Dark Victory

by Moldea, Dan E. ; Miller, Mark Crispin;

  At 12:01 A.M. on July 19, MCA’s franchise with the Screen Actors Guild to represent television and motion picture artists expired. MCA Artists was forced to set free its 1,400 clients, who were immediately descended upon and wined and dined by the other talent agencies.

  Later that day, a California state labor commissioner called Stanley Disney in the Los Angeles antitrust office and informed him that he had just received an application for a license to operate as a talent agency from a California corporation, Management Associates, Ltd., which wanted to do business as International Management Associates, Ltd. Corporate officers included Herbert Brenner and Howard Rubin, both vice-presidents of MCA, who had resigned the previous day. The application also included the names of eight other MCA employees who had submitted their resignations as well and would become IMA personnel. Disney told the official that the application was not in violation of the temporary restraining order.

  Heated, secret discussions between lawyers representing the government and MCA continued over the weekend before the court hearing set for Monday, July 23. Drafts of proposed agreements went back and forth.

  Finally, on Monday, before the hearing, lawyers for both sides went to Judge Mathes’s courtroom. When he arrived, they simply asked him to sign their settlement, stating that MCA would completely dissolve its talent agency without selling it or receiving anything for it. Further, MCA was forced to surrender all of its guild or labor union contracts and licenses regarding its talent agency throughout the world. The settlement did not include any decisions regarding MCA’s takeover of Decca-Universal or allegations of MCA’s block-booking or tie-in violations; both were to be made separately. The only solace for MCA was that it was not required to admit any civil or criminal guilt.

  According to the July 23 Stipulation and Order: “Nothing contained in this order … is meant to be nor shall ever be construed or deemed to be an admission of any kind

  “(1) that MCA Inc. admits any of the acts alleged in the complaint or that it admits it is guilty in any respect whatsoever of any violations of the law or that any allegations of the complaint are true or correct;

  “(2) that plaintiff has abandoned any of the allegations of the complaint, or is estopped to pursue any violations alleged therein, or any other violations.”

  In his victory statement to the press, Posner said that the action “destroys the power base MCA Inc. used for leverage for its filmed television production.”*

  Lew Wasserman issued a short statement, saying, “MCA deeply regrets that circumstances beyond its control precluded the company from having the opportunity to discontinue its talent agency functions in a more orderly manner.”

  The hearing for the government’s motion for a preliminary injunction against MCA’s takeover of Decca-Universal was scheduled for July 30. However, MCA quickly asked the government for more time to prepare its case. Posner thought that “it would be to our interest to have the hearing on the motion postponed as long as possible to give ourselves more time to prepare properly, and, if possible, to defer any hearing on Decca-Universal until the trial. My reason for this position was that if that judge hears all the ugly facts about MCA’s practices and becomes well acquainted with the beast, and further learns of the large number of MCA acquisitions, he might well resolve any doubts about MCA’s having violated Section 7 in our favor.”2

  At a meeting at the Antitrust Division’s offices in Los Angeles, Susman tried to negotiate another settlement with the government. Susman insisted that all MCA was trying to do “during the interim period before the trial is to conduct the businesses of MCA, Decca, and Universal in their ordinary way without restraint,” adding that “MCA must be free to run its business as it saw fit without interference, and that Decca and Universal must be free to do the same thing.”3

  Since the purchase of Universal, one of the government’s biggest concerns was the “competitive impact” of the studio’s remaining post-1948 library of feature films and television programs, not earlier purchased by Screen Gems, if MCA indeed gained control of that backlist. The Antitrust Division did not want that to happen; instead they wanted another company, such as Screen Gems or Seven Arts, to obtain the rights to these packages.

  However, during Susman’s negotiations with the government, he took the hard line, saying that he could not accept “any limitation on the right of Universal to dispose of its feature film library in any way that it saw fit.… If Universal wanted to sell to MCA, that was their business.”4

  Understanding that the government would be opposed to this—but that it would need additional time to prepare its legal arguments—MCA reversed course and asked for the hearing on the government’s motion for the preliminary injunction to be held as quickly as possible.

  During a telephone conversation with Gordon Spivack of the Antitrust Division’s New York office, Posner suggested that the government find some middle ground so that MCA could be permitted to operate Universal through, perhaps, an independent manager until the legal matters were resolved. But Posner also recognized the issue of Universal’s backlist as being “the stumbling block … possibly the break-off point in our negotiations [with MCA].”

  When the compromise was posed to Susman, his response was an angry one. “[N]either MCA nor I did or would agree for one moment that the film library of Universal Pictures Company, Inc., was subject to any restrictions whatsoever under the then existing stipulation, nor would I or my client agree so to restrict or limit the disposition of the Universal film library. That position has not changed one iota.”5

  Preparing for trial with MCA, Loevinger formally requested a full-field FBI investigation of MCA’s attempted takeover of Decca-Universal on July 30, 1962. Meantime, over on Santa Monica Boulevard in Beverly Hills, the beautiful MCA citadel—the home of MCA Artists—stood nearly vacant as a handful of employees cleaned out their offices, stepping around the antique-filled cartons scattered about the marble floors.

