by Connie Bruck
There were still many unresolved issues, however, and the litigation continued for a number of years. Eventually, MCA—with Baity as its lawyer—took the lead. He said he retained one image, years later, from his meetings with Wasserman. “Lew had this perfectly clear desk, and this was his habit: he would take his letter-opener, long, like a stiletto, out of his desk drawer, and turn its point on the desk, as he talked to you,” Baity said. In the mid-seventies, the television networks entered the fray, arguing that they, not the motion picture studios, were entitled to the investment tax credit; and Baity made a motion for summary judgment, trying to knock out ABC as a litigant. He lost. “Lew called, and said, ‘I guess you’ve lost your touch,’ ” Baity recalled. “This was after years, and all the successes. He had never called to say, ‘Great!’ when we won.”
By the summer of 1976, the long saga of the investment tax credit seemed about to have an idyllic ending for the motion picture industry. A section of the Tax Reform Act of 1976 had been drafted to resolve the unsettled issues—and, after much suasion, it had been done in such a way that was altogether pleasing to Wasserman. But then he learned that Senator Edward Kennedy was offering an amendment to the bill that would allow all these hard-won provisions in regard to the past—but would disallow the investment tax credit to the motion picture industry for the future. The investment tax credit had been passed as part of legislation during his late brother’s administration, and Kennedy was convinced that it had not been intended for movies.
That was when Senator John Tunney, the junior senator from California, heard from Wasserman. “I had a car phone (one of the few that was available then), and I got a call from Lew. He said Ted Kennedy was offering this amendment, to take the investment tax credit away from the movie industry. ‘Jack Valenti says you’re the only one who can beat Kennedy.’ Wasserman and Valenti felt my taking on Teddy was important, because we were known to be close—and they knew I was close to a number of freshmen senators, too, whom I could probably bring along. I said, ‘Lew, I am in San Francisco for this big fund-raising dinner. I can’t not show for it. I am campaigning very hard! I need my dinner!’ He said, ‘We need you. We need you to go to bat for us.’ I made a decision I would not go back—but then, ten minutes later, I turned around and took a plane back to Washington.” He would have netted $40,000 to $50,000 from his fund-raising dinner, he added. “That was a lot of money then—I only spent $2 million on my whole campaign.”
Kennedy opened the debate on the Senate floor on August 4. “The investment credit has traditionally, historically, and for sound reasons, been targeted on machinery and equipment, in order to increase competition within capital-intensive industries like manufacturing. It was never conceived as a means or device to apply in the area of personal services.” Moreover, he argued, “since a large part of the costs of motion picture and television films result from personal efforts of actors, directors, and producers, it is inequitable to allow the investment credit for this particular result of personal efforts, when it is not available for other personal efforts, such as books, stage plays, paintings, records, or other works of art. . . . Why should there be an investment credit for John Wayne’s salary in a movie, but not for John Denver’s work when he makes a record?”
Tunney did not attempt to address Kennedy’s points. Instead, he relied on the staples of motion picture industry defense. He stressed the importance of the industry to the American economy (“We were able to bring into this country $400 million as a result of the showing of American films overseas . . . [an] extraordinary benefit to our balance of payments”). He described the high unemployment within the industry. And he tried to counter its members’ image as a particularly moneyed, privileged class. “I might further say that to some the motion picture industry is a whipping boy, and I am afraid this has frequently been the case here on the floor of the Senate. . . . It is so obvious to me that some people who do not understand this industry believe that all the screen technicians somehow live the life of Riley, sitting around swimming pools drinking martinis all day. The great bulk of the people who make up the motion picture industry are average hardworking men and women trying to earn a living.”
A senator from Alabama, James Allen, tried to cut to the bottom line. “Is it correct that a picture like Jaws that made tens of millions of dollars in profits should cost, say, $10 million to produce, that . . . 7 percent of that [$10 million] be treated as investment tax credit, and that $700,000 should be stricken from the tax liability; is that correct?” Tunney gave a somewhat waffling answer, and Allen said he would support Kennedy’s amendment.
Kennedy, for his part, tried to make the big picture vivid. “We are basically talking about a $30 million item in this tax bill. If we were to have an appropriation before the Senate this evening that said, ‘We are going to spend $30 million of American taxpayers’ money on movies,’ I wonder how many votes there would be on the floor of the U.S. Senate for a direct subsidy like that. Yet we are providing the same amount of subsidy through the tax laws.”
The vote was thirty-three in favor of Kennedy’s amendment, and forty-nine opposed. George Smith, who was watching the vote, raced to the phone to report to Wasserman. “Mine was the second call he got. Alan Cranston [California’s other senator] had called Lew from the floor—‘Done!’ ” And Tunney, who had led the opposition to the amendment, had played an extremely important, if not definitive, role. He said that after he had returned to Washington, he persuaded about five freshmen senators who were going to vote in favor of Kennedy’s amendment to change their vote.
