by Vanda Krefft
William Fox had been a leader. Harley Clarke did not want to be one. Fox had inspired, motivated, celebrated, corrected, criticized, scolded, and, on occasion, as Sol Wurtzel well knew, terrorized his employees to get the results he wanted. Clarke turned away. He didn’t like the executives he inherited, especially the ones who had betrayed Fox during the fight for control. As he said shortly after the voting shares sale, “You know, Fox, I have enough intelligence to know that you have been shamefully and brutally treated by men who had your confidence . . . I have enough sense to know that if these men double-crossed you, they would soon double-cross me.”
During the critical transition period, Clarke wasn’t even present. He spent part of the summer of 1930 in Europe, negotiating to acquire large interests in German gas and electric companies. As a result, studio politics, previously held in check by Fox’s strong, paternalistic authority, ran wild.
The most serious friction occurred between Sheehan, head of all production and chief of the Movietone City lot in West Los Angeles, and Wurtzel, general superintendent of the secondary Western Avenue studio in Hollywood. Neither one was happy. After betraying Fox, Sheehan had failed to gain any reward except an increased salary. He didn’t become, as everyone had expected, president of Fox Film because Harley Clarke took that position for himself. New York head of publicity Glendon Allvine, who found Sheehan to be “always a volatile tycoon accustomed to having his own way,” described their meetings around this time: “[I]n the mornings, he used to work off his tensions by walking in Central Park, and I dreaded the occasional summons to walk around the reservoir with him . . . After a night of drinking and thinking and tossing and worrying, his subconscious sometimes dredged up unexpected broodings and revenges that needed ventilation.”
Wurtzel also stayed stuck in place, once again overlooked and unappreciated. No one seemed to notice that he had run the studio between October 1929, when Sheehan left for Europe, and late May 1930, when Sheehan finally returned to the West Coast from New York. To keep his job, Wurtzel now had to remain mutely in the background while Sheehan launched a major campaign to revise history and establish himself as the driving force of all Fox Film’s accomplishments. Surely it couldn’t have been easy to read the five-page article in the November 1930 New Movie Magazine about the “shrewd and able Mr. Sheehan . . . the man who made Fox Films [sic] what they are today and who turned a dream into a great production program.”
Evidence also indicates that Wurtzel had to loan back to Fox Film the $500,000 bonus that Fox had secured for him and that the money was repaid to Wurtzel, without interest, in $2,000 weekly installments over a period of 250 weeks beginning on May 26, 1930. According to the arrangement Fox had made, Wurtzel was supposed to receive the entire $500,000 within sixty days of April 7, 1930, with 6 percent accrued interest.
Powerless to address the real sources of their discontent, Sheehan and Wurtzel took what they could from each other and from the business. Although he didn’t succeed, Sheehan wanted to close the Western Avenue studio and consolidate production at Movietone City, a plan that was clearly meant to undercut Wurtzel, if not push him out the door. In the same spirit, Sheehan took credit for The Big Trail when it looked as if it would be a hit. Advance publicity material described Sheehan as the “guiding genius of production” whose “finger has ever been on the pulse of this masterpiece from the day of its inception.” After the movie foundered, Sheehan claimed in his deposition for a plagiarism lawsuit that he’d had nothing to do with the movie and that he had never even spoken to director Raoul Walsh about it. Sol Wurtzel, Sheehan now said, had been in charge. That wasn’t true. Sheehan spent a week on location in Wyoming with The Big Trail, and photos show him standing next to Walsh, watching production.
Wurtzel also used The Big Trail for his own purposes. In an action that would have been inconceivable during the hawkeyed Fox regime, Wurtzel assigned his ne’er-do-well brother Ben, previously head of Fox Film’s maintenance department, as the movie’s business manager. Predictably, Ben Wurtzel, who had a long history of cadging loans from his brother that he never repaid, stole from the production. In Yuma, Arizona, he made a deal with a farmer to falsify weight records and bill for four hundred more tons of alfalfa hay than the farmer delivered. Ben took the entire $7,400 excess payment. Another crew member, formerly in the hay and grain business, discovered the fraud after noticing the number of animals and wondering how they could possibly eat so much. Ben Wurtzel wasn’t fired, but returned to his former maintenance department job.