  As the FBI began its work, MCA attorney Hy Raskin visited Posner and Harry Sklarsky, chief of the Antitrust Division’s field operations. Raskin said that his client was interested in “entering negotiations with the government for disposition of the entire action against MCA.” However, Raskin reiterated that “one thing was not negotiable … the Decca-Universal acquisition by MCA.”6

  The government agreed to negotiate a possible consent decree—approval of a corporate merger—and on August 9 the talks began. Present for the government were Posner and Sklarsky; MCA was represented by Susman, Raskin, and Albert Bickford.

  Sklarsky opened the negotiations by addressing the central problem of Universal’s library. He argued that “even if an auction for this property is agreed upon and MCA is permitted to participate, the problem, as I see it, is that MCA could bid as high as it wanted to, because the money would, in effect, be returned to itself—since MCA is the biggest stockholder in Universal. It would be doing nothing more than transferring money from one company to another.”

  “It doesn’t work that way,” Susman replied. “MCA is extremely interested in money. And if someone from the outside bids higher than MCA thought it could realize from its distribution operation, then MCA would be happy to let someone else do it. You also have to remember that MCA owns only about seventy percent of Universal, and that the studio’s vigorous minority stockholders will be acting as watchdogs, protecting their interests.… Also, Universal is now an independently operated company with a separate board of directors and officers.”7

  With little hostility in the discussions and with what appeared to be a sense of mutual good faith, both sides agreed that there was room for compromise. They decided to postpone the hearing on the preliminary injunction until October 15, allowing both sides to better prepare their cases—and leaving time for a possible settlement.

  In reality, both sides were playing poker. MCA held its cards close to its chest, privately fearing that the government could rip the corporation apart in court and, perhaps, force
MCA to divest itself of Decca-Universal. Across the table—debating whether to call, raise, or fold—the government knew that even if an outside distributor was brought in to handle the Universal library, it would undoubtedly be under MCA’s direct or indirect control. But prosecutors would still have to prove that MCA’s possession of the library would give it an overpowering position, particularly in the television industry.

  In a Justice Department memorandum, written on August 9 after the first round of talks, Stanley Disney said that he “did not believe we could get divestiture, [so] I recommended that they [MCA] negotiate for the best order possible [concerning] the use of the library. Posner said that he also doubted that we could get divestiture of the film library.”

  On August 14, the second round of talks began. The same cast was present, along with the addition of Robert L. Wright, the Antitrust Division’s chief negotiator.

  “I understand that the basis for these negotiations is that the acquisition of Decca-Universal is non-negotiable,” Wright said. “But I also understand that MCA is prepared to discuss an alternative arrangement with regard to the film library. Is this correct?”

  “You are correct,” Susman replied.

  “Okay, then, gentlemen, what are you prepared to offer in the way of a proposal?”

  After spending some time discussing which side was supposed to come prepared with a written proposal, Susman managed to get the conversation back on track. “There is something that could compound our problems,” he said. “If, for example, Screen Gems—which already has a formidable backlog—wishes to purchase the Universal film library, they might not do so for fear of being sued by the government in an antitrust action of its own.”

  “I think that the bidders might well receive some assurances that if they purchase the films the government will not sue them,” Wright replied. “I believe this is an important point, because divestiture to an outside source appears to be the only practical way in which this matter can be quickly resolved. If MCA is disposed to have Universal sell to outside companies, this might be the solution to the entire case.”8

  In response to Wright’s remarks, the MCA attorneys asked if forty-four movies made after 1958 might be exempted and retained by MCA. Wright asked for details at their scheduled third round of talks the following day.

  The issue regarding the post-1958 movies was based on the theory that motion picture films had to play in theatres around the country until they were “milked,” after which there was generally a clearance of two to three years before the films were offered to television. Some of the jewels in this collection included Psycho, Spartacus, Flower Drum Song, and To Kill a Mockingbird. And two television networks, ABC and NBC, were committed to the broadcasting of weekly movies, paying as much as $300,000 each.

  The next day, Wright asked what MCA’s position was on the government’s divestiture proposal.

  “We will not negotiate on that basis,” Bickford said, “even if we are permitted to keep a portion of the library. MCA is only willing to negotiate on the basis which it had originally stated: that MCA would have a right to participate in competitive bidding for the film library. MCA has indicated that no other position is negotiable.”

  Sklarsky replied, “No, we have always been under the impression that MCA’s only non-negotiable position was the divestiture of Decca-Universal.”

  “Okay,” Bickford asked, “where do we go from here?”

  “My position is this,” Wright said firmly. “Unless MCA divests itself of the Universal library, a concentration of power will exist that will be in violation of the antitrust laws. You may go over my head if you like and discuss this matter with Lee Loevinger, but I would recommend settlement on nothing less than this.”

  The meeting then ended abruptly, without any plans for further discussions.

