by Connie Bruck
By 1961, it was evident to Wasserman and Stein that time was running out for them in the agency business. About three years earlier, the Justice Department’s antitrust division had commenced an investigation of MCA, and it was now energized by the interest of the new attorney general, Robert F. Kennedy. Stein would always insist that Kennedy’s interest had been sparked by Frank Sinatra, whom Wasserman had clashed with and ultimately “fired” as a client, and who, Stein believed, was carrying out a vendetta against MCA. But one really did not have to resort to conspiracy thinking to explain why the Justice Department was focused on MCA; indeed, the more interesting question would be why no fewer than eight investigations of MCA by the antitrust division had been aborted since 1941.
During the fall and winter of 1960, a young Justice Department attorney named Leonard Posner, assigned to the MCA investigation, had begun conducting interviews in New York. Among many others, he had spoken with Pat Weaver, the former president of NBC. Weaver, who described MCA as “tough and efficient,” told Posner about MCA’s use of packaging, which was a version of the antitrust violation of a tie-in—that is, using one’s power over one product to sell another (which is illegal because it means that others, who do not have power over the most desirable products, cannot break into the market). The situation had arisen when NBC wanted the actor Phil Silvers for a show it was producing. (Silvers had been a star on Broadway and, by the late fifties, was also enormously successful on television; he played Sergeant Bilko on the hit series The Phil Silvers Show.) “NBC had production facilities and was ready to go ahead with top scripts, writers, and directors and had its own facilities in Burbank, California, and merely wanted a star from MCA,” Posner quoted Weaver as having told him. “MCA would agree to furnish Phil Silvers but only if it got a commission not only on Silvers but also on the salary of all producers, directors, writers, etc., employed in the show. If NBC remonstrated that it wanted the best writers, and that some of the best writers were not those in the MCA stable, MCA would simply say, ‘That’s the deal; that’s the way it’s got to be.’ ” Not only were such practices anti-competitive, but they could also result in MCA’s serving their own interest to the detriment of their client’s. An independent producer might be prepared to pay a star $10,000 for a show. But if MCA were to demand 10 percent of all the above-the-line costs—say, $25,000—despite the fact that the independent producer had already arranged for a director and other talent, then that would mean that the producer would have to pay a total cost of $35,000 for a star worth only $10,000. And that might well mean the producer could not afford to hire the star.
Weaver also told Posner that MCA’s packaging in TV was an adaptation of what it had long been doing in the movie industry; if a studio wanted a top box office star, MCA would insist on furnishing all the talent for the picture. Its leverage in these situations was enormous, because the top stars were the only ones who were bankable—without at least one of them in a movie, it would be almost impossible to obtain bank financing. And MCA represented at least 70 percent of these stars, according to Weaver’s estimate. (Fortune magazine in 1960 estimated about 60 percent.) Included in its roster were stars such as Marlon Brando, Gregory Peck, Kirk Douglas, Clark Gable, Jimmy Stewart, Marilyn Monroe, Shirley MacLaine, Tony Curtis, and Janet Leigh; and personalities such as Jack Benny, Ed Sullivan, and Ralph Edwards. Also immensely bankable were directors Alfred Hitchcock, Mervyn LeRoy, Leland Hayward, and John Ford; and writers Tennessee Williams and William Inge.
Mike Dann, who had been Weaver’s assistant at NBC, was also interviewed by Posner, and elaborated on what Weaver had told him. “General Sarnoff would frequently bellow in rage at the idea of paying tremendous commissions to MCA for packaging the show when NBC did its own packaging,” Posner quoted Dann as having told him. But Weaver had had considerable experience with MCA, and he knew if he wanted its talent he had to play by its rules; so despite the General’s protests, MCA would collect a commission on all above-the-line costs. Later, Dann told Posner, MCA extended their demands to a commission on below-the-line costs as well. (Another witness told Posner that MCA’s view of below-the-line costs was expansive; in one instance, they had taken a percentage of what a trucking company had charged for hauling equipment, and a cut of the truck driver’s salary as well.)
