The Deal of the Century

by Coll, Steve;

  “No, I don’t want to go into all of that,” Greene answered. The diminutive judge, slumped in his high-backed swivel chair, was typically self-effacing. “I only point this out to indicate the uncertainties. Now, you have heard me. I have talked again and again about how everybody, and particularly the department of Justice, has been preaching and beating on the judiciary to get these cases going and for dealing with these complex antitrust cases. And here we are on the verge of trial, and here you are saying, ‘Well, now, we are thinking of settling the case …’ Why can’t we just start the trial? If somebody wants to settle it, we are always here. We are always open.”

  Litvack and Trienens tried to bring up the piggyback problem again, but Greene would not change his mind. Furthermore, he said, he was not inclined to keep the meeting secret.

  “You have not told me what the framework and the format is, so I can’t tell the newspapers,” Greene said. “So as far as there was a discussion and that this has been mentioned, I am not so certain that I want to be a party to keeping it confidential or secret. I don’t know what is secret about it. I don’t know what the public can’t know about it, except that somebody thinks it may be inconvenient.” Clearly, the circumstances of the 1956 settlement scandal were vivid in the judge’s mind, as they would remain in the weeks and months ahead.

  Two days later, on Wednesday, January 7, Judge Greene issued a public order denying Litvack and Trienens’ request for a trial postponement and disclosing that Justice and AT&T had agreed on a “framework” for settling the case. Suddenly, news of a possible deal was all over the newspapers and trade press. Speculation about divestiture terms was rife, and some elements of the Crimson Sky framework leaked out. The trial lawyers for both AT&T and Justice who had not known about the talks assumed now that the case they had slaved over for so long was finished. In a few weeks, as a memorial, one of the lawyers in the Antitrust division had printed up a T-shirt that said, “Reach Out, Reach Out and Crush Someone. U.S. v. AT&T. 1974–1981.” There was an elephant drawn on the shirt with a phone wrapped in its trunk and a bell on its chest.

  In the week following Greene’s order, Litvack and Trienens redoubled their efforts to convince the judge that the settlement talks were serious and that the trial should be postponed. They decided to draft a specific document, resembling a consent decree, that would lay out both the divestiture terms and a specific outline for equal interconnection rules. As soon as possible, they would bring the document in to Greene and show him that they had moved far beyond a settlement “concept.”

  On the morning of Wednesday, January 14, the day before the opening of U.S. v. AT&T, while snow was blowing on gusty winds across Washington’s wide avenues, Trienens and the government lawyers trudged back over to the courthouse to visit Greene in his chambers. They found the judge once again behind his George Washington desk. He seemed in a better mood than he had been the week before. Perhaps they had taken him by surprise at the first meeting.

  “We have worked on the settlement last week, over the weekend, and through last night, and we do have a concrete, detailed proposal for settlement,” Trienens began. “We have a tangible, concrete agreement. We have no complex or controversial features waiting to be resolved. But we do have last-minute technical drafting problems.

  “The major question,” Trienens continued, “is the factor of the incoming Reagan administration. I am not here to conjecture on their relative eagerness to break up the Bell System. That is not for me to conjecture about.”

  “I don’t know anything about it one way or the other,” Greene said. “What do you want me to do?”

  “Specifically, I think we are not going to ask you for what can be characterized as an indefinite postponement. I am not concerned about whether the trial starts tomorrow in terms of opening statements. I would like to recommend a two-week postponement of taking of evidence. Why two weeks? Because I think the biggest problem which none of us can address is that we have to get ahold of and get the attention of the incoming administration starting on the afternoon of January 20, when they take over.”

  “I am obviously not unsympathetic to the idea of settling this case if it can be settled,” Greene said. “I am not a masochist and don’t want to be sitting for years listening to this testimony, but the question is: Are we any more definite today than we were a week ago? I don’t know.”

