desired - how many individual stocks with the appropriate beta coefficient should be bought or kept.
Value investing is explicitly at odds with MPT, or any strategy that uses an MPT-like investment philosophy. Value investors believe that equity markets are not efficient, because some companies are below security analysts' radar and/or because of analysts' biases that are psychological in origin. One famous value investor, David Dreman, rebutted Modern Portfolio Theory in Appendix A (pp. 399-404, hc.) of his 1998 book, Contrarian Investment Strategies: The Next Generation.
Like all forms of investing, value investing carries risk with it - specifically, the risk that an ostensibly undervalued company has something subtly wrong with its prospects. Thus, value investors consider it sensible to diversify; the recommended number of stocks to hold in a value portfolio typically varies from 10 to 20. A value fund often holds the shares of more than twenty different undervalued companies in its portfolio.
In the criminal trial of Conrad Black, Peter Atkinson, Jack Boultbee and Mark Kipnis, the aggrieved shareholders in question, such as Christopher Browne of Tweedy, Browne, believe that the reason why the regular common stock of Hollinger International sold at a discount to its net asset value, and stayed at a discount for an unreasonably long time, was because Conrad Black and the other three defendants swindled Hollinger Int'l, and thus swindled its shareholders. The defendants, of course, deny this allegation.
Many institutional investors follow an investment model called "Modern Portfolio Theory" (MPT.) The Wikipedia explanation of it will probably seem like gobbledygook to anyone without a background in statistics, but its conceptual underpinnings are fairly straightforward. The two theories that underpin MPT are: the Random Walk hypothesis, which claims that stock prices do not move according to any predictable pattern because changes in those prices are random; and, the Efficient Market Hypothesis, which claims that the present price of a stock accurately reflects all that is presently known about its value. Put the two together, and you come up with the conclusion that it's impossible to predict a stock's future value by simply plowing through its, or perhaps the underlying company's, performance in the past. All that can be done is to rate a stock by the extent of a downturn (or upturn) in its price over a given time period, or its price-volatility over time, as compared with the price-volatility of the market in general. (This is called "the beta coefficient."). Before investing, the investor has to decide how much risk he or she is willing to put up with by investing in stocks at all, in exchange for a return higher than that offered by a risk-free investment like Treasury bills. The beta coefficient is then used to find stocks that are less risky, as risky, or riskier than the general stock market, with a corresponding damping, tracking or amplification of the expected gain when the stock in question increases in price. Once again, the investor's own risk tolerance determines what "beta-weighting" a portfolio will have, just as the investor's tolerance for overall "market risk" will determine how much of his or her portfolio is in stocks at all. An investor can also use diversification, or putting money in more than one stock, to ease the risk that has to be faced. This is MPT in a nutshell; the complexification largely involves specification of risk level and implementation of its principles, including the diversification principle. An MPT investor follows this three-stage procedure: first of all, deciding what percentage of funds should be in the equity market at all; secondly, deciding how much stock-specific risk to take on with the equity part of the portfolio; and finally, deciding how much diversification is desired - how many individual stocks with the appropriate beta coefficient should be bought or kept.
Value investing is explicitly at odds with MPT, or any strategy that uses an MPT-like investment philosophy. Value investors believe that equity markets are not efficient, because some companies are below security analysts' radar and/or because of analysts' biases that are psychological in origin. One famous value investor, David Dreman, rebutted Modern Portfolio Theory in Appendix A (pp. 399-404, hc.) of his 1998 book, Contrarian Investment Strategies: The Next Generation.
Like all forms of investing, value investing carries risk with it - specifically, the risk that an ostensibly undervalued company has something subtly wrong with its prospects. Thus, value investors consider it sensible to diversify; the recommended number of stocks to hold in a value portfolio typically varies from 10 to 20. A value fund often holds the shares of more than twenty different undervalued companies in its portfolio.
In the criminal trial of Conrad Black, Peter Atkinson, Jack Boultbee and Mark Kipnis, the aggrieved shareholders in question, such as Christopher Browne of Tweedy, Browne, believe that the reason why the regular common stock of Hollinger International sold at a discount to its net asset value, and stayed at a discount for an unreasonably long time, was because Conrad Black and the other three defendants swindled Hollinger Int'l, and thus swindled its shareholders. The defendants, of course, deny this allegation.