Wasserman was a very important backer of Tunney’s. He had been one of his top twenty supporters when Tunney first ran for the Senate in 1970, and he was one of his top ten in 1976. Indeed, that year he gave Tunney the use of the Universal Amphitheater for a fund-raising event where Diana Ross performed and Warren Beatty was the master of ceremonies; Tunney raised $350,000. But until the moment that Wasserman reached him in his car in San Francisco, Wasserman had not asked anything of him, Tunney said. “We’d go to dinner, the three of us—Lew, Edie, and me. He was always a perfect host, did things with a lot of style. Always appropriate in the way he handled the situation, as related to raising money, to handling the relationships with a senator. He’d go out of his way and help me with little things—I’d want my children to go to Universal Studios, for example, and he’d make sure his people handled it. He was so attentive—I thought it went back to his days as an agent. With me, he was always operating on a very high level, and on a very friendly basis. I remember once he called me at night and said, why don’t you come over for breakfast? I did. Edie came by, but it was just the two of us. He had this wonderful butler. Lew was gracious, hospitable, friendly—and never talked in a heavy-duty way about the issues. He would question me about education, civil rights, foreign policy—but not his specific business interests. He had people who did that—George Smith, Valenti, others. But even then, it was never something just for MCA, but for the industry as a whole.
“And he never put the muscle on, until that time,” Tunney continued. He added that it was not as if Wasserman was asking him to compromise his principles. “Lew and I had discussed the investment tax credit, and I’d told him I was in favor of it—I’d probably even said it at a fund-raiser at Lew’s house!” When Wasserman called, in any event, the reality was inescapable. “I needed the entertainment industry. And when Lew wanted to, he could exert enormous power.” Tunney paused, seeming to reflect on that—and then summed it up: “The truth is, I didn’t have a choice.”
Long after Stein had turned the company completely over to Wasserman, he would still come to work most days, taking the small private elevator from the tower’s fifteenth floor, where the executive offices were, to his penthouse office just above; he had had French doors constructed for his office in an effort to counter the starkness of Wasserman’s building. And Wasserman, to whom every second counted, would generally take the time to go upstairs a
nd consult with Stein—who still, after all, owned nearly 20 percent of the company stock. Considering how Wasserman felt about any failure of allegiance (leaving the company was a violation, challenging one of his rules a capital offense), it seems likely that he never forgave Stein for almost firing him, after Wasserman had worked for him for more than thirty years. Even before that near-betrayal, there had evidently been the strains that are almost inevitable in a relationship between founder and putative successor that continues for several decades. “Jules and Lew always seemed proper to each other in front of me,” said David Wexler, echoing what many others who observed the rather formal pair had indicated. “But what I understood from Don Rosenfeld was that Jules had given Lew the power to run the company, but when there were big decisions, Lew had to come to him. And for Lew, this went on for so many years, and Jules would not die.”
In old age, Stein continued to read the same five newspapers every morning. (He read the obituary page first, to see whom he had succeeded in outliving.) He was peremptory as ever. Amanda Dunne, the lovely wife of screenwriter Philip Dunne, recalled being seated next to Stein at a luncheon. “We were chatting, and finally he said, ‘You’ve had three cigarettes in less than two hours.’ ‘Yes.’ ‘Well, I want you to give up smoking.’ I thought—! And who are you? But he was substantial; he paid attention; he was at ease in his skin. Not Doris,” Dunne added. “We were sometimes her designated drivers home at the end of a dinner. Jules would leave early, and Doris would always have drunk too much to drive.” Jules seemed to have finally lost patience with Doris’s pretensions (“you and your anti-Semitic friends!” he once rebuked her), but he did not return to the observant Judaism of his youth; he sometimes remarked that his sister Ruth Cogen went to synagogue for him. He was concerned enough with posterity that he granted numerous interviews about his life to former New York Times reporter Murray Schumach—but, characteristically, he retained control over this material, and it was never published. The imprint of his early experience with inflation in Germany never left him, and in the seventies he became convinced that this country was on the verge of a terrible depression. Stein’s frugality (which somehow coexisted with his extravagance in certain areas) never diminished. He would only fly tourist class. (When he was critically ill, he was booking a flight home to Los Angeles from New York. He refused to fly first class but instead booked three seats in economy, so that he could lie down—with the proviso that if the plane was not sold out, the airline would refund him the cost of the two extra seats.) He instructed family members away from home to call collect; he would refuse the call, and return it on his corporate WATS line. He was very proud of the fact that his granddaughter Katrina vanden Heuvel attended Princeton University; but when she sent him a bill for her books, he returned it, saying that she should be paying for such things herself. And he tried to impose his will on his grandchildren, as he had on his daughters. He was very concerned with how they dressed; when Katrina, as a teenager, chose hippie-style flowered skirts and platform shoes, he took her to the illustrious costume designer Edith Head, who had an office on the Universal lot, and asked her to design Katrina’s wardrobe. “I know my grandparents hoped to marry me off to a prince,” said Katrina. “They made my sister, Wendy, and me practice curtsying for days before Prince Charles came.”
