The Man Who Made the Movies

by Vanda Krefft

  Fox believed that Otterson and Stuart had promised to appoint Sheehan president of Fox Film if he helped them dispose of Fox.

  “Little Caesar,” director Raoul Walsh called Sheehan. “Power was his earthly god,” observed former newspaper reporter Edwin C. Hill, whom Sheehan had brought to Fox News in 1922. Hill recalled Sheehan telling him, “I want to be the power behind the scenes. I want to enjoy the sensation of pulling the strings and seeing the Punch and Judys do their stuff. That’s the biggest thing in life. That’s what makes money important.” According to Hill, Sheehan had lost heavily in the stock market crash and his personality changed “from outward cheerfulness to a dour and distant attitude even toward those who had counted themselves as his friends.” Hill was shocked by Sheehan’s betrayal of Fox, who “had lifted him out of the obscurity of an ill-paid municipal job and made him a millionaire.”

  On March 24, the day that most New York City morning papers carried detailed articles about Sheehan’s lawsuit, Fox issued a stinging reply for the evening editions. Previously, Fox had always built Sheehan up publicly, the better to advance their shared goals. Now he attacked, charging that Sheehan was scheming to “wreck this great enterprise” even though “Mr. Sheehan . . . owes everything he is and has in the world to me.” Pointing out that he himself had turned down an offer of $33 million for his voting shares, Fox said, “I want the stockholders to know that in all this desperate, sordid game of high finance, there is at least one man to whom money is not the only thing in the world.”

  Later, Fox would say that Sheehan’s “treachery to me has been one of the great disappointments of my life.” Out of “fondness,” he had appointed Sheehan as West Coast head of production, even though Sheehan previously “never had anything to do with and knew absolutely nothing about the producing end of the business.” Fox had taught him the job, watched over him, and allowed him to posture as the face of Fox Film even though other executives knew more about the business and had contributed “far more” to its prosperity.

  Fox’s sense of personal affront was tinged with sadness over the foolish futility of Sheehan’s decision—not because Sheehan wouldn’t necessarily get what he wanted, but because if he did, it wouldn’t be worth the price he had paid. Alluding to Macbeth, Fox said of Sheehan, “Vaulting ambition has gone to his head and made an ingrate out of a good fellow.”

  Other assaults followed relentlessly. Two days after Sheehan sued Fox to try to force him back to the voting trust, Halsey, Stuart sent another blistering letter, this one twenty-four pages long, to the Fox stockholders. Repeating the same old accusations about Fox’s recklessness and “selfish ambitions,” the letter warned, “Are the stockholders to be constantly placed in peril by Mr. Fox . . . ?”

  The following day, on March 25, 1930, Halsey, Stuart president Harry Stuart filed an affidavit of prejudice against Judge Coleman, asking the U.S. Circuit Court of Appeals to appoint another judge to take over the Fox receivership cases. The application was highly unusual—it was only the second one filed in that federal judicial district during the past thirty years. Stuart alleged that Judge Coleman’s repeated demonstration of “personal bias and prejudice” in Fox’s favor made it impossible for Halsey, Stuart to get a fair and impartial hearing.

  On March 27, 1930, Judge Coleman disqualified himself from the Fox cases. He had no choice. Legally, it didn’t matter whether the statements in Stuart’s affidavit were true, only whether, if true, they were sufficient to show bias. Because they would be sufficient, Judge Coleman had to step down. Judge John C. Knox was appointed in his place. The receivership lawsuits would now have to begin all over again. The setback was a crippling blow to Fox. With the Fox board meetings less than three weeks away, he needed to move forward as quickly as possible.

  The next day, Arthur Berenson, the Boston lawyer leading one of the receivership lawsuits, sent a letter to Fox, with copies to the press, asking twelve questions that were less questions than scurrilous, unfounded accusations. Among them: What were the secret side agreements that Fox had made with the Bancamerica-Blair group? (None existed.) Wasn’t it also true that Fox planned to sell the Fox companies’ “finest asset,” West Coast Theaters, to RKO? (No.) Why had Fox voted himself a back salary of $1 million when his companies were in such distress? (He hadn’t.) The truth, however, wasn’t the point. Frightening investors was.