The indictment and the evidentiary proffer: second iteration
I've already read through these documents once; this time, I've extracted a trivia item that relates to Peter Atkinson. On pages 46-7 of the PDF copy of the evidentiary proffer, numbered pp. 43-4 in the document itself, Mr. Atkinson is quoted as using the term "T5" in a 2002 E-mail. A T5 is a statement of investment income for Canadian income tax forms; it's different from a T4, which is a statement of employment income. It seems that Mr. Atkinson had made a bit of a slip-up between his 4s and his 5s. (I note that this was Mr. Atkinson's mistake, not a mistake of the proffer's author. The defendant was quoted verbatim in it.)
One question about the indictment itself has occurred to me lately, though. Given that CEO swindles of the shareholders often involve inflating earnings and revenue, why wasn't this item included by making it grounds for a charge? It was dealt with at the civil level long before the final indictment was drawn up. I suppose that the circulation scandal linked to just above was one of those miscreancies that violated civil law, but not criminal law; that would explain why it wasn't included in the charges.
[An alternate explanation is that the scandal that erupted back in '04 had nothing to do with the four defendants.]
(The proffer and the indictment can be downloaded from this webpage; look for "US v. Black, et al." The latter document is labeled "Superseding Information.)
One question about the indictment itself has occurred to me lately, though. Given that CEO swindles of the shareholders often involve inflating earnings and revenue, why wasn't this item included by making it grounds for a charge? It was dealt with at the civil level long before the final indictment was drawn up. I suppose that the circulation scandal linked to just above was one of those miscreancies that violated civil law, but not criminal law; that would explain why it wasn't included in the charges.
[An alternate explanation is that the scandal that erupted back in '04 had nothing to do with the four defendants.]
(The proffer and the indictment can be downloaded from this webpage; look for "US v. Black, et al." The latter document is labeled "Superseding Information.)
Today's court events, starting with a rejected motion for mistrial
The Globe and Mail's Paul Waldie has just reported that Gus Newman, head counsel representing defendant Jack Boultbee, filed a motion asking for a mistrial, which was denied by Amy St. Eve. Csr. Newman objected to a line of questioning by another defense counsel, Michael Schachter, in his cross-examination of Fred Creasey. Csr. Schacter is representing Peter Atkinson. There's also a report from the Canadian Press, which seems to have been written by Romina Maurino and was webbed by the Toronto Star, which discloses that the motion was rejected "swiftly" by Judge St. Eve.
[An updated report by Ms. Maurino has been webbed by CBC.ca. It contains excerpts of a 2003 E-mail, written by Peter Atkinson, that was read in court today by Csr. Schachter. It notes that the videotaped testimony of Torys lawyer Darren Sukonick has yet to be played in court.
[A second update, also written by Ms. Maurino, mentions that Mr. Creasey was questioned under redirect by Julie Ruder: "Creasey said he asked former Hollinger International top legal executive Mark Kipnis for documents detailing the basis of the non-compete agreements for one of the deals, but didn't receive any documentation showing the audit committee had approved the payments." It also mentions that the Csr. Sukonick videotape should be played tomorrow.]
Mr. Waldie was also interviewed on BNN at about 1:50 PM ET. He said that Csr. Newman had asked for a separate trial while making the mistrial motion. Judge St. Eve promised to rein in Csr. Schachter's questions if any had the tendency to make Mr. Atkinson look guilty in such a way that would necessitate Mr. Atkinson taking the stand to refute. The trial is still revolving around the non-compete agreements, a "fundamental" part of the prosecution's allegations, according to Mr. Waldie. He speculated that Peter Atkinson's lawyer might try to distance his client from the others "in order to make him look less guilty" over the next few weeks.
Mark Steyn has weighed in by noting that the defense team isn't the only assertive objector in the room. He detects a certain pattern, of the prosecutors protecting the Hollinger Int'l audit committee that was headed up by former Gov. James R. Thompson, in the prosecution's objections. (It is a further part of a committee that...)
Reuters has posted a write-up, by James B. Kelleher, on the cross-examination of Mr. Creasey today, entitled "Witness In Black Trial Hammered On Disclosures." It reports that Mr. Creasey admitted, while being cross-examined by Csr. Schachter, that the shareholders were informed of the payments "'to individual officers" and were "'told what was paid to Conrad Black (and other executives)...'" It does specify, though, that the issue at hand was$600,000 worth of payments to "Black and three associates," not all of the non-compete payments that form the core of the allegations against the defendants. This report has also been webbed by Chicago Business.