  “Let me clarify one thing,” Trienens added moments later. “I want to say that the ‘ground up’ features of this agreement are unique. I was told by some very learned hands around this town a year ago that the way to get a case settled is you go and sweet-talk the top people who don’t know much about it, and then the people at the bottom who do not want to settle, they have it imposed on them. This is exactly the opposite of the traditional learning, if that is what it is. This does come from the trial staff and it is relevant because these are the institutional people, not the people at the political level.”

  It was an argument worth stressing to Greene, who had been an “institutional level” staff lawyer at Justice for more than a decade.

  “Let me think about it,” the judge said. “I will try to let you know this afternoon, but in any event we will go ahead with the opening statements tomorrow. So if I don’t let you know this afternoon, I will let you know Monday when the taking of evidence would begin. I am not rejecting it out of hand and I am not accepting it out of hand.”

  That was about as much as Howard Trienens and Charlie Brown could hope for from Greene. Less than twenty-four hours before George Saunders would deliver his opening argument in U.S. v. AT&T to Judge Greene, AT&T’s top executives were as optimistic about the company’s antitrust problems as they had been in months, even years. President Reagan had said occasionally during his campaign in 1980 that he thought the government’s suit against the phone company was silly. With a little help from Reagan, and from Greene, the debilitating controversy over phone industry competition would be over in a matter of weeks, and while AT&T would have made a sacrifice, the Bell System would be preserved.

  As snow descended on Washington that night, Charlie Brown’s “new realism” seemed like an idea whose time and place had finally come.

  Chapter 15

  Two Lawyers

  The weather had worsened by early the next morning when Gerald Connell steered his Plymouth Horizon onto the George Washington Parkway and headed north toward Washington. Snow was still falling and fog clung to the icy Potomac River on Connell’s right. He crossed over the river on the slippery 14th Street Bridge and merged onto the Southwest Freeway. At 12th Street he went north to E Street and then turned into the FBI garage where the government provided him a parking space. For almost two decades now, Connell had made this twenty-minute morning trip with blind regularity, had listened to the news and the comic disc jockeys on WMAL AM-63 radio, had seen the cherry trees along the Potomac blossom and fade and blossom again, had endured the traffic and the rain and snow. The sameness of his commute must at times have seemed a stark metaphor for the life of a career government lawyer with a handful of children and a mortgaged house in the Virginia suburbs. But this morning, the drive represented something else entirely. It was a new beginning, an opportunity for personal and professional renewal rarely available to a settled husband and father nearing fifty years of age. And already, Gerry Connell felt vaguely ill at ease.

  There were those in the Antitrust division who questioned whether Connell had been the right choice to succeed Ken Anderson as the lead attorney on the government’s case against AT&T. Connell was a capable trial lawyer, they said, but hardly the sort of firebrand leader that this large, complex, and important case demanded. A hot-shot trial lawyer like AT&T’s George Saunders might chew Connell up and spit him out. Connell had never worked on a case as big as this one; of course, no one else in the division had, either. He had been in charge of twenty lawyers in the division’s General Litigation section, where he supervised trials, occasionally tried a case himself, and
increasingly handled a lot of paperwork. He was a sleepy, even-tempered man, the sort of fellow you might say hello to on the elevator for twenty years without even knowing his name. He looked older than he was and always seemed to be weary or overworked. His face was like a basset hound’s, with droopy eyes and jowls and a prominent red nose. He reminded some people of an aging Irish politician from Boston, an assessment that wasn’t far from the truth. His mother and father were both Irish Catholics, and his father had been active in New England politics. Connell was perhaps best known inside the Antitrust division for the Saint Patrick’s Day party he threw every year. It was a rough and ready affair, and at it Connell could be seen wandering blithely about with a half-empty bottle of Paddy’s Irish whiskey, pouring generously to keep his guests’ glasses full.