Dann, who had worked for Weaver in the early fifties, had been inspired by his boss’s almost messianic conviction that television, properly developed, could become a force to transform people’s lives. That it had instead become such a pedestrian, even dulling, medium, Dann attributed in part to the pervasive influence of MCA. He argued that creativity was being stifled because MCA had so appropriated the production business that there was a dearth of other programming sources; and MCA was “merely interested in money, not creativity, and hence wants only shows which are in the standard format design, to bring in the biggest ratings by appealing to the largest mass audience.”
In February 1961, Posner wrote a lengthy memorandum describing what he believed to be MCA’s antitrust violations. He acknowledged that some of the allegations were based on hearsay but said that he considered the overall picture “generally reliable.” And he had, indeed, assembled many elements that were critical to the MCA narrative. Among them were tie-ins, exclusive contracts, packaging, demanding packaging commissions even when MCA had not done the packaging, conflicts of interest, omnibus contracts, coercive dealings, blacklists, bribes, procuring women, luring talent from other agencies with houses, cars, and huge sums of money, withholding of top talent from competitors. “Perhaps the most striking measure of MCA’s power over networks,” Posner wrote, “is the fact that MCA is able to insist on commission for all above-the-line costs (talent), even where the network supplies most of the talent, and for all below-the-line costs (facilities, production components), even where the network produces the show.” He concluded that MCA’s power was ever increasing—due to its control of a large percentage of the most sought after talent, the largest percentage of productions on network prime time, production facilities, literary works, and its unparalleled entrée to networks, advertising agencies, and sponsors. “Each dominant position feeds and reinforces MCA’s control of other facets,” Posner wrote. “The totality of control, through all these facets, is such that MCA wields monopoly power.”
The government investigation would continue for nearly eighteen months. During that time, Bobby Kennedy repeatedly would ask in internal memoranda to be informed of the progress of the investigation, and he would urge “faster action.” On one occasion early in the investigation, Posner explained that “it would be important to try to have a grand jury in the MCA matter because the witnesses were frightened to death and we wouldn’t expect to be able to get any specific direct evidence without the cloak of secrecy of a grand jury.” He also said that there was no likelihood of obtaining any direct evidence from MCA; he had been told that “MCA is not only cleansing its files but has actually maintained specific records in anticipation of our forthcoming antitrust suit.” To that end, it had also amended its behavior, he concluded. As he wrote in a memo in August 1961, “MCA has refined its practices in television to the point where the violations are not readily perceptible, and it will require proof of a most difficult order . . . the evidence of tie-ins, once so flagrant in the band business, have become the most subtle type of practice in the television field, where the advertising agency (knowing what the facts of life are) themselves offer to buy poor shows, knowing that that is the only way they are going to get good ones.” He also noted that the evidence thus far gathered on the West Coast was not quite as strong as that obtained in New York. “People on the Coast are extremely frightened and chary of talking against MCA.”
On August 31, 1961, Lee Loevinger, the assistant attorney general in charge of the antitrust division, wrote a memo to J. Edgar Hoover, director of the FBI, requesting an FBI investigation of MCA. He placed particular emphasis on MCA’s relationship with NBC, saying that many in t
he television industry believed it was a “captive market” of MCA, and that Robert Kintner may have entered into “a secret agreement (written or oral) with MCA providing for a continuous flow of programs.” Summarizing the thrust of the government’s investigation, he stated that MCA’s drive to monopolize television production appeared to be built on two pillars: the blanket waiver from SAG, and an exclusive agreement with NBC. He was asking the FBI to look for evidence of conspiracy in both.
A few days later, the Justice Department’s requests for a grand jury and FBI investigation were authorized. Almost immediately, articles appeared in the trade press stating that MCA was planning to divest its talent agency from its production business. The Screen Actors Guild, furthermore, announced that by the end of 1961, it would revoke production waivers it had given to talent agencies, with no extensions beyond June 1962; by that date, therefore, MCA would have to be out of one business or the other. SAG executives would always maintain that they took this action independently of MCA. “We told Posner we were going to shut MCA down, that it had gone too far. Posner should have been thrilled with that—but he didn’t know how to accept a victory,” SAG executive Chet Migden said. He added, “Lew knew it couldn’t go on, it had gotten too big.”