It was no way to run a studio. Murmuring arose that Fox might return. That didn’t happen. What was done was done.
Despite his uncontrollable animosity toward Clarke, Fox tried to help. His name was still on the studio, on the movies, and on the theaters. He later said, “I had constructed this company and I really thought they were desirous of having my advice and counsel.”
The advisory board, for which Fox was being paid $500,000 a year to serve as chairman, met only three times. During those sessions, Fox hammered away at Clarke about cost-saving measures. Of paramount importance, Fox warned, was the need to keep a close eye on the film rental contracts that the studio’s branch offices made with exhibitors. The relationship was key to the company’s profitability, and because there was no uniform pricing structure—every theater had to be evaluated individually according to its location, number of seats, price of admission, and competition—Fox believed it would be easy for crooked side deals to occur. He had therefore always personally reviewed every exhibitor’s contract, whether for $100 or $100,000, and he volunteered to continue to do so for no extra payment, even though the studio did business with about eight thousand U.S. theaters.
Clarke ignored all Fox’s recommendations and rejected his offers of help.
Although Fox was supposed to remain a director of both Fox Film and Fox Theatres for five years, he was invited to only one board meeting for each company and was never notified about the dates of subsequent meetings.
When Fox complained that it wasn’t fair to keep him in the dark, Clarke replied that the new regime was fully competent on its own. Fox commented, “No, they didn’t need any advice. They took me into a room and showed me a stack of books that contained statistics they had just prepared that gave them complete knowledge of the business.”
Undeterred, Fox started writing letters to Clarke. “And I wrote many times. I got tired of writing to Mr. Clarke offering my services, to which he would write a very polite letter and say that if anything came up, he would be sure to send for me—and for some reason, nothing ever came up.”
Fox soon understood. Clarke meant to plunder the Fox companies’ treasuries to generate sales for his General Theatres Equipment.
That may have been the main purpose of Movietone City’s $5 million upgrade. Plans called for the construction of eight new sound stages, all of which would need new equipment, all of which had to be ordered from General Theatres Equipment and Western Electric. In a particularly egregious example of wasteful spending, in late May 1930 the studio ordered forty Grandeur cameras from the J. M. Wall Machine Company, a GTE subsidiary, even though The Big Trail was already filming with three previously purchased Grandeur cameras and even though Clarke would soon decide to abandon Grandeur. More importantly, the J. M. Wall Machine Company had just built a new motion picture camera manufacturing plant in Syracuse, New York, the largest such facility in the United States, and it needed orders. Although no price for the Grandeur cameras was disclosed, they were estimated to cost $7,000–$8,000 apiece. The studio would never use any of them.
As the lower-profile company, Fox Theatres bore the brunt of Clarke’s looting. Although Clarke nominally replaced Fox as president of Fox Theatres, to do the work he appointed as the company’s new executive vice president Oscar S. Oldknow, the former vice president of GTE’s National Theater Supply Company. Under Fox, no theater manager could buy any merchandise on his own authority. Fox said, “It was all purchas
ed at the home office by what we called the meanest man in the world. He would argue longer about one-tenth of one percent additional discount on the balance if you paid it promptly than any other human could argue.” Under Oldknow, all Fox theater managers became responsible for their own theaters. Summoned to New York, they were told to start renovating, with all orders placed through National Theater Supply.
Stories drifted back to Fox. “One theater manager came to me and said, ‘I was at that meeting, but my building was in such fine shape, I couldn’t spend a dollar to improve it. I was sent for. ‘Didn’t you hear the instructions? You haven’t spent anything.’ I said, ‘But I have nothing to spend it for. I have no occasion.’ ‘We don’t want the buildings in fine shape, as under the Fox regime. We want them superfine, as under the Clarke regime. You go on and do something.’ ” If he didn’t, the theater manager understood, he would be fired. Consequently, although he had installed the best carpet available only six months before, the theater manager had it torn up and replaced “at cost, plus 15 percent.” Similarly, a Fox Theatres executive had bought a new marquee for a California theater from another vendor on a competitive bidding basis. Clarke made him cancel that contract and buy the same item through National Theater Supply at a 15 percent markup.
