Tom Bower - Conrad and Lady Black - Dancing on the Edge

The following year Black invited Kissinger to address a group of Canada’s elite in Toronto. The former US Secretary of State, attracted to expensive meal tickets, was easily flattered by Black’s material generosity and scholarly praise. That Christmas Fred Eaton would give a copy of Kissinger’s memoirs to Black, and thereafter he would often hear from his friend, ‘I’ve just had lunch/dinner with Henry, and he says …’ Having gained an entrée to both the Bilderberg cast and Palm Beach’s aristocrats, Black sensed his opportunity to join the American establishment. Stepping up would require his own fortune.

Expanding into American mining seemed the perfect way to realise his financial and social ambitions. In January 1979 he had identified Hanna Mining, the world’s second-largest iron-ore producer, based in Cleveland, Ohio, as an ideal target. After secret discussions with Fred Eaton and Edward Battle, another director of Norcen, they agreed to accumulate enough shares covertly to buy Hanna at a bargain price.

Hanna was owned and managed by the Humphreys, a long-established family which was embroiled in numerous feuds. Argus and Hanna both owned an interest in the Iron Ore Company of Canada, which was run by Hanna with a 26.5 per cent stake, compared to Argus’s 10.5 per cent. That connection provided Black with the opportunity in June 1980 to initiate a conversation with George Humphrey, Hanna’s vice president. Humphrey, Black knew, was disgruntled by the Hanna board’s refusal to appoint him as chief executive. Instead, the family had selected Bob Anderson, a professional mining expert. Humphrey’s mother, a widow, shared her son’s anger. As a master of exploiting dissatisfaction, Black called on George Humphrey, offering his condolences and help. Seducing dissatisfied shareholders, Black knew from the capture of Argus, was an ideal tactic in take-over battles. With that chore completed, Black made use of repeated opportunities to meet other vulnerable members of the Humphrey family across America – in country clubs, boardrooms, restaurants and at a society ball. In August 1981, believing that his credentials were established, he sought the family’s approval to buy shares in Hanna. He would claim that both George Humphrey and Bob Anderson had offered no objections to his purchase of ‘some shares’, 20 but the family and the company’s directors would insist that his proposal was firmly rejected. 21 Events would bear out the family’s version.

During August 1981 Black’s company Norcen secretly bought 4.9 per cent of Hanna’s shares. The purchase was entirely financed by a C$20 million loan from CIBC. In securing that loan, Black, a director of the bank, demanded special treatment, stipulating that ‘secrecy was paramount’. No statements regarding the loan and the purchase were to be delivered by the bank to Norcen’s office; and Hanna’s shares were to be bought by the bank, using an undisclosed numbered account. On 9 September, after the shares had been bought, Black summoned a board meeting of Norcen directors in Toronto. Fred Eaton, Edward Battle and others were in no doubt about his intention. ‘We want a friendly take-over,’ Black agreed with his directors. Bill Kilbourne, the company’s secretary, accurately recorded in the minutes of the meeting that the purchase of shares in ‘the target company’ was completed, ‘with the ultimate purpose of acquiring a 51 per cent interest at a later date’. 22 Black signed those minutes.

Having secretly agreed his company’s objective, Black took a decision which could have increased his personal wealth. If the take-over of Hanna was successful, the value of Norcen’s shares would rise. To benefit personally from that increase, Black offered to buy back Norcen shares from his own shareholders. By law, he and his directors were required to tell their shareholders the full truth about their intentions regarding Hanna. Yet their letter, sent on 16 October 1981, did not reveal their secret purchase of Hanna’s shares or their resolution on 9 September to mount a take-over bid.

During October, again in secrecy, Black increased his stake in Hanna to 8.8 per cent. As soon as the second purchase was detected, Bob Anderson telephoned Black and accused him of breaking the rules. Black was prepared for the onslaught. Conjuring a performance as a helpful, innocent and sincere intellectual, he sought to smooth-talk the American into believing that his intention was simply cooperation. Only Black could have feigned surprise that Anderson’s response was, in Black’s own description, ‘an antagonistic, hostile and even frenetic reaction’. 23 A meeting was summoned in Cleveland. Black flew south, to be told by Anderson to retreat and to sell off his shares. He ignored the warning. To enhance the impression of his virtue, he expressed his ‘hurt’ and ‘outrage’ that Anderson, a ‘rather underwhelming’ person, treated him with disdain and condescension. 24 Undeterred and eager to raise his interest to 20 per cent, Black approached other Hanna shareholders, including old female members of the Humphrey family. He offered them all ‘an alliance’ against Hanna’s directors. War had been declared.

In Black’s opinion, his secrecy was consistent with normal trading in Toronto. Bud McDougald and the other Bay Street players had never considered behaving in any other fashion. In the heat of battle, he said, companies often misrepresented their intentions. Such tactics were aided by Canada’s weak regulators. Toronto’s stock market was supervised by the Ontario Securities Commission (OSC), which had never, in Black’s experience, so much as slapped a reprobate’s wrist in punishment for a crime. Reared in that wild-west monoculture, the aspiring tycoon did not understand that the stakes and rules for playing in the United States were different from those in his own crude backwater.

The investment by Norcen required Black to disclose his intentions to America’s all-powerful Securities and Exchange Commission, the SEC. In his submission, he described the purchase of nearly 13 per cent of Hanna’s shares as ‘an investment position’, concealing his intention to mount a take-over bid. Convinced that his cultivated performance, combining his eloquent vocabulary, benign demeanour and forceful personality, would steamroll the opposition, he flew on 2 April 1982 to Palm Beach with Rupert Hambro on Black’s Challenger, the private plane he had inherited after the Argus coup. At the same time, Monte Black was dispatched to Cleveland to deliver a threat. Unless, said Monte, Bob Anderson and the Humphreys agreed to Norcen owning 30 per cent of the company and acquiring an influential position on the board of directors, Norcen intended to launch a take-over bid for 51 per cent of Hanna on 5 April. This was the Blacks playing hardball. Anderson’s response to the ultimatum was emphatic. Amid raised voices and papers flung on the table, Monte’s offer was rejected. Twisting the screw, Anderson applied to the Cleveland court for an order preventing the bid. Black was so exposed, Anderson reasoned, that any shot was guaranteed a hit. In his claim, Black was accused of ‘fraud and racketeering’ because he and Norcen had submitted false information to the SEC.

The counterattack surprised Black. Lawyers representing Hanna unexpectedly invaded Norcen’s headquarters. Their trawl of documents produced the board minutes of 9 September 1981, describing Black’s ‘ultimate purpose’ to take over Hanna. Anderson’s lawyers were thrilled. It was ‘like a grenade with the pin pulled’, admitted Black. 25 Black’s deception broke the US Securities Act and exposed him to prosecution. Hanna’s share price plummeted from $74 to $26.

Black’s cabal had been caught red-handed. ‘Bill, you dumb idiot,’ Black screamed at Kilbourne, Norcen’s company secretary, at an emergency meeting of his fellow directors. ‘Why did you put that in the minutes?’ ‘Horseshit,’ replied Kilbourne. ‘That’s what you said at the meeting. You signed it. You should have read it.’ Black calmed down. The thrill for his partners was watching ‘such a bright guy at work’. After some thought, Black fashioned his response: ‘I’ll say, “I’m innocent. This is ridiculous. This is a misunderstanding, a technicality.”’ His audience were impressed by his apparent calm under fire. Black the performer always conjured up a mask of sublime assurance of success.