by Vanda Krefft
No one outside Fox’s tight inner circle knew that he was trying to buy Loew’s. Fox insisted on that. He was especially worried about Adolph Zukor, who had grown tougher, meaner, and more brilliant with the years. “Anaconda Adolph,” journalist Allene Talmey wrote, “sits frozen bitterly blue in the midst of the red hot argument.” Make no mistake, that “little brief man” could be ruthless. According to Talmey, “Zukor kills, and then buys the corpse from the family of the deceased.” Fox feared that if Zukor knew he was trying to buy Loew’s, he would take advantage of his position as an in-law—Zukor’s daughter, Mildred, was married to young Arthur Loew—to persuade Carrie Loew not to sell. Schenck, not about to jeopardize his commission, obliged Fox. No one breathed a word to any of M-G-M’s production executives, not even to chairman Louis B. Mayer, to see how they would feel about working for Fox.
But perhaps Adolph Zukor knew all about it anyway. That seems more likely, given the close, friendly ties that had existed for years between Paramount/Famous Players–Lasky and Loew’s. Besides, there was very little that Zukor ever missed. Possibly it was easier to fight Fox by proxy, through the Warners. After Zukor’s attempt to purchase Warner Bros. fell through, rumors percolated throughout the trade press about an eventual merger between Warners and Paramount. Possibly Zukor planned to let the Warners get Loew’s, probably at a lower price than the prosperous Paramount would have been able to, and then to dominate Warners in a merger. That scenario would explain the curious fact that Paramount made no attempt to join the bidding for Loew’s.
Schenck favored Fox as a buyer for Loew’s because the Warners’ offer reportedly included a stock swap—a risky proposition because in view of Warner Bros.’ unstable financial history and its recent share price gyrations, no one was really sure what the Warner stock was worth. Fox, enticingly, promised all cash. By late 1928, to the exclusion of almost all other business matters, he had immersed himself in the Loew’s negotiations.
Word seeped out. On December 10, 1928, Film Daily reported on “unimpeachable authority” that Fox was close to buying a controlling interest in Loew’s. “Hard to imagine? You bet.” Everybody in the vicinity rushed to deny the story. It “hasn’t a word of truth in it,” Fox fumed. “I have no interest in acquiring the chain. I don’t want to buy it.” Schenck charged, “this unfair report was maliciously created, possibly with the idea of stock manipulation.” And M-G-M officials, who didn’t know, demanded that Film Daily either publicly apologize for the story or reveal its informants. The publication “respectfully” declined to do either.
In his bid for Loew’s, Fox was beginning to look dangerously like a monopolist. As of July 1928, there were fewer than two hundred U.S. locations that had any competition in film buying or theater operation and, excepting the low-class, daily-change theaters,* there were fewer than two thousand independently owned and operated theaters in the United States. Fox’s feverish buying spree was knocking those numbers down rapidly, and a Fox-Loew’s merger would deliver more power to one source in setting film rental prices, making it even more difficult for the small exhibitor to stay in business. Fox rationalized to himself that times were different from the simpler era of twenty years ago, when he had opposed the monopolistic ambitions of the Motion Picture Patents Company. These days, Fox believed, no studio could continue to spend vast sums of money to make “better and finer pictures” unless it controlled exhibition, so as to get the largest return possible. If most exhibitors were independent, Fox believed, rental fees would drop to such a level that it would be impossible for movie studios to improve the product, “and the sufferer would be the general public.”
Convenient as those ideas were, they directly opposed the principles on which Fox had based all his previous business life: open competition, protection of the small entrepreneur, and progress through a balance of industry rivalry and cooperation. As recently as March 1927, in his Harvard University speech, he had said, “I shall devote my life to prohibiting any man or group of men from forming a monopoly that would tend to prevent the motion picture from growing to its full height.” Now, it seemed, he wanted to become the one exception to the rule. Was it safe to break so sharply with the philosophy on which he had built his success?
