CHAPTER TWENTY-FOUR
When Ronald Reagan regained his memory, he would eventually recall the events of that afternoon on February 5, 1962. Three years later—in his 1965 autobiography, Where’s the Rest of Me?, which he coauthored with Richard C. Hubler—Reagan wrote that he “had spent a long, unhappy afternoon being interrogated by a federal lawyer who’d seen too many Perry Masons. Feuding is a mild word to use when one is talking of our government’s campaign against a private business concern.…
“Once on the stand, he launched into a series of questions such as, ‘Do you recall a discussion at a Guild board meeting the night of August 16, 1950 (ten years ago), regarding a waiver.…’ Well, of course, I was not only caught off-guard but … I’d lived a lifetime of meetings, and to pick out one for specific questioning was like asking a fellow in a sawmill accident which tooth of the buzz saw cut him first. Before the day ended I was pretty red-necked.”1
On February 13, a week after Reagan’s testimony, the Antitrust Division subpoenaed the Internal Revenue Service for the income tax returns of Ronald and Nancy Reagan for the years 1952–55, the same period that the MCA blanket waiver was approved and reaffirmed while both of the Reagans were on the SAG board. The income tax returns of John Dales and his assistant, Chet Migden, and four members of the 1952 SAG board were also subpoenaed. However, no charges were filed against anyone.
Two days later, Leonard Posner learned from one of his key sources that MCA was receiving information from the grand jury.
“You mean from witnesses who have appeared?” Posner asked.
“No,” his source replied. “MCA has a means of obtaining information from the grand jury itself.”
However, when Posner tried to track down the leak on the grand jury, he was unsuccessful.2
On March 7, Posner interviewed another industry source with inside knowledge of the MCA-SAG blanket waiver. When asked how the MCA waiver affected competing talent agencies, the source replied that “the effect was drastic” and that the other agencies “could not compete against a talent agency which could promise jobs in television shows.… The talent was assured that they would get network exposure if they appeared in a Revue production. They could only get into a Revue production by joining MCA.”
Posner wrote that his source told him that “Reagan may have been given the role of host, a most desirable plum, in GE Theater in return for having lent his good offices to see that MCA got the blanket waiver. He explained it this way: Reagan in 1952 was at the end of the road as far as [his] motion picture career was concerned. He was having a rough time.… Within a short time later, the concept of GE Theater apparently developed and after some months of preparation, the series went into production. [The source] thought it likely that Reagan had been given a promise of the role as host of GE Theater as consideration for his keeping actors in line. He also said that it was possible that Reagan may have sincerely believed that he was helping actors get jobs. However, he said that undoubtedly … [the idea that] MCA was going to be able to go into production and get a lot of jobs for hungry actors in television was completely fallacious. He said that there were many independent producers who were then in the television film production films [sic] that would have been necessary to fill whatever needs the networks had for television production, and consequently to give actors jobs. He said that the only effect of the blanket waiver to MCA alone was to give MCA the dominant part in this television production. It did not increase television production—it merely assured MCA a larger share of whatever television film production there was to be.”
At the end of his memorandum, Posner described his source by writing, “He is honest and is giving us every bit of information within his recollection. He appears to be trustworthy and is not apparently just trying to hurt MCA.”3
However, Posner had become pessimistic about the government’s chances to break up MCA. Convinced that the antitrust action had come too late, Posner felt that the government “was merely locking the barn door after the horse had been stolen.”
MCA had already started diverting its operations into other enterprises, including nonentertainment ones. Wasserman had even turned a portion of the Universal backlot into a cemetery and had purchased a bank in Denver, Columbia Savings and Loan Association.
Many of MCA’s clients no longer had representation contracts—the traditional agent-artist relationship—with MCA. Instead they had converted them to long-term “employment contracts” to accommodate MCA’s television production interests, as well as omnibus contracts which covered foreign engagements and any field not covered by their clients’ unions. These agreements stated that even if a client left MCA Artists—by personal choice or forced by the government’s antitrust action—MCA would retain perpetual rights to the work done while the client was under contract at MCA. If the government forced the spin-off of MCA Artists, MCA agents were prepared to form their own separate agencies while keeping their business ties with MCA intact.4
No matter what the Antitrust Division tried to do, MCA was always a step ahead.
On April 5, Posner received a telephone call from Hy Raskin, an MCA attorney. Raskin said that he wanted to be of service to the Justice Department. “I understand that MCA is somewhat arrogant, and, because of this attitude, people might misunderstand its motives.” Raskin added that his only function on behalf of MCA was to help the government “get the facts. If you really knew all the facts, I think you and the government would be satisfied.”
Posner replied, “It would be helpful if we had all the facts.… Without the facts we won’t be able to arrive at a truly valid determination as to our proper course of action.”
“I promise you, Mr. Posner, that a change of attitude will be forthcoming in MCA, and that you will begin to get all the facts you really want and need.”5
Six days later, Allen E. Susman, MCA’s lead attorney on the antitrust case, contacted Charles Whittinghill of the Los Angeles antitrust office. Susman said that he wanted to “get together” with the Antitrust Division and “discuss the matter.”