  With the in-fighting now on public display, morale at Fox Film was in shambles. As the Los Angeles Times observed, “The old spirit that has built the organization to what it is—a leader in its field—has gone. Mr. Fox or his former close associates must give way. It is doubtful if they can ever work together again in friendly business cooperation.”

  Specifically, either Fox or Sheehan would have to go. Both options would entail major loss. What would Fox Film and Fox Theatres be without William Fox, the person who had created them and built them out of a handful of dollars and a dream? Conversely, Sheehan had overseen Fox Film’s most glorious productions and had, as Fox had not, an extraordinary eye for acting talent. Harrison’s Reports warned that without Sheehan and his allies, “Mr. Fox will then again be surrounded by his relatives, whom he has always tried to keep in strategic jobs . . . Fox will go back to making . . . Johnstown Floods.”

  Whichever one left, that team of Fox loyalists would also have to go. Debilitating anxiety pervaded the workforce. As one observer pointed out, “when the men in the field do not know whether they will have their job the following day or not, they haven’t the heart to work.” Sales representatives in particular faced a baffling future. Just a few weeks away, in May 1930, negotiations would begin with theater owners to pre-sell almost all the studio’s movies for the coming season, which would run from August 1, 1930, to July 31, 1931. Typically in the industry, at the time of contract signing, many of the movies offered had not yet been made. Exhibitors had to buy them based on the evidence of past performance and, critically, faith in a studio’s ability to deliver what it promised. If Fox Film were to enter receivership, there would probably be no money for any movies at all. How were Fox Film sales representatives to persuade already distressed theater owners to take the chance of ending up with blank screens?

  Even employees not directly on the firing line felt an urgency to lock down as much as they could get. Fox Film’s biggest female star, Janet Gaynor, effectively went on strike in February 1930 and sailed off to Honolulu with her mother to avoid starring in Frank Borzage’s Budapest (later titled Liliom). Gaynor gave the studio a written list of eleven complaints—among them, that Fox Film’s atmosphere had become “unpleasant and not conducive to developing her best talents.” Until conditions improved, she declared, she didn’t want to make any more movies for Fox. She also wanted a salary increase from $2,000 a week to $4,000 a week, shorter hours, more publicity, and a schedule of no more than three movies a year. Without such contract adjustments, she would not set “foot on the Fox lot again.” Evidently Gaynor, who did not get along with Sol Wurtzel, who was running the studio in Sheehan’s absence, feared that Sheehan might not return and that this was her last chance to get better terms.

  The poisonous atmosphere also wore away at Eva Fox’s mental health. After the mid-January 1930 incident when she jumped out from behind a door and threatened to throw sulfuric acid at Alfred C. Blumenthal, two more bizarre events occurred. During a visit from Alfred M. Greenfield and his lawyer Harry Sundheim, who were still trying to persuade Fox to sell his voting shares to Harley Clarke, Greenfield advised Fox to toss the Tri-Ergon patents into the deal. He considered them worthless.

  “There was a time during these sessions that, rather than go on any further, tired as I was, I was ready to surrender these Tri-Ergon patents,” Fox said. “Mrs. Fox was in the doorway, with only a curtain between us. . . . She came into the room and went into a rage of a kind I would never like to see her or anyone [else] in again. It resulted in a terrific expression of frenzy, and she finally dropped to the floor and passed out. For a
while I thought she was dead. It took us half an hour to bring her to again.”

  Another time, to emphasize the extent of ruin Fox would face if he didn’t sell out, Greenfield swept his arm around the room to indicate Fox’s sizable art collection. “Now, you know you can’t go on like this,” he warned. “All these things are going to end up in the public auction room. You know they are going to strip this home.” Again, Eva was listening from behind the curtain. Fox recalled, “She again went into a frenzy and said she didn’t want a piece of it—it could all be sold.” She would rather go back to the eleven-dollar-a-month apartment they had rented after they were first married, she said, even though eleven dollars a month would now rent no more than a hall bedroom in New York City.