Amid the fraught, secretive negotiations for Loew’s, a family crisis erupted. Fox’s elder daughter Mona wanted to end her marriage to Douglas Tauszig, from whom she had been separated since January 1928. Had they been an ordinary couple, the matter could probably have proceeded with no more than the usual amount of acrimony. But Fox money and Fox pride were at stake. Tauszig had rejected Fox’s system of values. He had given up an easy, secure, well-paid job in a prestigious organization; a luxurious home; and a wife who would have loved him devotedly if only he’d been willing to play his part. Worse, he was building a new life. Having set himself up in business as a commercial photographer, by late 1928 he had a new girlfriend, a twenty-two-year-old office worker named Clare Nussenfeld. They went on dates to the Flea Circus on Forty-Second Street, to see the musical comedy Whoopee at Broadway’s New Amsterdam Theatre, to restaurants, to beaches, to an amusement park for a roller-coaster ride. Fox knew all this because the private detectives he hired for $1,800 a month from the Tunney Detective Agency (owned by Thomas J. Tunney, a distant cousin of heavyweight boxing champion Gene Tunney and the former head of the New York Police Department’s bomb squad) followed the couple and took detailed notes. Tauszig called Nussenfeld “sweetheart”; she called him “monkey.”
Tauszig had to be punished. Although Fox’s views hadn’t changed since The Blindness of Divorce (1918), when he had called divorce a “curse to men, women and innocent children,” this was different. Rather than try to encourage a reconciliation, he pushed his daughter’s marriage to an end.
The scene might have been lifted from a bad Fox melodrama, the kind of movie he didn’t even make anymore. Tauszig and Nussenfeld often ended their evenings at his residence in Suite 642 of the Montclair Hotel at Forty-Ninth and Lexington. On the night of January 6, 1929, Tunney agency detectives took rooms adjoining and across the hall from Tauszig’s, as well as on the floors above and below. Around 1:00 a.m., in what was evidently a setup, a man who had been playing cards a short time earlier with Tauszig returned to knock on his door, shouting that he wanted his hat and coat. As soon as Tauszig opened the door, agency owner Tunney, two of his detectives, and two longtime Fox Film employees rushed from their hiding spots and into Tauszig’s room. There they saw Nussenfeld—tall, slender, with dark brown eyes and dark brown bobbed hair—standing next to a twin bed wearing a man’s bathrobe and with her stockings down around her ankles. While the two Fox employees shoved the pajama-clad Tauszig up against a table, the terrified young woman fled to the bathroom and hid in the tub with her hands covering her face. A detective chased her there and pulled back her robe to reveal a scanty chemise. “Gentlemen, is that necessary?” Tauszig asked.
Yes, it was. Mona needed evidence so she could be the one to file for divorce, as she did on January 9, 1929. On the same day, Tauszig filed assault charges against the two Fox employees, Louis S. Levine and Herbert Leitstein, and had them arrested. A week later, those criminal charges were dropped after Tauszig couldn’t identify his alleged assailants. Evidently, he had been intimidated or paid off. Of course he recognized Levine and Leitstein. Levine was Eva Fox’s cousin and a Fox Film purchasing agent, and Leitstein was Fox Film’s chief accountant and Fox’s personal accountant, positions he had held for many years. Levine and Leitstein had been chosen for the love nest raid because they knew Tauszig so well and could identify him beyond a shadow of a doubt. Fox, the good father, had fixed everything. At least he thought he had.
Around the same time that he was ensuring the end of Mona’s marriage, Fox struck a deal to pay $50 million (equivalent to $712 million in 2017), for the Loew family’s total holdings of 400,000 shares of stock. Carrie, Arthur, and David Loew would receive $100 per share, or $40 million, and the other $25 per sha
re, or $10 million, would go to intermediary Nicholas Schenck as a commission. Fox also agreed to buy another 37,500 Loew’s shares from Schenck and from Marcus Loew’s longtime friend, actor David Warfield.