The chiseling cost more than money. In September 1930, Harold B. Franklin, president and general manager of the West Coast Theaters division of Fox Theatres, quit after Clarke called him to New York and ordered him to refurbish all 513 of his theaters—the chain now extended as far east as Illinois—even though none of them needed it. Fox met Franklin in the hallway right after that discussion. He and Clarke had had a “terrific” argument, Franklin said. No wonder. With an annual base salary of only $65,000, Franklin drew most of his compensation from his 10 percent profit participation in West Coast’s earnings. (Franklin had gotten that contract provision not from Fox, who didn’t believe in profit-sharing arrangements, but from West Coast’s previous owner, the Hayden, Stone banking firm.) During the first half of 1930, West Coast earned net profits of $3.5 million, an amount that would be obliterated if Franklin spent the $4–$5 million that Clarke wanted. At most, Franklin offered to place the needless orders only if the expense didn’t reduce his income. Clarke preferred to let Franklin go and bought out the remaining seventeen months of his contract for $500,000.
Fox considered Clarke’s decision “a most stupid and asinine act.” Franklin was, Fox said, “one of the finest assets the corporation had, one of its best executives.” Franklin went on to RKO, and West Coast Theaters quickly slid downhill.
While spending millions of dollars on unnecessary refurbishments, Fox Theatres slashed movie rental fees to other studios. In November 1930, eleven United Artists stars and producers, including Mary Pickford, Charlie Chaplin, Douglas Fairbanks, Al Jolson, Ronald Colman, Gloria Swanson, D. W. Griffith, and Sam Goldwyn, denounced Fox West Coast Theaters as “an arrogant monopoly” seeking to stifle art. According to the UA group, the circuit had introduced a new price structure “so low we cannot accept it and continue to make the kind of pictures we want to create. The monopoly intends to pay us less and charge the American public as much as ever.” Unless Fox West Coast relented, UA would prefer to show its movies in tents, armories, and halls. Clarke didn’t budge, and in his public statement on the matter, he referred to the UA luminaries as “old-time actors” with an inflated sense of their value to the moviegoing public.
While he enjoyed honeymoon treatment in the press, as early as the fall of 1930, Clarke was in hot water with his bankers. The only successful piece of the Fox companies’ three-part refinancing was Halsey, Stuart’s $55 million issue of Fox Film notes. Secured by the Loew’s shares and by Fox Film’s percent interest in the British Gaumont theater chain, they sold out.
In sharp contrast, the GTE securities offerings drew almost no response. Investors bought less than $2 million of the $30 million in GTE bonds that went on sale on April 23, 1930, and they also failed to buy much of the May 1930 offering of 433,000 new shares of GTE stock, for which the bankers had paid GTE $18 million. In October 1930, after five months of dismal sales, the Chase Bank loaned Clarke $6 million to organize several trading syndicates to buy and sell both GTE and Fox Film shares in the hope of propping up their prices and attracting buyers. However, the investing public, so euphorically gullible just two years before, was no longer eager to have all its feathers plucked. GTE was essentially worthless, and Fox Film was overspending and underearning.
During the next six months, despite the attempted stimulus, both GTE and Fox Film stock prices tumbled head over heels. Two of the brokerage firms that participated in the trading syndicates were ruined. Pynchon & Co., formerly one of the nation’s largest financial houses, was suspended by the New York Stock Exchange on April 24, 1931, for financial instability arising mainly from its GTE and Fox Film trading activity. As Fox heard the story, on the day of the suspension, firm head George Pynchon pulled a $5 bill and two singles from his pocket and told a colleague, “This is all I have got left in the world.” Four days later, West & Co., $5 million in debt, filed for bankruptcy. As the ultimate underwriter of the new GTE shares, the Chase Bank got stuck with most of them and would never be repaid the $6 million it loaned to fund the stock market manipulations.