  Sandy Litvack had offered Connell the AT&T job for several reasons. When Ken Anderson first told the front office that he was leaving, Litvack had considered looking outside the government—because of the prestige that would accrue to him—for an experienced trial lawyer willing to come in and run the case. Quickly, however, Litvack realized that it could take months to conduct such a search, and that even if it was successful, such outside talent might never blend with the younger department staff lawyers who would inevitably do much of the work during trial. Once the decision was made to look inside the division for Anderson’s successor, Connell’s name quickly arose. Morale in Connell’s General Litigation section was generally high, and Connell himself had an exceptional winning record on cases he tried or supervised. He was steady and thorough, qualities that contrasted sharply with Ken Anderson’s style. And Connell was experienced, even if he had never handled a gargantuan case like U.S. v. AT&T. The big question was whether Connell had the energy and desire to transform his professional life by hurling himself, eighty hours a week, fifty-two weeks a year, into a litigation battle against the largest corporation in the world. To some, it seemed that Connell had retired on the job in the General Litigation section. Was he capable of a professional metamorphosis? After talking with his old Antitrust drinking buddy Hugh Morrison, and even though he told himself that the case might be a “killer,” figuratively if not literally, Connell had decided that he was. A few days after Litvack called with an offer in January 1980, Connell accepted.

  The questions about Connell’s desire and stamina had really not been answered by the morning of Thursday, January 15, 1981, when he arrived at the U.S. District Courthouse on Constitution Avenue to present the government’s opening arguments to Judge Harold Greene. Some of the lawyers on Connell’s staff still talked about that time the previous March, soon after Connell took over, when, during a Saturday meeting at the height of intense stipulation negotiations with AT&T ordered by Judge Greene, a blood vessel had spontaneously burst in Connell’s nose. Connell tried to stop it, but he bled profusely, and some of the lawyers had to half-carry him to the hospital for surgery. Connell had missed several weeks of work, and more than a few of the lawyers on his staff wondered whether the incident was a foreshadowing of how their leader would hold up under the tremendous personal pressure ahead.

  The scene at the courthouse as Connell arrived that morning was enough to make any jaded trial lawyer nervous. As wet snow fell, newspaper photographers snapped pictures of Connell entering the building. Inside, the wide hallways were crowded with lawyers, reporters, and industry executives. Several of AT&T’s executives had flown down from New York to hear Connell and Saunders summarize their respective cases. The floors were wet from all the snow that had been tracked in, and the air was hot and steamy. Judge Greene’s courtroom was on the second floor, and it was a windowless, airless room with wood paneling on every wall, wooden spectators’ pews, a wooden jury box, a wood bench for the judge, wood-colored carpeting, and even a wood clock on one wall. It felt like a coffin. Even though word about the Crimson Sky settlement talks had leaked out, the atmosphere inside the courtroom was akin to the opening of a sensational murder trial. There were more spectators than available seats, and tickets were issued so that the working lawyers and reporters could find a place to sit. Since this was a bench trial—there was no jury, and Judge Greene would decide every aspect of the case—the jury box had been converted into a makeshift press headquarters. There was even an artist poised to sketch Connell’s profile once he began to present his argument.

  Just after 9:30 A.M. and slightly more than six years after Attorney General William Saxbe had decided to “bring an action” against the phone company, Judge Greene rapped his gavel and called the trial of U.S. v. AT&T to order.

  What Gerry Connell noticed more than anything else as he stood behind the lectern and prepared to begin his speech was the heat. It was not just warm inside the courtroom, it was hot. Connell was sweating, and he felt uncomfortable. Under the circumstances, though, he couldn’t be sure how much of his discomfort was simply nervousness. In front of him was a large notebook that contained an outline of Connell’s argument. Most of the work had been done by Connell’s key lieutenants, notably Peter Kenney, who had stayed on the trial team after Ken Anderson left, Michael McNeely, Jeff Blumenfeld, Jim Denvir, and Alan Silverstein. The outline had been literally cut and pasted together from various briefs and drafts prepared by Justice in recent months. It was organized by sections: opening statement, the MCI case, the phone equipment case, a few other topics, and a conclusion. Connell clung to the notebook because the last thing he wanted to do was stand in front of an audience this large and forget what he had to say. In the more than two hours it took him to present his argument, he never once moved from behind the wooden lectern directly in front of Judge Greene’s bench.