Although $125 per share represented slightly less than double the market price of about $65 in early January 1929,* Fox considered his purchase a bargain. To amass an equal number of shares on the open market would have involved substantial transaction costs and much wasted time—and as word got out that someone was buying large amounts of the stock, the price would have gone up anyway. Even if he had been able to piece together an equal-size block through such trading, Fox still would have faced the Loew’s family’s 400,000 shares, either in their hands or in those of the Warner brothers, a circumstance that would have meant constantly wrestling with another party for control. Besides, if the accountants were right and the combined Fox and Loew companies could achieve annual cost savings of $17 million, the deal would pay for itself in only three years.
Fox asked for only one condition to the $50 million sale. Anxious about antitrust issues, he wanted to get preliminary approval from the U.S. Justice Department. Fine, said Schenck, but he had better hurry because the Warners were waiting in the wings and ready to move ahead without any such stipulation.
Fox was right to worry about the government. In its September 1925 brief on the five-year Famous Players–Lasky antitrust investigation, the Federal Trade Commission had bluntly stated its position that ownership of movie theaters by producers and/or distributors constituted “an unfair method of competition . . . It is unfair to the competing producers, the competing distributors, and the public.” Since then, the motion picture industry had become even more highly concentrated. On the exhibition side, of the nation’s 15,000 to 20,000 movie theaters, by 1929 about 5,000 had the vast majority of seats and were controlled by the largest producers and distributors. In film production, eight major studios produced almost all the movies for a nation of 110 million people. Clustered together in Hollywood, those companies constituted “a close knitted community remote from the rest of the world, where the interbreeding of ideas, taste and prejudices, is inevitable,” J. D. Williams, one of the organizers of First National and now executive vice president of World Wide Pictures, told an industry group in January 1929. Government officials were watching—“much more closely than most of you think.”
Indeed, although no one took the action very seriously, on September 28, 1928, the U.S. Justice Department had filed a Sherman Antitrust Act lawsuit in Los Angeles against nine major U.S. studios and exhibitors (including Fox Film, Fox’s West Coast Theaters, and M-G-M) alleging a conspiracy to restrain trade. At issue was the major studios’ policy of protecting prestige first-run theater engagements with a buffer zone of time, called “clearance,” before renting to second-run houses.
In this atmosphere of intensified scrutiny, a Fox-Loew’s merger might prompt frowns. Combined, Fox and M-G-M would account for about 40 percent of U.S. film production. Combined, the Fox Theatres (including the new Fox Metropolitan subsidiary) and Loew’s circuits would comprise about eight hundred theaters, the largest circuit in the world, with many large houses in key cities that influenced the booking choices of smaller theaters throughout their surrounding area. In New York, the most important U.S. market, Fox-Loew’s theaters would have an estimated buying power of $12 million to $14 million out of a $20 million total.
In early 1929 it was possible to request an antitrust review before money changed hands. Although for a long time the Department of Justice had refused to advise business leaders about the legality of proposed mergers, telling them they should decide for themselves and then discover the consequences, the current assistant attorney general in charge of the antitrust division, William J. Donovan, had changed that policy. Routinely, he reviewed mergers in advance and issued opinions that were tantamount to official decisions. His standards for approval weren’t especially stringent.
Many political observers expected Donovan to become the next U.S. attorney general upon the inauguration of President-elect Hoover in March 1929. Donovan had served as a Hoover campaign adviser and speechwriter and had made it clear that U.S. attorney general was the only appointment he wanted from Hoover. On January 12, 1929, emerging from an afternoon meeting with Hoover, Donovan declined to be interviewed by reporters, but he smiled.
Days later, Fox traveled to the Bishop’s Lodge resort in Santa Fe, New Mexico, to meet with Donovan, who was then chairing the Boulder Dam Commission and serving on the Rio Grande Commission. Accompanying Fox was Sheehan, who, like Donovan, came from Buffalo, New York; Fox believed they were friends.
Laying out his case to Donovan, Fox emphasized three points. First, it was Fox Theatres and not Fox Film that proposed to acquire the 400,000 shares of Loew’s, Inc. Because Loew’s theaters were mostly in cities that didn’t have a large Fox theater, a merger would not diminish competition. Instead, the two chains would complement each other. Second, Fox would not interfere with M-G-M’s operations. He wanted a friendly relationship. He wasn’t going to dismiss the successful management team that had brought M-G-M to the peak of its earning power.
