Dark Victory

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

  Most executives wouldn’t touch this case with a “ten-foot pole.” It’s simply too hot a “political potato”—but the Dick Nixon I know has the guts not only to make the decision which should be made but dramatically explain it to the satisfaction of fair-thinking Americans. I hope that you do.

  My thanks to you for taking a few minutes of your time to read this plea from a friend of yours.

  Sincerely,

  Paul Laxalt

  On December 22, 1971, Hoffa’s prison sentence was commuted by Nixon. Hoffa was released the following day.

  In 1972, Laxalt and his brother Peter built a new 237-room hotel/casino on seven commercial acres two blocks from the state capitol in downtown Carson City and named the property Ormsby House. Opening in July 1972, the swanky casino featured two dice tables, one roulette wheel, eight blackjack tables, a $25,000-limit keno game, a bingo game, and three hundred slot machines.

  Laxalt and his brother invested only a total of $1,851 of their own money in the venture that cost more than $5 million. The rest of the funding came from three Nevada banks, the First National Bank of Chicago, and several private investors—including Bernard Nemerov, a former front man for Allen Dorfman and a known associate of others in organized crime. Nemerov purchased $75,000 in stock and gave the Laxalts a $475,000 loan for the project. Peter Laxalt later described him as “the eyes and ears” of the business, as well as the person who had “a direct line of communication with Paul Laxalt.”10 Laxalt insists that he was unaware of Nemerov’s shady past.

  Paul and Peter Laxalt, the president and vice-president, respectively, of Ormsby House, were the only two shareholders with voting stock. Two other brothers, Robert and John Laxalt, were also directors of the corporation, but they held only nonvoting stock, like the other investors—including Nemerov, who was the “chief liaison officer.”11

  At the licensing hearing for Ormsby House before the Nevada Gaming Commission, the Laxalts expressed confidence that their funding was all in order. Peter Laxalt told the panel, “We feel at the present time that we have very adequate funding to carry this project forward through the tough winter months and for the expected future.”12

  Within a year, the Laxalts were having financial problems, which were complicated by Paul Laxalt’s dispute with Nemerov over a matter that Laxalt has never publicly explained.

  “The falling out was strictly over business,” Nemerov claimed. “There were times when there wasn’t enough money for the payroll, and I had to go into my own pocket and loan them the money.… When it comes to running a business, this guy’s stupid.”13

  Paul Laxalt sought financial help by returning to the First National Bank of Chicago, where he had already received an initial $950,000 loan, secured only by a personal guarantee from him and his family. In May 1973, the First National loan officer, Robert Heymann—the son of former MCA executive board member and Korshak associate Walter Heymann, the vice-chairman of First National—authorized an additional $750,000 loan. This loan, secured only by pledges of casino stock, was partly used to buy out Nemerov the following month. First National later threw even more money into the pot, loaning Laxalt an additional $200,000 in November 1973 and another $200,000 in February 1974 to help keep the casino afloat.

  Robert Heymann had a history of helping out Nevada casino owners. He explained that he had first met the former governor through one of Laxalt’s clients, Delbert Coleman. Coleman had previously received millions of dollars in loans from the First National Bank of Chicago to help finance his earlier takeover of the Parvin-Dohrmann corporation, which had purchased the Stardust, Fremont, and Aladdin. These loans were administered by Heymann and were arranged by Sidney Korshak.

  Heymann denied that either Coleman or Korshak had anything to do with the Ormsby House loans.

  “My negotiations and dealings with Paul and his brother on the part of the First National Bank were strictly between their group and the bank,” Heymann insisted. “The fact that he had been Coleman’s attorney had nothing to do with the loans.”14

  Laxalt has also firmly rejected the suggestion that either Coleman or Korshak were involved in the First National deal. Laxalt specifically denied that Coleman “was responsible for assisting me in the obtaining of finances and loans for Ormsby House.” Laxalt added, “I have never been associated in any manner with Mr. Korshak.… Mr. Korshak had no role in my conversations with Mr. Heymann.”*15