Wasserman and Stein evidently thought that the SAG move was likely to short-circuit the government’s plans—and, as Migden indicated, even give the prosecutors some reward for their pains. Stein would later say that he and Wasserman had been making plans to cut away the talent agency for some time. “We wanted to do what the movie companies did with their theaters,” said Stein, referring to the divestiture following the Paramount Decree, in which his friend Ed Weisl had been much involved. And Stein—in traditional MCA style—had also been active on another front. Shortly after President Kennedy took office in January 1961, Jacqueline Kennedy had decided to conduct a massive restoration program in the White House. The Steins (notwithstanding Jules’s right-wing political views) volunteered to contribute. And on May 11, 1961, Jacqueline had sent them a handwritten note. “It is a wonderful thing that anyone would be so generous—and I’m so happy it is you—as all I hear from everyone is how beautiful—and perfectly arranged your collection is—and what great taste you have.
“There was never any Chippendale or Queen Anne in the White House, which breaks my heart as I love it the most. . . . There is one other place I would be so grateful for your help. . . . It is the 2nd floor hall (outside our yellow oval room—I’m sure you saw it with Tish [Letitia Baldrige, her social secretary]. It is just a sad collection of tired old mismatched stuffed chairs and department store tables and lamps. It looks like the lobby of a rather dreary hotel. . . . the reason this hall is so important is that all the important visitors the President brings upstairs pass through it and wait in it. It is where foreign dignitaries assemble before state dinners. All it has now worth keeping are 3 lovely old crystal chandeliers—and the Catlin paintings of Indians I have borrowed from the Smithsonian, which they may loan to us permanently.”
In the fall of 1961, however, Justice Department officials contacted Baldrige and told her that the Steins’ intended gifts could not be accepted. And Bobby Kennedy agreed with his prosecutors’ decision to move aggressively with their grand jury and FBI investigation. (As Loevinger wrote in a memo, “The Attorney General has indicated a personal interest in this case and has directed that it be investigated fully and promptly.”) MCA’s indicated plans to divest itself voluntarily of the agency had not had the desired effect. Posner was convinced that unless the divestiture were supervised by a court, the possibility of behind-the-scenes cooperation between the talent agency and production company would remain; that the split would not be bona fide. It seemed to him, too, that the SAG ultimatum and MCA action were utterly orchestrated; he was convinced that MCA was dictating the course of events, not being acted upon.
Indeed, relations between Wasserman and the SAG officials had grown only more incestuous since they had granted him the waiver in 1952 and MCA had become the most active producer in Hollywood. For years, SAG members had been demanding that they be paid residuals when movies in which they had appeared were shown on television. A great deal hinged on how this matter was resolved for MCA—with its ownership of the Paramount pre-1948 library (and, also, some believed, Wasserman’s plans to acquire the rest of Universal Pictures, now that he owned its physical plant). In 1959, Reagan—who had left the SAG presidency in 1952 after MCA got its waiver—had been asked to resume that office and lead the union’s negotiations with the studios. “We needed him,” Jack Dales, SAG’s executive director, said. “There was no other actor like him. He could make people believe.” Reagan, in his autobiography Where’s the Rest of Me?, would write that he had not really wanted to become SAG president again, since he thought it had taken a toll on his acting career. “I called my agent, (MCA’s) Lew Wasserman—who else? I knew that he shared my belief that my career had suffered. To tell the truth, I was positive he’d reiterate that belief and I could say ‘no’ with a clear conscience. Well, I pulled the ripcord and the chute didn’t open. Lew said he thought I should take the job.” After a bitter six-week strike, Reagan recommended the following settlement: the studios would create a pension and welfare plan for actors—and the actors would forfeit all claims to residual payments for television showings of movies made prior to 1960. For decades to come, Reagan would be vilified for having recommended this forfeiture of pre-1960 residuals. Shortly after this settlement was made, Reagan resigned the presidency of SAG to become a partner in a joint production venture with MCA and Revue Productions.