Those two arguments were specious. In fact, there was little separation between Fox Theatres and Fox Film. The two companies shared most of the same executives, with Fox at the top of each, and Fox Theatres had been created in 1925 specifically to serve Fox Film. In December 1927, because they operated so closely, Fox had reportedly planned to merge the two companies—and now his ultimate intention was to consolidate both Fox companies with Loew’s into one giant organization. As for Fox not interfering in M-G-M’s affairs when he had the power to interfere, anyone who knew him would have understood that to be a dim possibility.
As his third justification for a Fox-Loew merger, Fox tossed in flag-waving patriotism. Surely that would appeal to war hero Donovan, who during the Great War had earned a Medal of Honor, a Distinguished Service Cross, and two Purple Hearts. It was the federal government’s duty, Fox insisted, to retain motion picture supremacy for the United States, “even if this consolidation did not entirely conform with laws on our books.”
A master of self-protective evasion—on the football team at Columbia University, Donovan had earned the nickname “Wild Bill” because of his unpredictable maneuvers—Donovan sidestepped. Well, now, you see, he really had his hands full with the Boulder Dam project, he told Fox. He urged Fox to dictate a statement outlining his intent and purpose regarding Loew’s. Donovan would then mail copies of the document to his assistant, C. Stanley Thompson, and to Saul Rogers, in-house counsel for both Fox Film and Fox Theatres, so those two could work out a way for the deal to go through.
This was typical Donovan. Energetic, charming, socially facile, and unreliable. In the words of Edward L. Bernays, the “father of public relations” who had worked on Fox’s Cleopatra (1917), “Donovan was the man who was so busy being busy that he was too busy to do the things he might have been busy about.”
Fox didn’t see it. Taking Donovan at his word, expecting a quick response—he had told Schenck the process would take no more than eight days—Fox went to Los Angeles to wait. From there, it would take only twenty-four hours to return to Santa Fe to finalize the understanding with Donovan. Every few days, Fox phoned his lawyers. Over and over, he heard that there was no answer yet. When Saul Rogers met with Donovan’s assistant, Thompson, at the Department of Justice in Washington, DC, Thompson asked for extensive economic data about the movie industry. Rogers prepared that data and went several more times to Washington.
While Fox was waiting in Los Angeles, his longtime friend Anthony R. Kuser, one of the original investors in Fox Film and always a stalwart Fox supporter, died on February 8, 1929, at age sixty-six from an undisclosed illness at his oceanfront estate, Los Incas, in West Palm Beach, Florida. It was terrible news. Fox considered Kuser one of his best friends, “a great believer in me and in the Fox enterprises.” Had Fox left immediately, he could have a
ttended Kuser’s funeral on February 14 in Bernardsville, New Jersey. He didn’t go. The call might come at any moment for him to return to Santa Fe.
It didn’t. After Fox had been away from the East Coast for about five weeks, still with no word from Donovan, he returned to New York on Thursday, February 21, 1929. Saul Rogers told him his timing was perfect: only half an hour earlier he and Thompson had concluded their talks at the Ambassador Hotel. Relating the outcome, Rogers was in a difficult position. He knew Fox wanted to hear only that Thompson had approved the Loew’s acquisition, but Thompson hadn’t exactly done so. Instead, he had told Rogers that although he wasn’t entirely sure about clearance under the Sherman Act, he was reasonably confident that the Loew’s acquisition would not violate the Clayton Antitrust Act. Of course, Thompson cautioned, he was speaking only on the basis of current conditions. If circumstances were to change, then his opinion might change. Rogers asked Thompson for a letter stating his position. Thompson demurred. Because Hoover, who would take office in a week and a half, hadn’t yet named Donovan as attorney general, no one could officially state policy for the next administration. Any letter he might provide, Thompson explained, would be so full of reservations as to be meaningless. Better to let events take their course and trust the administration to make good on their friendly relationship. Rogers told Thompson he planned to advise Fox to go ahead with the Loew’s purchase. Thompson didn’t object.