  Ormsby House continued having financial problems after Heymann’s dismissal. Executives of the First National Bank of Chicago consolidated Ormsby’s loans—including those to the three Nevada banks—in a $7.3 million package, accepting the hotel/casino as collateral. Laxalt legally avoided paying $155,000 in federal income taxes from 1970 to 1975, using the casino as a tax shelter. The final sale of Ormsby House cost Laxalt an additional $76,592 in taxes.16

  Just when Laxalt was facing the most serious financial crisis of his career, Nevada Democratic senator Alan Bible announced that he was not going to seek reelection. Laxalt—who had previously given thousand-to-one odds against his ever returning to politics—immediately made his bid for the senate seat. His Democratic opponent was Nevada’s lieutenant governor, Harry Reid. They were both challenged by a third-party candidate.

  “It was a hotly contested election,” said Reid. “Paul had an effective campaign. I brought up his personal finances and the Ormsby House matter as campaign issues, but, frankly, they went nowhere. He was just too strong in the northern part of the state [Carson City and Reno, among other towns], and that’s where he beat me.”17

  In the end, after a recount, Laxalt’s forty-seven percent of the total vote ensured him a victory by the narrow margin of 624 votes.

  *As it had with MCA, the Antitrust Division forced Kinney to divest itself of Ashley-Famous Artists, which was then purchased by Marvin Josephson Associates, another talent agency. Ashley–Famous Artists was renamed International–Famous Artists, which later bought out the Chase-Park-Citron agency. Josephson had once been with the General Amusement Company—which became Creative Management Associates (CMA), headed by Freddie Fields. Eventually, International–Famous Artists merged with CMA to form International Creative Management (ICM), which rivaled William Morris as the most influential talent agency in the United States.

  *Kerkorian would eventually sell his casino and hotel interests in Las Vegas to Hilton Hotels, which was then represented by Korshak.

  *Reagan sold the Riverside property for $856,500 in December 1976.

  *Among MCA/Universal’s difficulties were the medical problems of board chairman Jules Stein. Suffering from ventriculitis, affecting his intestines and stomach, Stein underwent exploratory surgery in December 1969, another operation in January 1970, and surgery for the third time the following month. However, the seventy-three-year-old Stein recovered.

  *Attempts to interview Unruh for this book were unsuccessful. There is no evidence that either Reagan or Unruh personally solicited Korshak’s support.

  †Two years later, he and his wife were divorced.

  *In 1974, Heymann was fired from the Chicago bank after a federal investigation revealed that he had been on the payroll of a New Jersey company, which had received nearly $30 million in First National loans. Heymann was later indicted for his activities and has since pleaded guilty.

  CHAPTER THIRTY-ONE

  In December 1972, Lew Wasserman announced that MCA would soon be marketing a new technological breakthrough in home entertainment. During a dramatic demonstration, motion pictures and other programs were placed on video discs and played on home machines hooked up to standard television sets. Like a long-playing record, the disc was thin and flexible, while the player resembled a stereo turntable which “read” discs with a laser-beam stylus. MCA had begun to explore this potential market in 1965 and was now looking for a manufacturer.

  MCA’s search for a partner/manufacturer for its “Disco-Vision” venture ended up at the doorstep of N. V. Philips, a large Dutch electron
ics firm and the thirteenth-largest corporation in the world, the third-largest outside the United States. It had also recently acquired Magnavox, the television company. The idea behind the prospective partnership was that Philips’s responsibility was to manufacture the hardware, and MCA’s responsibility was to produce the programs for the software.

  The negotiations between the two companies were tough, particularly after MCA tried to put a leash on Philips. In a letter to Wasserman, Jack Findlater, the president of Disco-Vision, wrote, “Under no circumstances will Philips agree to limit their sales or other activities to Europe or anyplace else.… Philips operates globally and they intend to sell video-disc hardware world-wide in competition with other manufacturing companies to whom licenses are granted or who have systems of their own. If that is not possible, there can be no deal.”1

  After two years of hard bargaining, the problems remained but were slowly being worked out. Findlater told Sheinberg, “[T]he way the contract would read is that Philips can include its own issued patents in any such multi-product cross-license but no know-how or trade secrets; that if the cross-licensee wants any MCA-developed patents or technology they would have to come to MCA for that; and if they do, then MCA keeps one hundred percent of any licensing income it receives—Philips does not participate.