  But they couldn’t go back, Fox knew. It was one thing to be young and dream of good fortune, and another thing entirely to have had everything and lose it all.

  The end began on March 28, 1930. On that date, “out of a clear sky, wholly unexpected,” Fox received a letter jointly signed by Bancamerica-Blair; Dillon, Read; and Lehman Brothers releasing him from his obligation not to sell his Fox Film and Fox Theatres Class B voting shares. “That made me pretty suspicious,” Fox said. Why would they give up this essential element of control?

  Hastily, Fox had Untermyer arrange a conference with them on Monday, March 31. With little more than two weeks left before the April 15, 1930, Bancamerica-Blair deadline, he planned to ask for a sixty-day contract extension. He could still pull through, he believed. Greenfield, who knew about the bankers’ letter—as did everyone else, because Sheehan had issued a press release about it—urged Fox to sell his voting shares to Harley Clarke and avoid the trouble. No, Fox said.

  The meeting at the Bancamerica-Blair offices started badly. Instead of being brought into the conference room right away, Fox, Untermyer, and Untermyer’s son Alvin were kept waiting outside for nearly an hour.

  “You do all the talking,” Fox told Samuel Untermyer. He and Alvin would watch the reactions of the bankers and their lawyers.

  There were about fifteen of them. Fox recalled, “As I came into the room, they appeared to me as though they were all . . . wearing a Japanese mask. All their faces were tense.” Studying those impassive expressions, Fox understood that something had gone terribly wrong, that the bankers who had supported him “like school boys in a contest” at the stockholders meeting had turned cold. He had no idea what had happened.

  Untermyer opened the meeting by asking for a contract extension until June 15, 1930.

  Fox recalled, “There was dead silence, and at the other end of the room Mr. Swaine, attorney for the Bancamerica Blair Corporation, asked Untermyer a wholly irrelevant question.”

  Untermyer spent about fifteen minutes answering, then repeated his request for an extension.

  A Lehman Brothers’ lawyer asked a question that took Untermyer another fifteen minutes to answer.

  “Not a sound out of all these bankers. Not a word, not an eyelash movement,” Fox said. “You couldn’t read what was in their faces at all. You had to guess at it.”

  For the third time, Untermyer asked for an extension.

  Swaine replied with another question.

  Fox realized that it was hopeless. “I went over to Alvin Untermyer and said, ‘Go and tell your father not to ask the question again, but to leave with our question unanswered,’ and so we did leave. It was never replied to.”

  Now he understood. The pile-up of legal action, the relentlessness and the intensity of aspersions against his character, Halsey, Stuart’s threats to sue over its alleged preferential financing contract: it all added up to too much trouble for the Bancamerica-Blair bankers. They wanted out.

  Then why didn’t they just say so? Fox later admitted that he had probably scared them. “I wasn’t guarding the language that I was employing,” he conceded. He had been urging his lawyers to get a grand jury indictment of his adversaries for criminal conspiracy. “It wasn’t a secret. It was commonly talked about. What was the use of saying no when they [the Bancamerica-Blair bankers] didn’t have to say anything—when perhaps in the near future Fox would make a sale and they could still occupy the position, ‘We never said no. We wanted time to answer the question you proposed. Search your memory as you will and you will not find that we said no.’ Of course, sometimes an answer is almost complete without saying anything.”*

  The fight was over, and he had lost. Seven major lawsuits, including four applications for receivership (three against Fox Film and one against Fox Theatres) and many other lawsuits by creditors were pending against the Fox companies. According to legal experts, the situation was without parallel in legal history. Otterson and Stuart were virtually guaranteed to seize control at the April 15 board meetings.

  Two days later, Fox made up his mind. To save Fox Film and Fox Theatres, he would sell his voting shares to Harley Clarke.

  CHAPTER 45

  The End of the Dream

  On Wednesday, April 2, 1930, Fox sent for Greenfield to help prepare a memo outlining his terms for selling his voting shares. Two days later, Greenfield went to see Clarke to make sure he had the money. Clarke did. Upon Greenfield’s return, Fox agreed to proceed right away.