Stein continued to have a deep reservoir of emotion, generally well guarded, but there was an occasional rupture. His daughter Susan was critically injured in a motorbike accident, and all his self-control evaporated. “This is the worst thing that has ever happened to me,” he murmured. “Jules! Get ahold of yourself,” Doris remonstrated. And with his daughter Jean—his favorite, who flouted him—he continued to find ways to express his disapproval. She loved the Middle European music box with revolving instrumentalists that he always kept near his desk, and she would ask him on occasion if he would leave it to her. “It’s going into inventory!” he would reply brusquely. But on MCA’s fiftieth anniversary, in 1974, he gave her a copy of the company’s annual report, with the following inscription: “To my daughter Jean, with whom I disagree politically, socially, financially, economically, and otherwise, but still love very much. Devotedly, Father.”
He never stopped keeping count—of clear financial wins and losses, and of the maddening what-might-have-been of a missed opportunity. In 1962, shortly after MCA had acquired the Columbia Savings and Loan Association in Colorado, Jules and Doris attended the opening of a branch in Fort Collins, Colorado. Jules had commandeered Jack Benny as the featured speaker; he was also doing TV commercials for the S&L. As Stein was leaving the event, a man appeared at his elbow carrying a large box; he said it was his invention, and he was presenting it as a gift in the hope that Stein might become his business partner. “I felt like throwing the carton at this fellow,” Stein said. “I wanted no part of the thing. I had had a long day and was carrying two heavy briefcases, and the last thing I wanted was a big box to carry on the airplane. Well, anyway, I got it home and the directions said to open it in the bathroom, plug it in, and follow the directions. So I took it to our upstairs bathroom. It has mirrored walls and a mirrored ceiling. I scanned the directions. I did not read them too carefully. I filled the container with water and I plugged the contraption into the electrical outlet.
“The next thing I knew there was water squirting all over the place; all over the mirrored walls and even the mirrored ceiling. It was a mess. I guess I must have made a lot of noise while this contraption was squirting water. . . . Next thing I knew Doris was there. She was very angry. So I just shoved everything back into the box and forgot about it.
“This contraption that I decided to forget about later became famous as the Water Pik, one of the most successful items on the international market in years. The man who handed me the carton was Gene Rouse, for many years the president of the company. Many years later, when I was thinking what a fool I had been, I got in touch with Mr. Rouse just to find out exactly how much our company lost by my failure to pay attention to the directions on this device. It made me feel worse than ever.” Rouse told him that when he had approached Stein, the company he had formed the year before to market this device was almost broke, and he was desperate. “For an investment of $100,000 or much less, I would have gotten down on the ground and kissed your feet,” Rouse said. Shortly thereafter, Rouse managed to find a backer who invested $17,000, and in 1963 the company turned around. By 1966, Stein learned, it had made $2,616,483 before taxes; then it merged into Teledyne in a tax-free stock exchange for $16 million of Teledyne stock.
These numbers did not allow Stein to make his desired calculation with precision. “I was still curious about how much we lost by not going into Water Pik at that time, so I called Rouse again,” Stein continued. He learned that if MCA had put in $100,000, it would have been worth $50 million by 1967 (and substantially more by 1975, when Stein called Rouse for the second time). “Since that day when I turned down the chance to get into Water Pik in a big way, I’ve visited dentists because of my teeth. All of them tell me to use Water Pik. This advice upsets me as much as my teeth.”
But Stein comforted himself with this observation: “Counting up all my mistakes, I’m still millions ahead.”
His interest in the market and the daily fluctuations of MCA stock did not abate. In the early seventies, he met a young Wall Street research analyst and broker named Laura Sloate, who was blind. While Stein may have first become interested in her because of her handicap and her ability to overcome it—she founded her own firm in 1974—he quickly came to value her acumen. She advised him on investments for the MCA profit-sharing plan (“Mr. Stein was giddy when the MCA stock ran up after Jaws—the plan became really big then,” Sloate recalled), and he introduced her to people like Billy Wilder and Richard Rodgers, the composer. She was somewhat in awe of Stein—“I thought he had become so successful because he had a genius capability of seeing opportunity before others did”—and, perhaps for this reason, was never able to relax
in his presence. “It was rare that I would ask him a question; my function was to answer his questions. I found him scary—but he was very generous and kind to me.” Not long before he died, he gave her something he said was to remember him by: a $20 gold coin from 1923 (the year he graduated from medical school), split, with a watch placed inside.
Stein had been focused on his estate planning for decades. As the avatar of creating ingenious schemes to reduce or avoid taxes at MCA, it must have galled Stein not to be able to find any way around a high estate tax. He estimated that under the prevailing tax structure, estates of wealthy individuals were subject to a federal tax of 70 percent—and, after adding various other costs, the figure would reach 75 to 80 percent. “I find no single method of passing on substantial wealth to beneficiaries,” he concluded. In addition, though, Stein by this time may have preferred to leave the bulk of his wealth to the institutions for which he held such high hopes. In any event, it was decided: Doris and he would be leaving approximately 75 percent of their wealth to be divided equally between Research to Prevent Blindness and the Jules Stein Eye Institute.