When Whittinghill asked what he wanted to discuss in particular, Susman replied that MCA would soon be making an offer to the shareholders of the Decca Record Company* for the purchase of that company and all of its subsidiaries, including Universal Studios. Before Whittinghill had a chance to catch his breath, Susman assured him that MCA would cooperate and supply the government with all information regarding the sale. While Whittinghill waited for Susman to send him a copy of MCA’s registration statement filed with the Securities and Exchange Commission, regarding the proposed purchase of Decca and Universal, the Antitrust Division responded to the latest development—and, once again, MCA seemed to have the edge.
In a rare interview, with Murray Schumach of The New York Times, Lew Wasserman claimed that he had never submitted a talent package to the motion picture industry—which, the government knew, was utter nonsense.
“We have never made a package deal,” Wasserman insisted. “The truth is that presidents of movie companies have asked me if I have a package. I laugh at them. They want us to do their job.
“I know that many of these executives and producers look upon themselves as creative people and upon us as flesh-peddlers. The truth is that one of the reasons agents are needed so badly is because clients cannot trust movie executives. I look upon our agency as a business and a profession.”6
Sorting out what MCA’s takeover of Decca and Universal would mean, Posner was told that “it would have a profound effect on the music business since MCA controls so many artists who do singing and band work that they will have a tremendous competitive edge in the recording field.” In the film industry, “MCA will quickly forge to the front in the motion picture production field.… It has the best manpower and is acquiring tremendously good manpower from Universal.”
Posner also learned that MCA planned “to break cleanly between its talent agency and film production company.… MCA will not try to hang o
n to the talent agency, but will jettison it.”
“Wasserman,” Posner was told, “will have power in the recording field, motion picture production field, television production field, and sales. Moreover, in Universal he is getting a good distribution organization. No motion picture production company can be successful without some means of distribution.”7
Posner’s fear was that if MCA simply sold MCA Artists to its own agents, nothing would be accomplished by the government’s long antitrust investigation. The block-booking and tie-in situations would potentially remain through a newly formed sweetheart relationship between MCA and its former employees.
On June 18, MCA acquired eighty percent of the stock of, and thus the controlling interest in, Decca and Universal, which also included Universal’s library of 250 post-1948 feature films—such as Hamlet, Harvey, and The Glenn Miller Story—and nearly 2,500 hours of filmed television programs. The sale had received approval from the company’s stockholders two weeks earlier.
Ten days later, during a conversation between the Antitrust Division and MCA’s lawyers, the government was notified that MCA would “dispose” of its talent agency on July 18, 1962. However, when the Antitrust Division received the MCA prospectus sent to the SEC on June 29, it referred to “an agreement between MCA and the Screen Actors Guild in which MCA agreed to terminate its activities either in representation of SAG members or in television film production [by July 18].” The government suspected that MCA was trying to stage another charade by simply shuffling its talent agency around but still keeping it under its aegis.
In a letter to Assistant Attorney General Lee Loevinger, the head of the Antitrust Division, from Allen Susman on July 5, MCA assured the government that its talent agency would be “transferred to various present employees of MCA who, upon the transfer being accomplished, will no longer be employed by or connected with MCA in any capacity.” Susman added that the purchase price for the agency would be neither secured nor guaranteed, adding that the time and method of payment had not been agreed upon. Loevinger became totally skeptical of MCA’s facade of good faith.
The front page of the July 9 issue of Variety carried a story entitled, “MCA Spin-off of Agency Set for July 18,” explaining that MCA had notified the Screen Actors Guild that it was divorcing itself from direct control of its talent agency.
Wasserman personally announced that Larry Barnett, the fall guy in the 1946 Finley v. MCA antitrust case, was to be appointed as board chairman of the new spin-off agency, and George Chasin, a long-time MCA agent, was expected to be its president. Among the stars Chasin had personally represented were Marilyn Monroe, Marlon Brando, Gregory Peck, Gene Tierney, and Kirk Douglas. Arthur Park, Reagan’s day-to-day agent, would also join the new agency. Wasserman said that he would continue to head the MCA parent company, that Universal would continue to be headed by Milton R. Rackmil, and that Taft Schreiber would continue as president of Revue Productions.
Ultimately, it was MCA’s own predictable arrogance that led it into the government’s web—when just a few months earlier the government had feared it had no case at all.
Seeing through MCA’s smokescreen, the government—after several days of secret meetings and coast-to-coast telegrams—moved ahead, on Friday, July 13, filing a complaint, approved by Attorney General Robert Kennedy, in federal court, and charging that MCA and its subsidiaries had violated the Sherman Antitrust Act. Named as coconspirators were the Screen Actors Guild for its July 1952 and June 1954 blanket waivers granted to MCA, and the Writers Guild of America, West (formerly the Screen Writers Guild), for its April 1953 MCA waiver. At the same time, the Justice Department filed for and received a ten-day temporary restraining order against MCA, in an attempt to prevent MCA from selling off its talent agency to its former employees on July 18.8
*Decca had become the fourth-largest recording company in the United States and had a gross income of $90 million in 1961, as well as company assets totaling over $73 million.