  The next sixty hours flew by in a chaotic frenzy. Lawyers and aides and confidants were mustered, and a meeting arranged for Fox and Clarke at Clarke’s office at 10:00 a.m. on Saturday, April 5. The various participants would move locations several times, go out to dinner together on Saturday to Childs, break off into splinter groups, and take brief naps, but throughout the long weekend, only Untermyer would leave (and then, only briefly, for a trip to Atlantic City) and among the others, none would even change clothes. Courtland Smith, who was advising Harley Clarke, said, “I have been in Mr. Fox’s office and Mr. Clarke’s office during these negotiations at which time no human being could tell who was there and who was not there. People were rushing in and out; various offers were being made, propositions were being made and counter-propositions; some propositions were being accepted and later completely denied. There was never a financial case in the history of this country in which there was so much confusion and so much disorderly conduct.”

  Fox was torn with remorse. He knew he had to sell. He also knew he didn’t want to sell. He agreed to terms, then disagreed with them. He asked for something, then asked for more. He flew into a rage when others opposed him. Trapped, he kept looking for a way out that he knew didn’t exist. Several times he seemed ready to walk away entirely. “Fox must make his own financial plans,” he said. Fox would “rather have his name and prestige than any amount of money.”

  But he didn’t back out. It had to be done.

  By 9:00 p.m. on Sunday, amid a battalion of typewriters and stenographers at Samuel Untermyer’s apartment at the Ambassador Hotel, the sale contract was finalized. Everyone knew that if Fox were to see Clarke in these ending stages, the deal might blow up. So, for the past several hours the two had been kept apart. Shortly after 9:00, with Fox absent, Clarke arrived at Untermyer’s apartment and signed the contract. Then Clarke left to take the night train back to Chicago.

  Around 11:00 p.m., Fox arrived at Untermyer’s apartment. Untermyer insisted that because it was Sunday, they ought to wait until at least one minute after midnight, to ensure the legality of the contract. They watched the clock, and when it reached twelve, Fox wanted to wait even longer, “until ten or fifteen minutes past twelve—perhaps the watch we were going by was not keeping accurate time.” It wouldn’t make any difference, he thought. “I saw no haste. I knew that Clarke wanted these shares and I knew he would wait until Monday morning—yes, until a month from Monday morning.”

  Finally, sometime between 12:05 and 12:10 a.m. on Monday, April 7, 1930, Fox shrugged, picked up a pen, and silently signed the contract that ended his life’s work. The dream was over.

  In exchange for Fox’s Class B voting shares—50,101 of the 100,000 total at Fox Film and all 100,000 of Fox Theatres—Clark
e agreed to pay Fox $15 million in cash.

  As compensation for his claims for back salary, for the years he hadn’t taken any payment as president of Fox Film or Fox Theatres, and to reimburse him for the expenses he had paid out of his own pocket as well as stock price losses sustained in trying to protect the Loew’s shares, Fox would receive an additional $3 million, to be paid in the form of twelve $250,000 promissory notes with 6 percent interest.

  Fox would remain on the board of directors of Fox Film and Fox Theaters.

  He would not remain, as he had very much wanted to, chairman of the board of either company. On that point, Clarke had resisted just as strongly as Fox had insisted. To resolve the dispute, Clarke had come up with the idea for Fox to serve for five years as chairman of a newly created advisory board for both companies. The duties weren’t yet specified, but Fox would receive an annual salary of $500,000.

  He would also personally retain ownership of the Tri-Ergon sound-on-film patents, while giving Fox Film and Fox Theatres royalty-free licenses to use the technology. Although AT&T, which was helping to back Harley Clarke financially, aggressively pushed for the patents to be included in the deal, Fox would not relent. With the only alternative being a receivership for the Fox companies, which AT&T wanted no more than Fox did, the phone company gave in. It was a risk worth taking. Without a film studio or theater chain, Fox’s power to use the Tri-Ergon patents would be hobbled. Indeed, beaten down as he had been, he might well take his $18 million and, other than showing up once in a while to dispense the odd bit of advice, quit the motion picture industry and spend the rest of his days playing golf.