There's a report from Bloomberg out too, by Andrew Harris and Thom Weidlich, which opens with some perspective on that 2003 E-mail written by Peter Atkinson: "An e-mail from Atkinson, a former vice president, to a company lawyer may support defense claims that he tried to avoid wrongdoing. It also helps prosecutors, showing he suspected the so-called noncompete payments were wrong." The report also mentions that the videotaped testimony of Csr. Sukonick has been pushed back, to tomorrow at the earliest. [The most recent update, of the same report, includes redirect pertaining to delayed disclosure of the non-compete payments, which were not put in until the 2001 Hollinger Int'l annual report; it was published in May 2002.]
You may be amused to know that the AP report on today's events in the trial has been webbed by Pravda; it's also been webbed by the Houston Chronicle. A different write-up has been put on Stuff.co.nz.
----------
From the New Zealand Herald, an old story, with at least two new paragraphs at the end of it, about how Canadians in the media are beginning to warm to Conrad Black.
And finally, although the timing of this item is probably coincidental, a Reuters story about CEO compensation, which is still a'rising as of 2006. Gordon Paris actually wasn't one of those CEOs; in 2006, he had to take a pay cut, to 900 thousand a year from 2 million/year. (Pay data gotten from this mock-ridden post from "Minor Tweaks.") He left the job as of November 15th, about a month before the Sun-Times Media Group (SVN - NYSE) suspended its dividend.
[An updated report by Ms. Maurino has been webbed by CBC.ca. It contains excerpts of a 2003 E-mail, written by Peter Atkinson, that was read in court today by Csr. Schachter. It notes that the videotaped testimony of Torys lawyer Darren Sukonick has yet to be played in court.
[A second update, also written by Ms. Maurino, mentions that Mr. Creasey was questioned under redirect by Julie Ruder: "Creasey said he asked former Hollinger International top legal executive Mark Kipnis for documents detailing the basis of the non-compete agreements for one of the deals, but didn't receive any documentation showing the audit committee had approved the payments." It also mentions that the Csr. Sukonick videotape should be played tomorrow.]
Mr. Waldie was also interviewed on BNN at about 1:50 PM ET. He said that Csr. Newman had asked for a separate trial while making the mistrial motion. Judge St. Eve promised to rein in Csr. Schachter's questions if any had the tendency to make Mr. Atkinson look guilty in such a way that would necessitate Mr. Atkinson taking the stand to refute. The trial is still revolving around the non-compete agreements, a "fundamental" part of the prosecution's allegations, according to Mr. Waldie. He speculated that Peter Atkinson's lawyer might try to distance his client from the others "in order to make him look less guilty" over the next few weeks.
Mark Steyn has weighed in by noting that the defense team isn't the only assertive objector in the room. He detects a certain pattern, of the prosecutors protecting the Hollinger Int'l audit committee that was headed up by former Gov. James R. Thompson, in the prosecution's objections. (It is a further part of a committee that...)
Reuters has posted a write-up, by James B. Kelleher, on the cross-examination of Mr. Creasey today, entitled "Witness In Black Trial Hammered On Disclosures." It reports that Mr. Creasey admitted, while being cross-examined by Csr. Schachter, that the shareholders were informed of the payments "'to individual officers" and were "'told what was paid to Conrad Black (and other executives)...'" It does specify, though, that the issue at hand was$600,000 worth of payments to "Black and three associates," not all of the non-compete payments that form the core of the allegations against the defendants. This report has also been webbed by Chicago Business.
There's a report from Bloomberg out too, by Andrew Harris and Thom Weidlich, which opens with some perspective on that 2003 E-mail written by Peter Atkinson: "An e-mail from Atkinson, a former vice president, to a company lawyer may support defense claims that he tried to avoid wrongdoing. It also helps prosecutors, showing he suspected the so-called noncompete payments were wrong." The report also mentions that the videotaped testimony of Csr. Sukonick has been pushed back, to tomorrow at the earliest. [The most recent update, of the same report, includes redirect pertaining to delayed disclosure of the non-compete payments, which were not put in until the 2001 Hollinger Int'l annual report; it was published in May 2002.]
You may be amused to know that the AP report on today's events in the trial has been webbed by Pravda; it's also been webbed by the Houston Chronicle. A different write-up has been put on Stuff.co.nz.