CHAPTER TWENTY-FIVE
The government did not tell the MCA lawyers that a complaint was going to be filed. When Allen Susman and the other MCA attorneys arrived for their meeting with the Antitrust Division on July 13, they were handed a copy of the complaint at the same time it was being filed in court. They were stunned by the suit—and particularly by the temporary restraining order. The MCA attorneys immediately filed a motion with the court to deny the government’s request.
When reporters asked MCA executives for comment on the government’s litigation, nearly all of them replied, “Ask Lew.”
Two days later, Lew Wasserman filed his affidavit with the court, bitterly protesting the complaint and the motion filed by the government, stating:
1.I deny that MCA has been guilty of any violations of law or any other alleged wrongful acts charged.
2.I deny that MCA has engaged in any conspiracies …
As for the assertions … that the proposed divestiture may not be “bona fide,” the fact is that bona fide negotiations have been taking place between MCA and the proposed owners [of the new talent agency] for several weeks in an attempt to effectuate an agreement.… [I]t has been my personal observation and experience that such proposed owners and employees are devoted men and women who have worked, and will continue to work, honorably, efficiently and with integrity and dedication to serve the best interests of their clients.
The government replied to MCA by filing a motion for a preliminary injunction against the corporation to block its takeover of Decca-Universal. Neither Jules Stein nor Wasserman would comment about the government’s latest action.
On Monday, July 16, there was a hearing in the Los Angeles federal court on whether MCA—which had filed motions in opposition to the proposed restraining orders—could divest itself of its talent agency on July 18. In an exchange with Laurence Beilenson—who, along with Susman, was representing MCA—U.S. District Judge William C. Mathes asked, “But this divestiture is a form of merger, isn’t it?”
Beilenson replied, “No, Your Honor. You see, the whole thing, everybody has got it backwards about who employs whom. It’s the agent that employs the actor. Excuse me. It’s the actor who employs the agent.…”
Later, still attempting to convince the judge to deny the government’s motion, Beilenson said, “It really doesn’t make any difference to us, because we are not going to get a nickel out of it, Your Honor. Because if we sell the corporation involved [MCA Artists], it will be stripped where it can be sold for a nominal sum. MCA is not trying to make any money.
“It is not trying to make money out of the transfer of this agency. But it is trying to preserve the orderly share of its talent which it represented for many years and, despite all the allegations of the complainant, have renewed their contracts again and again and stayed with the agency. It’s for their benefit, and for the people who served it so long, that they would like the opportunity to make an orderly transfer of the business.”
When Posner presented the government’s case, Judge Mathes asked, “Let’s assume it’s a collusive arrangement [the sale of MCA Artists to its own employees]. It’s not an arm’s-length deal at all, it’s a collusive arrangement to continue indirectly what they can’t do directly. Wouldn’t that all come out later?”
“Yes, Your Honor,” Posner replied, “I think that there is some suggestion of that on the face of the documents, since here they are selling the business that grossed annually 8.4 million dollars for what Mr. Beilenson said that they weren’t taking a nickel out of. And MCA, up to now at least, has not had the reputation of being an eleemosynary organization.”
“All business concerns are in business to make money,” Mathes continued, “and I think one of the great misrepresentations, I’ll say, of the twentieth century is the notion that business concerns can be philanthropic. They have no business being philanthropic. Anytime a board of directors or an officer of a business corporation isn’t doing everything he can to make every dollar he can for tha
t concern, he is committing a breach of trust.”
“I agree, sir,” Posner replied, “and that is precisely why the government is suspicious of this transaction.… We say that this MCA Artists has been the crux of the leverage which MCA has used to build its violations of the antitrust laws. In effect, we claim that MCA has said, ‘If you want this actor, then you must take this program.’ MCA has told that to networks. And we have many instances of that. And we say that if this huge pool of name talent is transferred en masse to any other group, and particularly to the old MCA agents, this pool of name talent is going to provide the basis for a leverage for causing the same abuses we have had in the past.…
“What we really want is to dissolve this mammoth corporation and turn these actors free to whomever they want.”
Judge Mathes granted the government a temporary restraining order against MCA—on the spin-off of its talent agency—until July 23, when a full hearing on all of the government’s charges would be held, including the government-proposed injunction against MCA’s takeover of Decca-Universal.
That same day, MCA’s stock dropped 4⅛ points on the New York Stock Exchange.
In an attempt to settle the case, the corporation’s attorneys—with their hats in their hands—made a proposal to the government on July 17, asking that MCA be permitted to terminate all of its talent contracts and to obtain a two-month postponement of a preliminary injunction blocking MCA’s purchase of Decca-Universal.
Loevinger said that he wanted a provision “that MCA will abrogate any talent employment contracts that MCA has negotiated with itself as a talent agency for production activities of Revue, Decca, or Universal. This would be true if these contracts provide for employment of talent more than six months in advance.” Loevinger added that he would be firm on matters concerning the talent agency, but that the Antitrust Division would be “flexible” on Decca-Universal, permitting the two-month postponement.1
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