As if all that weren’t trouble enough, Clarke alienated his previous supporters Harry Stuart and John Otterson. Stuart had wanted his firm, Halsey, Stuart, to handle most of the refinancing, but the Chase Bank, which had loaned Clarke the $15 million to buy Fox’s voting shares, had insisted on control. In a meeting at Clarke’s office on April 8, 1930, Stuart complained, “I have been put out on the end of a springboard and told to jump off.”
A few months later, Stuart had completely reversed his position. He wanted out. Watching the Fox companies beginning to crumble, he feared there would be no money to repay the $55 million in Fox Film notes that his firm had underwritten. What would happen to Halsey, Stuart’s reputation? According to Fox, Stuart went “on a rampage to discover whether the leopard had changed its spots” and sent spies into the Fox companies. After learning about the waste and graft that was shoveling money out of Fox Film and Fox Theatres and into GTE, Stuart told Chase Bank officials that his firm would not renew the $55 million in notes if Clarke remained in power. Stuart wanted ERPI’s John Otterson installed as president of the Fox companies.
Otterson also felt betrayed by Clarke, who had dropped his friendly demeanor as soon as he had what he wanted. Otterson had expected Clarke to sign a new sound recording contract for Fox Film immediately after taking office. For six months Clarke stalled and pettifogged. When the two finally met on October 9, 1930, Otterson insisted that Clarke had a moral obligation to keep his word. No, Clarke replied, he would sign the new contract only if ERPI could prove he was legally obligated to do so.
Doubtful that Clarke would do even that, Otterson tried a different tactic. He now demanded “proper collateral” for the $5 million that ERPI had loaned Clarke to help him buy Fox’s voting stock and for ERPI’s endorsement of two bank notes totaling $3.875 million. Proper collateral? Clarke didn’t have any of that. On November 14, 1930, he grudgingly signed the contract that Otterson wanted.
Then he retaliated. Within weeks, Clarke’s National Theater Supply began competing directly with ERPI by selling sound equipment and replacement parts to the motion picture industry.
Stuart and Otterson had managed to oust Fox only to end up with an even more obstreperous colleague—one who, unfortunately, lacked any of Fox’s film production genius.
Rather than fret over his troubles, Clarke lied. Did the truth really matter as long as a great many people could be persuaded to believe something else? Could not the something else, by standing in for reality, become reality? It must have seemed worth a try.
Above all, Clarke had to make himself look better than Fox. He first set about making Fox look worse. In late June 1930, he issued a 1929 annual report for Fox Film
downgrading earnings performance. Less than two months earlier—when the company was marketing $55 million in gold notes through Halsey, Stuart—ads stated that 1929 pretax net profits had been $13.97 million, higher even than Fox had estimated. Now that the gold notes were all sold, Clarke lowered the figure to $10.74 million. Then, on August 26, 1930, Clarke sent a letter to Fox Film stockholders with a balance sheet full of cheery news about the first six months of the year: net profits totaled $7.175 million, compared to $7.054 million for the last half of 1929; current assets were up by more than 30 percent, from $23.4 million to $30.4 million; and cash on hand had increased from $2.5 million to nearly $7 million. Everything was improving, Clarke wrote, expenses were dropping and income continuing to climb. Word circulated that Fox Film’s annual dividends might increase from $4 to $5.
The numbers were phony. They drew the attention of John W. Pope, a young, highly regarded New York statistician who had started two investment companies that actually increased their asset value during 1930 to more than $4 million. Scrutinizing Clarke’s report, Pope saw that accountants had taken regular operating expenses and classified them as extraordinary expenses so they could be deducted from the company’s cash reserves rather than counted against earnings. Pope believed that Fox Film’s earnings should have been expressed in cents, not dollars. He wired all his associates and clients nationwide, advising them to sell their Fox Film stock. Unsurprisingly, Clarke had him brought up on charges before the New York Stock Exchange governing committee. Pope was completely exonerated.