In February 1962, when Reagan was called before the grand jury, he was questioned about both the 1952 waiver and also the 1960 strike settlement. Among other things, the government was interested in whether he had an ownership interest in films or TV productions during his tenure as SAG president. SAG tradition had long held that its officers should not be producers, because that could pose a conflict of interest; indeed, Reagan had first risen to the SAG presidency back in 1947 when seven of the union’s top officers resigned because they had financial interests in films in which they appeared; Reagan, the highest-ranking officer not to resign, was elected to fill the president’s un-expired term. Rumors that Reagan had such financial interests himself—but, unlike his colleagues, had chosen not to disclose them—had surfaced when he was named to his sixth term as president in 1959. SAG’s official publication, Screen Actor, had come to his defense in an editorial in December 1959, stating that Reagan was the object of “vile and unscrupulous tactics” and “false rumors.” However, in his grand jury testimony, which would remain secret for more than twenty years until obtained by Variety, Reagan acknowledged that he had been given a “25% ownership” interest in the reuse rights of General Electric Theater in the spring of 1959—so the rumors, which had been so heatedly denied, were in fact true. Reagan testified that he had been granted this interest in discussions with Wasserman.
What the government was looking for, however, was not just signs of favor like Reagan’s job as host of General Electric Theater or his financial interest in the show, but evidence of outright payola; Reagan’s tax records, and other SAG officials’ as well, were examined. By this time, the government had decided to focus its attempt to prove conspiracy on the MCA relationship with SAG, and not NBC. “The case was twofold,” said Gordon Spivack, a Justice Department lawyer who ultimately made the recommendation to Bobby Kennedy on the disposition of this case. “Did they bribe someone to get the waiver? And did they do these tie-ins? The waiver looked like they must have bribed someone. But we put Reagan in front of the grand jury, and he said he got nothing—and we weren’t able to find any checks,” said Spivack, evincing a certain naïveté about the ways of MCA. “And as for the tie-ins (we won’t give you this actor unless you take this package, or we won’t give you this show unless you take these), we had a lot of smoke but no fire. People would either say it hadn’t happened or, if they did
feel coerced, you’d ask why, and they’d say, well, he didn’t say you have to do x, it was more of a feeling, or ‘I understood I had to.’ Now, maybe they’d gotten to these people—I’m not going to tell you the investigation wasn’t inept. They had a small staff, seven or eight people. They were putting hundreds of witnesses in front of the grand jury. They needed to locate them. So they decided to use the FBI. That in itself was okay. I said to them, so how did the FBI find these people? They said, they went to the union [SAG]. I said, the union? How could they go to the union? We are investigating the union! They were going with lists of people, turning over the lists—and, in some cases, a series of questions, too. So the union knew who was going to be called before the grand jury!”
Spivack concluded that however the investigation might have been subverted, the evidence was not strong enough to bring a criminal case. Posner and the other staff attorneys, however, disagreed; they believed MCA should be indicted, and they were afraid that it was MCA’s power that would somehow prevent it from happening. In any event, at a meeting with Bobby Kennedy and a couple dozen Justice Department lawyers in June 1962, Spivack explained his recommendation that the government should bring a civil, but not a criminal, suit. “Bobby Kennedy said, ‘Did you talk to Frank?’ ” Spivack recalled. “I said we had called him several times but he was out of the country. (Kennedy was then very tight with Sinatra, and Sinatra and Wasserman were on the outs. MCA had dumped him. And Sinatra had heard a conversation where Wasserman had said to someone about Sinatra, ‘Don’t bother with him. He’s through.’)”
While the government was weighing its options, MCA attempted to seize the initiative. On June 18, Wasserman consummated what he had begun back in 1959, with MCA’s purchase of the Universal lot; now, MCA acquired Decca Records Inc. and Decca’s subsidiary, Universal Pictures Company, Inc.—thus fulfilling Wasserman’s goal of becoming a diversified entertainment company, dedicated to television and movie production, and music, too. Universal also had an international distribution system, which would be vital to MCA as it moved into movie production. At the same time, Wasserman was proceeding with his plan to spin off the talent agency, by selling it to two trusted, senior MCA agents, Larry Barnett and George Chasin, who were to pay MCA $1 million a year for ten years. (Sonny Werblin had offered to head the new agency, but Wasserman—no doubt anticipating that Werblin would be less than subordinate—declined his offer.) On July 3, Wasserman sent a notice to the Screen Actors Guild that MCA would surrender its agency franchise on July 18, and MCA lawyers informed the Justice Department of this action, too.