  The following day, President Kennedy and his brother, the attorney general, received telegrams from the Hollywood AFL Film Council, stating: “Hollywood craftsmen and technicians and creative artists [are] suffering grievously from unemployment caused by the flight of feature motion picture production to foreign countries.” A coalition of Hollywood unions dominated by the Screen Actors Guild, the American Federation of Musicians, the Teamsters, and IATSE, the film council lauded MCA for its “plans to create still further job opportunities and continuity of employment for studio workers” and asked the government “to reexamine the advisability of the present attempts of the Antitrust Division of the Department of Justice to prevent MCA from engaging in feature film production.”

  Both the White House and the Justice Department were baffled by the film council’s request since no one in the Antitrust Division had even suggested that MCA be barred from producing films.

  On August 22, Raskin, on behalf of MCA, decided to accept Wright’s offer and discuss the situation with Loevinger. After several conversations, Loevinger stood behind Wright but offered a variation of the compromise that the MCA attorneys themselves had offered: that a portion of the Universal library be retained by MCA.

  Loevinger’s intervention into the negotiations brought new life to them. The talks resumed and details were worked out.

  Finally, on September 18, Attorney General Robert Kennedy announced that a proposed consent decree had been filed in the United States District Court in Los Angeles, and that the settlement would become effective in thirty days.

  The final judgment ordered that Universal Pictures sell 215 of the 229 films in its library. The studio could select fourteen of those films for remakes or reissues. Also, consistent with the conditions of a consent decree, all criminal proceedings against MCA and its alleged co-conspirators were suspended. And the entire case was taken off the public record. Further, Jules Stein, Lew Wasserman, Taft Schreiber, Ronald Reagan, and others avoided having to appear in open court to answer messy questions about their financial relationships.

  Two months earlier, MCA had appeared to be dead, but the Department of Justice could not find the means to ram a stake through its heart. MCA would live again.

  *Daily Variety’s July 24 banner-headlined report of the final settlement, “MCA DISSOLVES ENTIRE AGENCY,” written by reporter David Kaufman, must have been particularly painful for MCA loyalists to read:

  “MCA Inc.’s talent agency, only a week ago the most powerful in the industry, is no more.… Obituary for MCA Artists Ltd., the talent arm, was written in U.S. Federal Court yesterday, when MCA and the U.S. government in a stipulation agreement spelled out terms for dissolution of the agency.

  “Actual death of MCA occurred in such a prosaic, offhand fashion it was like the funeral of a long-forgotten star of yesterday.”

  Syndicated columnist Jim Bishop, the former director of MCA’s literary department, simply described his old employer as “a dead whale.”

  III

  THE RESURRECTION

  CHAPTER TWENTY-SIX

  Indeed, MCA and Lew Wasserman were alive and well*—so well, in fact, that on September 19, 1962, the day after the consent decree was announced, workers began razing the Revue-Universal studio just north of the Hollywood Freeway, in one of the biggest real estate developments in the history of Hollywood. The land was to be cleared for the new, $110-million home of MCA’s production companies. Included among other structures planned for the site, known immediately as “Universal City,” were a bank, a post office, the Universal Amphitheatre, and the new, modernized Universal Studios. Universal City would also be the site of MCA’s fifteen-story, black-glass-and-marble administration building, the “Black Tower”—which, quite intentionally, stood like a black steel monolith: an ominous presence, at once imposing and intimidating.

  MCA’s only public comment in the wake of its settlement with the federal government was that it intended, “in complete coordination with the management of Decca and Universal, to proceed constructively and vigorously in strengthening the production of motion pictures.”

  Universal provided MCA with an incredible legacy in film p
roduction. Former nickelodeon owner Carl Laemmle had founded the Universal Film Manufacturing Company in June 1912; soon after, the studio started cranking out silent movies, including The Hunchback of Notre Dame and The Phantom of the Opera, starring Lon Chaney.

  Academy Award-winning director William Wyler, who had come to the United States in 1920, when he was eighteen, recalled, “I have a great affectionate feeling for the old Universal. It was my school, my cradle in America. Carl Laemmle … brought over dozens of young people from Europe. And not all of them were relatives, although I was. Old man Laemmle gambled on people. Many times he was right. Opportunities were easier to get in those days. Movies were a small business, not overcrowded. Working in films was even a little disreputable, not a sound profession.”2

  In 1930, Universal won its first Academy Award for Best Picture with All Quiet on the Western Front. But, for the most part, Universal became known for its inexpensive Westerns, romantic dramas, and comedies—those films which Laemmle was convinced would attract Middle Americans to their neighborhood theatres. Laemmle was right, and the studio made big money. With the Depression, Universal found itself in financial trouble. Laemmle turned his studio over to his son, Carl Laemmle, Jr., who could do little to turn the family business around. Consequently, in 1936, the Laemmle family was moved out and replaced by Robert H. Cochrane and Nate J. Blumberg, who developed the “new Universal.”

  But the new Universal was much like the old, as the new owners continued to produce horror films like Son of Frankenstein, even after some success with teenage singer/actress Deanna Durbin’s movies, like Three Smart Girls and One Hundred Men and a Girl. But as the country began to slip out of the Depression and into war, the horror films again began to make money. Soon, Universal started to branch out into musicals, such as One Night in the Tropics, and Bud Abbott and Lou Costello comedies, including Abbott and Costello Meet Frankenstein.