  Afterwards, the government’s lawyers used words like “disaster” and “fiasco” to describe Gerry Connell’s opening argument. Actually, it hadn’t been as bad as all that. The lawyers’ criticism partly reflected a fear that Connell was in way over his head, and that the difference between Connell’s lackluster style and George Saunders’ ebullience would obscure the issues in the case. Such fears, it turned out, were unfounded.

  “What is this litigation all about?” Connell asked rhetorically, after he had introduced the lawyers at his table.

  And then slowly, methodically, doggedly, he answered his own question. Date by date, episode by monotonous episode, he listed the stories that made up the government’s antitrust case. It was like asking someone about how they did their grocery shopping and then hearing, in response, a list of every product the person had bought in the previous five years.

  “Well,” Connell began, “it is about a very, very, very large company. Assets of more than $100 billion. Revenues in excess of $40 billion. Profits in excess of $7 billion, employees numbering more than a million …

  “This may very well be, as some press reports have said of it, history’s biggest case. I suppose that certainly in terms of the stakes in the case, it could fairly be called that.…

  “This case is about deliberate choices made by the Bell System at important junctures. This case is about regulation that doesn’t work. This case is about … This trial is not about … But it is about … Let’s talk a little bit about …” and on and on. Connell’s only shining moment came when he addressed the AT&T defense constructed by George Saunders. “What about the defendant’s case?” Connell asked. “What does it say, what does it argue? Well, it says a number of things, but what it says mostly … is that AT&T is really a powerless, helpless giant, totally restrained by regulation, unable to do anything.

  “You kind of get the picture, if you read Bell’s filings, of an enormous but friendly elephant, Horton Hears a Who. A slow-thinking elephant, not quite able to figure out what messages are being sent to it by its masters, the regulators. As a result, from time to time it stumbles around in a regulatory jungle, doing its best to go in the direction in which it has been pushed. The trouble is, from time to time this big elephant might reach out and crush someone. Bell’s argument—with apologies to Erich Segal, the aut
hor of Love Story—in a nutshell, is regulation is never having to say you are sorry.”

  The crowded courtroom erupted in laughter for the first time, and even the lawyers at AT&T’s defense table could not resist smiling.

  Finally, mercifully for both the sweating Connell and his tired audience, he concluded his opening argument shortly before noon. “This court sits to dispense justice,” he said. “We ask no more than that the court do that.”

  In the weeks preceding the opening of U.S. v. AT&T, while Howard Trienens and other AT&T lawyers were feverishly negotiating the Crimson Sky settlement in an effort to avert a trial, George Saunders had been preparing the case as if a deal with Justice was little more than a wild pipe dream harbored by the New Realists at 195 Broadway. There were personal as well as professional reasons for Saunders’ unrelenting devotion to the trial preparations. In a manner uncharacteristic of most corporate attorneys, who generally cultivate a cool detachment toward the issues they confront in their work, Saunders passionately believed that the government case was a rip-off perpetrated by Bill McGowan and some misguided liberals at Justice. He lived, breathed, and, most of all, talked about AT&T’s defense as if his own urgent emotion might be enough to persuade the government to leave the phone company alone. The MCI verdict had been the most devastating event in Saunders’ long professional life. Not only had he lost a case that he had worked on for some seven years, but the defeat was not even remotely ambiguous; it was a humiliating rout, the biggest antitrust loss in American history. Saunders was looking to the government trial for vindication, both of his ability as a lawyer and of AT&T’s version of telephone competition history. The two things were inextricably linked. If AT&T made a deal with the government, even under the relatively benign Crimson Sky terms, both Saunders’ lawyering and his beliefs about the case would be discredited. So while Saunders was aware of the negotiations being conducted by Trienens, his overriding interest was in the upcoming trial. If the executives at 195 Broadway would give him a chance, Saunders believed he would win the government case and solve the phone company’s problems the best way: triumphantly.