Conrad's Black Mark on Big Jim's Reputation

Years ago, when James R. Thompson was running for governor of Illinois, he and a small entourage visited a neighborhood tavern near Chicago's Logan Square to do some old-fashioned campaigning. As fellow patrons told me later, Thompson walked in, personally said hello to everyone, asked for their support and then--to the joy of many thirsty customers -- bought a round for the house.
You see, despite his reputation as a bulldog U.S. prosecutor and Illinois politician, Big Jim Thompson knew how to be one of the gang. It's a knack that helped Thompson win election as governor, a post he held for 14 years.
Now, it appears that Thompson's ability to go along with the crowd will end up sullying his reputation as a legal eagle, savvy businessman and earnest public servant. That's because the group he was hanging out with, the top managers of media company Hollinger International, are now on trial for pillaging millions from that enterprise.
This week, Thompson has been in the uncomfortable role of star witness in the Chicago-based trial of ex-media mogul Conrad Black. The federal government claims that through a series of complex financial transactions and non-compete agreements, Black and some top associates stole $60 million from shareholders of Hollinger, where Black was chief executive officer.
All this allegedly occurred during Thompson's tenure as a board member. More than that, Big Jim headed Hollinger's audit committee--which is suppose to make sure management doesn't have it's hand in the cookie jar or even look like it does. More details of the Black trial will emerge over the next few weeks, so there's no need to go into all of that here.(Hollinger owned the Chicago Sun-Times, which now operates under a new parent company.)
But it appears that the jury is in on Thompson's role in this mess. The verdict? He sure did a lousy job.
By his own admission, Thompson approved more than $200 million in fees to Black's management company without ever deeply reviewing documentation that outlined or supported making the payments. Big Jim said he "skimmed" documents for 11 various deal disclosures, according to the Chicago Tribune. That's skimmed, as in take a casual glance.
What's more, he never pressed management to justify the fee payments, nor did he check with any outside experts to discuss the propriety of the situation, the newspaper reports.
The estimated $200 million in fees is not part of the money allegedly taken by Black and the three other executives. However, Black's attorneys are making the case that Hollinger's top management disclosed all fee payments to the board. Hollinger's board members, including those on the audit committee, say that's not true.
Nonetheless, Thompson's testimony suggests that he and fellow board members were snoozing at the wheel, or didn't want to probe too deeply into management's behavior.
I mean, wouldn't you think that an ex-U.S. attorney would hear alarm bells when the boss' personal side firm is getting over $200 million in hard cash?
Thompson testified that he did periodically meet with David Radler, Hollinger's former chief operating officer, to discuss the fees but that Radler never produced any written materials to back up why these payments were proper.
How in the world did a super-attorney like Thompson let Radler get away with that dodge? Even in the cloistered business world, that's the type of reaction that screams out for flexing some corporate governance muscle!
The fascinating picture that's emerging during this trial is of a board, and an audit committee, that did not want to bother asking the tough questions.
Why didn't Thompson, who reportedly got $60,000 annually for being on the Hollinger board, crack down on these shenanigans?
Cynics will say he was paid off by Black, who put together a blue chip board of political, economic and international stars. They were there to shine, take their money and perks, and mind their own business. Along with Thompson, Hollinger's board included former Secretary of State Henry Kissinger and Assistant Secretary of Defense Richard Perle.
Perhaps this high-flying committee thought it was enough of an honor just to be in each others' company. Or maybe they believed that board meetings were really more like elite social gatherings, not working sessions where difficult questions are asked of the CEO and his underlings.
Other board members, including Thompson, argue they were deceived by Black and his boys, who held back information on the allegedly illegal fee payments. That theory gets put to the test when Radler--who has pleaded guilty to fraud for 29 months in the slammer -- takes the stand later this month.
Truth be told, none of the Hollinger directors come out of this looking very good. But the one getting the worse of it is Big Jim, who probably thought the best way to get along at Hollinger was to go along.
This time, however, being one of the gang is coming back to haunt him.