----------
From the New Zealand Herald, an old story, with at least two new paragraphs at the end of it, about how Canadians in the media are beginning to warm to Conrad Black.
And finally, although the timing of this item is probably coincidental, a Reuters story about CEO compensation, which is still a'rising as of 2006. Gordon Paris actually wasn't one of those CEOs; in 2006, he had to take a pay cut, to 900 thousand a year from 2 million/year. (Pay data gotten from this mock-ridden post from "Minor Tweaks.") He left the job as of November 15th, about a month before the Sun-Times Media Group (SVN - NYSE) suspended its dividend.
Media Roundup: Bring Out The Lawyers
There are two pieces webbed overnight, both of them by reporters who've been covering the case practically from day 1, plus a television report (with later update) aired this morning.
1. An abbreviated report by Romina Maurino of the Canadian Press, based on one released yesterday afternoon (also by her.)
[NOTE: According to this "Morning Business File" report, Beth DeMerchant's videotaped testimony is not going to be aired this week. See item #3, "Black trial resumes," in it.]
2. Paul Waldie of the Globe and Mail outlines what the two lawyers on videotape, Darren Sukonick and Elizabeth DeMerchant, are expected to reveal under videotaped direct and cross-examination, after editing. He ends by noting that Paul Creasey will have the benefit of redirect examination this morning, before the tape machine gets rolling.
3. On BNN, there was a discussion of the case with Lou Schizas, in which he raised the possibility that the personal non-competes were to protect the buyers from Conrad Black, and the other signers, competing with them through quitting Hollinger International and setting up a new operation. (It was noted on the segment that Mr. Schizas was bringing up an issue not brought up in the trial, as of yet.) Also, the trial was linked to the question of whether or not the Ontario Securities Commission is a toothless watchdog, as discussed in today's issue of the Globe and Mail. (That discussion started at about 8:10 AM ET; it doesn't seem to have been broadbanded at BBN's Website.)
[UPDATE: There was another discussion with Mr. Schizas at 9:45 AM ET, which built on the above point by questioning the claim, made by at least one of the Torys LLP lawyers in videotaped testimony, that the legal team was 'forced' to sign off on it. (Presumably, the lawyer, if only one made that claim, was Darren Sukonick.) Mr. Schizas noted that there's a lot of clients' barking in the normal course of business.]
From the media blog world, two stabs at humour. The "Black Board" has an entry on another comedy moment in the trial, and Mark Steyn devotes an entry to making fun of an accountant, but with a different schtick than the usual, one more fitting for poking fun at a government official.
1. An abbreviated report by Romina Maurino of the Canadian Press, based on one released yesterday afternoon (also by her.)
[NOTE: According to this "Morning Business File" report, Beth DeMerchant's videotaped testimony is not going to be aired this week. See item #3, "Black trial resumes," in it.]
2. Paul Waldie of the Globe and Mail outlines what the two lawyers on videotape, Darren Sukonick and Elizabeth DeMerchant, are expected to reveal under videotaped direct and cross-examination, after editing. He ends by noting that Paul Creasey will have the benefit of redirect examination this morning, before the tape machine gets rolling.
3. On BNN, there was a discussion of the case with Lou Schizas, in which he raised the possibility that the personal non-competes were to protect the buyers from Conrad Black, and the other signers, competing with them through quitting Hollinger International and setting up a new operation. (It was noted on the segment that Mr. Schizas was bringing up an issue not brought up in the trial, as of yet.) Also, the trial was linked to the question of whether or not the Ontario Securities Commission is a toothless watchdog, as discussed in today's issue of the Globe and Mail. (That discussion started at about 8:10 AM ET; it doesn't seem to have been broadbanded at BBN's Website.)
[UPDATE: There was another discussion with Mr. Schizas at 9:45 AM ET, which built on the above point by questioning the claim, made by at least one of the Torys LLP lawyers in videotaped testimony, that the legal team was 'forced' to sign off on it. (Presumably, the lawyer, if only one made that claim, was Darren Sukonick.) Mr. Schizas noted that there's a lot of clients' barking in the normal course of business.]
From the media blog world, two stabs at humour. The "Black Board" has an entry on another comedy moment in the trial, and Mark Steyn devotes an entry to making fun of an accountant, but with a different schtick than the usual, one more fitting for poking fun at a government official.