  “The risk MCA would assume with this approach does not appear to be substantial.…”2

  Finally, in September 1974, the MCA-Philips deal was finalized; the two corporations held equal shares from licensing agreements made through their new, joint operation. However, MCA would not share in Philips’s revenues from the sale of players, and Philips would not share in MCA’s revenues from the sale of discs. Ready to proceed, Lew Wasserman—who was driving around Los Angeles in a Mercedes roadster with California tags that said “MCA-1”—had high hopes that Disco-Vision would be the crowning glory of his incredible career.

  In 1972, Henry Denker, a well-known New York writer, producer, and director, wrote The Kingmaker, a thinly disguised, fictional account of the rise of MCA. The Jules Stein character, Dr. Irwin Cone, is the founder of the Talent Corporation of America, TCA, which busily combats the Justice Department’s Antitrust Division while attempting to make a popular has-been actor, Jeff Jefferson, into a legitimate political figure.

  The book began with the inauguration of Jefferson as the governor of California. Denker wrote: “To take a man who had been an actor, a man without a single day’s experience in government, and catapult him to the highest office in the state was an achievement. And nothing to feel guilty about.

  “If there had to be blame, place it where it belonged. On the system which sanctioned it. On the people who permitted it. On the media which allowed themselves to be manipulated so easily.

  “All the Doctor had done was to apply the same basic rule to politics as he had to developing TCA into the leading power in the entertainment industry.

  “A lifetime ago he had been instructed by an expert, a man of primitive but deep insight: ‘Never waste your muscle. Find out where the weakness is and put your muscle there.’”3

  Interestingly, there was no Lew Wasserman character in Denker’s book, but Wasserman found reason enough to call Denker’s book a “piece of garbage.”

  Stein had remained involved in politics. He and Taft Schreiber had contributed $118,000 and $68,000 respectively to President Richard Nixon’s 1972 reelection campaign. Schreiber was also a co-chairman of the finance committee of the Committee to Reelect the President.

  According to an FBI document, Stein, who had been to Nixon’s Western White House in San Clemente, had been asked for his contribution to the CRP by Schreiber, who then invited Stein to another meeting with the president. The FBI report stated: “On April 5, 1971, President Nixon had held a meeting at his San Clemente home which was attended by approximately thirty people who were interested in the movie and communications industry. It was attended by members of the Teamsters Union and other such individuals including several studio executives from the Los Angeles area. During this meeting the members furnished their views to the president regarding their belief that tax investment credit should be given to the movie industry, the prime-time access rule concerning television, support for the copyright laws regarding the recording industry, and their views concerning cable television.”4

  Although the report stated that Nixon “made no commitment whatsoever,” Stein agreed to make his large contribution after this meeting.

  Schreiber’s name came up in another FBI report. “On 6/6/73,” the document stated, “source advised that John Mitchell, former attorney general of the United States, was at a party for Pat Nixon at [Taft] Schreiber’s house in Beverly Hills, California, on the night that word was received about the break-in at the Democratic Headquarters. Source advised that Mitchell had no drinks and appeared extremely nervous throughout that evening.”*5

  Governor Ronald Reagan was one of Nixon’s chief defenders, insisting that the Watergate conspirators were “not criminals at heart.” Reagan had also been present at Schreiber’s party—along with actors Jimmy Stewart and John Wayne, among others—and had held a joint press conference with Mitchell earlier in the day.

  While Stein and Schreiber were busy helping Nixon, Wasserman had other matters on his mind. In December 1972, he named Sidney Sheinberg as the executive vice-president of MCA, opening up speculation throughout the entertainment industry and Wall Street that Sheinberg was being groomed to be Wasserman’s handpicked successor. Wasserman also appointed H. H. Martin as the new president of Universal Pictures, succeeding Milton R. Rackmil, who became the studio’s “president emeritus.” The MCA president also signed a long-term contract with David Brown and Richard D. Zanuck—who had become an independent producer after losing a proxy fight against his father at Twentieth Century–Fox in 1971 and a subsequent battle with Warner Brothers, which had since been taken over by Warner Communications.

  By the end of 1972, MCA had shattered all records with revenues totaling almost $350 million and profits of nearly $21 million.

  On May 22, 1973—after Wasserman was given the Jean Hersholt Humanitarian Award at the Academy Awards ceremonies—seventy-seven-year-old Jules Stein shocked the entertainment industry by resigning as the chairman of the board of MCA. Just as quickly, the sixty-year-old Wasserman—who had made $250,000 during his twenty-seventh year as MCA president—was named to succeed Stein, and Sidney J. Sheinberg was selected as MCA’s new president. And Frank Price replaced Sheinberg as the head of Universal-Television. Sheinberg, thirty-seven, who was immediately given a $156,000 annual salary, beat out thirty-year-old Thomas Wertheimer, an MCA vice-president for financial affairs, for the job. The corporate changes became effective as of June 5, 1973, at the MCA board of directors meeting, where Stein was officially given the title “Honorary Founder.” Stein told reporters that he would continue as a director but would concentrate on his medical philanthropy causes, adding, “Mr. Wasserman has been the quarterback; he’s been calling the plays.”*

  During the fall of 1973, MGM’s Kirk Kerkorian decided to sell his studio’s theatres and properties in its overseas markets. The immediate reason was a plan to construct the MGM Grand Hotel in Las Vegas.† The buyer of MGM’s overseas assets was the Cinema International Corporation, which had been created jointly by MCA and Gulf & Western and its Paramount subsidiary. The CIC had been organized to expand the lucrative foreign distribution businesses of both corporations—and to avoid U.S. antitrust laws that had plagued MCA and G & W. Personally negotiating with Kerkorian were Wasserman, representing MCA, and Charles G. Bluhdorn, the chairman of the board of Gulf & Western. Sidney Korshak was selected to mediate the negotiations, which culminated with CIC’s purchase of the overseas package for nearly $93 million.

  “Mr. Korshak was very close to Wasserman and Kerkorian and played a key role as a go-between,” Bluhdorn said. “It was a very, very tough negotiation that would have broken down without him.”6

  Korsha
k received $250,000 for helping to make the deal, which was signed at the Bistro in Beverly Hills.

  Incredibly enough, Korshak, a multi-millionaire, needed the money. The previous fall, the Chicago office of the IRS had charged him with fraud and negligence, resulting from his alleged failure to pay $677,000 in federal income and gift taxes. The IRS also asked the U.S. Tax Court in Washington, D.C., to impose a $247,000 penalty on Korshak. According to IRS records, government auditors discovered that Korshak and his wife had only declared $4,481,703 in taxable income between 1963 and 1970, when his real taxable income was $5,080,987. Documents showed that Korshak had not paid $13,031 in gift taxes on stocks worth $115,124—from Parvin-Dohrmann, Pizza Hut, and City National Bank—that he gave to his two sons, Harry and Stuart. Also, the IRS charged that Korshak had falsely declared a $10,000 gift to Jill St. John as legal fees paid to her attorney. The IRS examiner auditing Korshak’s taxes concluded that Korshak’s actions were “intentional and substantial.”7

  The litigation was settled just before the case went to court, with the IRS dropping all charges against Korshak and agreeing to allow him to pay only $179,244, twenty percent of the initial demand.

  In early 1974, after Wasserman named Sheinberg as MCA president, he stepped down as the chairman of the Association of Motion Picture and Television Producers.* He was replaced as chairman by Gordon T. Stulberg, the president of Twentieth Century–Fox; MCA’s Sid Sheinberg was named vice-chairman. The move ensured Universal’s continued influence over labor negotiations, especially with Wasserman serving as a behind-the-scenes powerbroker and deal-maker—sometimes with the help of his close friend, Sid Korshak. When a major problem arose, the Hollywood powers still turned to Wasserman for advice. Others, like American Airlines and the California Institute of Technology, sought his counsel by naming him to their boards of directors. At a testimonial dinner thrown for Wasserman in Beverly Hills by the entertainment industry in late 1974, he was even honored by IATSE*—whose president over the past thirty-three years, Richard Walsh, had retired earlier that year and was succeeded by Walter F. Diehl.