A Point About Short Selling
First of all, a personal disclosure. I short-sold once, in the mid 1980s, and actually scored a small profit on the short. Since I shorted a stock that I had bought and sold previously, I'd rather not name it. I'll confine myself to saying that it was a holding company. I also remember anticipating, back in 1989 in conversation with my father, that Campeau Corp. would implode, which it did.
So, those questions I raised yesterday, with the naming of two books as the source of them, drew on background reads whose points went into an already-primed mind.
A recent "Daily Article" at Mises.org, posted three days ago, has a defense of short sellers, which raises a question with regard to Hollinger International: what was the short interest on it from 1998 to the end of 2003, when Conrad Black was ousted? As author Gary Galles pointed out, short sellers "often uncover what regulators miss, as they did at Worldcom, Enron, Tyco, etc., showing themselves as more effective market policemen."
Where were they when Conrad Black was still with Hollinger Int'l? Is the short-interest pattern similar to the one for "Worldcom, Enron, Tyco, etc."?
So, those questions I raised yesterday, with the naming of two books as the source of them, drew on background reads whose points went into an already-primed mind.
A recent "Daily Article" at Mises.org, posted three days ago, has a defense of short sellers, which raises a question with regard to Hollinger International: what was the short interest on it from 1998 to the end of 2003, when Conrad Black was ousted? As author Gary Galles pointed out, short sellers "often uncover what regulators miss, as they did at Worldcom, Enron, Tyco, etc., showing themselves as more effective market policemen."
Where were they when Conrad Black was still with Hollinger Int'l? Is the short-interest pattern similar to the one for "Worldcom, Enron, Tyco, etc."?
Sunday, April 8, 2007
Nothing On The Trial On The Verdict Tonight, Once Again
The weekly recycle episode of The Verdict had nothing on the Conrad Black trial for tonight's. There also won't be a new episode until Tuesday, because of the Easter holiday in Canada.
So, instead of a write-up, I'd like to mention a general omission in media coverage of the trial that I've recently thought of, thanks to re-watching the CTV docudrama Shades of Black (mentioned here) and remembering the sources behind the post that's three below this one.
Those sources were two books I had read more than a decade ago: Fleecing The Lamb by David Cruise and Rampaging Bulls by Alexander Tadich. Both of them stress that the typical behavior pattern of a stock-market con artist is to inflate the value of earnings (and sometimes assets) of an "exciting" company, up to the point of fixing the books to make such inflation seem genuine, at which point they either off-load or gouge. I noted in the post, which I linked to at the end of the above paragraph, that the behavior of Black, et. al. was closer to the opposite of that pattern.
I don't know if either of the two authors of the books mentioned above had interviewed an experienced police officer, one who has specialized in white-collar, public-company commercial crime. I do know, however, that there has yet to be an interview or article that I've come across that did talk to that kind of (perhaps retired) police officer about the Conrad Black trial. The RCMP may be of help in this regard, as they've been involved in going after stock-market crooks for decades, and are probably familiar with the proper American law-enforcement counterpart(s) to talk to.
It was actually the CTV docudrama the proved to be the tipping point. It includes (forgive the spoiler) a fictional character that's an FBI officer.
So, instead of a write-up, I'd like to mention a general omission in media coverage of the trial that I've recently thought of, thanks to re-watching the CTV docudrama Shades of Black (mentioned here) and remembering the sources behind the post that's three below this one.
Those sources were two books I had read more than a decade ago: Fleecing The Lamb by David Cruise and Rampaging Bulls by Alexander Tadich. Both of them stress that the typical behavior pattern of a stock-market con artist is to inflate the value of earnings (and sometimes assets) of an "exciting" company, up to the point of fixing the books to make such inflation seem genuine, at which point they either off-load or gouge. I noted in the post, which I linked to at the end of the above paragraph, that the behavior of Black, et. al. was closer to the opposite of that pattern.
I don't know if either of the two authors of the books mentioned above had interviewed an experienced police officer, one who has specialized in white-collar, public-company commercial crime. I do know, however, that there has yet to be an interview or article that I've come across that did talk to that kind of (perhaps retired) police officer about the Conrad Black trial. The RCMP may be of help in this regard, as they've been involved in going after stock-market crooks for decades, and are probably familiar with the proper American law-enforcement counterpart(s) to talk to.
It was actually the CTV docudrama the proved to be the tipping point. It includes (forgive the spoiler) a fictional character that's an FBI officer.
Subscribe to:
Posts (Atom)