The Man Who Made the Movies

by Vanda Krefft

  For at least two years, all Fox theaters would continue to be called Fox theaters.

  For at least one year, all Fox movies would be captioned “William Fox presents.”

  Clarke would pay all Fox’s legal fees. That was only fair, Fox believed, because the opposition camp had forced him to hire the lawyers.

  Although Fox agreed not to compete with Fox Film in film production, he was free under certain conditions to produce content on 16mm film for the “home talker” market.

  Altogether, Fox had landed safely. Remarkably, despite the depth of personal loss that the sale represented, he did what he could for those who had believed in him.

  To Jack Leo, Fox Film vice president and his brother-in-law, and to Western Avenue studio superintendent Sol Wurtzel, Fox required that Fox Film pay each a bonus of $500,000. That was $1 million Fox might have had for himself, but he wanted to reward the two men’s loyalty and provide for their families. Wurtzel especially must have faced intense pressure to turn against Fox. He had endured Fox’s verbal abuse for years, had suffered a nervous breakdown in the early 1920s, had been passed over in favor of Sheehan as West Coast head of production, and had had to work closely with top executives who had cast their lot in with Stuart and Otterson. Wurtzel, however, had not signed the December 17, 1929, round-robin letter chastising Fox for disavowing the voting trust. Nor had he added his name to the March 5, 1930, newspaper ad that denounced the Bancamerica-Blair refinancing plan on the day of the stockholders meeting. He also had not joined with Sheehan in suing Fox to block the Bancamerica-Blair plan.

  Before deciding to sell out, Fox had phoned Wurtzel and asked for allegiance. Wurtzel had agreed. But if Fox should sell out, Wurtzel said, all he had to do was ask and Wurtzel would return immediately to New York to help in any way possible. On a photo of himself that Fox gave to Wurtzel a short time later, he wrote, “Sol Dear, your loyalty I shall never forget.”

  Fox would also be able to choose ten Fox employees who would be guaranteed their jobs for the next three years at salaries not less than they were currently receiving.

  Greenfield’s Bankers Securities would instantly be repaid its $10 million loan.

  Samuel Untermyer would receive his $1 million fee. Although Untermyer hadn’t saved the Fox companies for Fox, he had put through the sale contract that avoided a receivership, and that was what Fox had asked him to do. Fox told Untermyer to make sure he got the money. Later, when Clarke refused to pay more than $800,000, Fox gave Untermyer the remaining $200,000.

  For all Fox Film and Fox Theatres employees who had bought the new issue of Fox Theatres stock during the October 1929 Silver Jubilee sales campaign, Fox Theatres would offer to buy back their shares at the $25 purchase price, plus 6 percent interest, at any time during the next ninety days. Fox had insisted on this provision as the company’s “moral obligation.” His employees had made the investment on the assumption that he would run Fox Theatres, and most of them could not afford to lose the money. Some 38,000 shares were involved, and at the time of the sale contract, they were worth $11 each, so Fox Theatres stood to pay out $532,000 above the stock’s market value—and more if the price continued to decline.

  Even those employees who had already dumped their Fox Theatres stock could still be made whole. In the April 8, 1930, offer letter, Jack Leo suggested that they repurchase the same number of shares and then sell them back to the company at $25. Leo explained, “Mr. Fox is deeply appreciative of the faith and confidence which you have evidenced in the purchasing of the Theatre stock, and is happy to be able to inform you that no loss will be sustained by you.” One grateful employee, owner of fifty-eight shares, wrote back, “I think it was most considerate of Mr. Fox to remember his employees even in the midst of negotiations involving such large affairs.”

  It fell to Samuel Untermyer to announce the sale of Fox’s voting shares, which he did on Sunday night, April 6, 1930, even before Fox had signed the contract. Untermyer presented the transaction as a victory for all concerned, accomplished “under conditions that Mr. Fox is satisfied will safeguard the future prosperity and expansion of the companies and of their army of faithful employes [sic] who have for so many years aided him in upbuilding this great enterprise from a small beginning.” The Fox companies’ debts would all be paid in full, with interest, Untermyer said, and both Film and Theatres would have ample working capital left over.

  Should anyone think that Fox had obstinately delayed this resolution, needlessly causing five months of terror and anguish, Untermyer staunchly defended his client. “There has been no time, since the financial troubles of the company began, when Mr. Fox could not have sold his ‘B’ shares,” Untermyer noted. Instead of running out, Fox had stayed and fought to secure terms that, when fully revealed, would “demonstrate the vision and unselfishness of Mr. Fox in the interests of the shareholders.”

  During the afternoon of Monday, April 7, 1930, Harley Clarke officially took over the Fox companies. First, at Untermyer’s law offices at 120 Broadway, the officers and directors of Fox Film and Fox Theaters resigned. Clarke was elected the new president of both companies, and a temporary board was appointed, consisting of Fox, Saul Rogers, James R. Grainger, and Clayton P. Sheehan. Next, at the Bankers Trust Company in New York, where his voting shares had been in escrow since early December 1929, Fox handed over the securities and accepted in exchange a check for $15 million and promissory notes for $3 million.

  News of the sale of control of Fox Film and Fox Theatres stunned the motion picture industry. It seemed inconceivable that after trying so hard to hold on, Fox had suddenly let go. Yet on the whole, the outcome was a welcome relief. The fight had gone on too long. Now everyone could get back to business. Ironically, in their statements to the press about the sale, both Clarke and Sheehan indirectly acknowledged that the scathing attacks on Fox’s management had been lies. While Clarke announced that Fox Film’s upcoming movies were “considerably ahead of any previous year” in both quality and efficiency of production, Sheehan attempted to restore public confidence by praising the fundamental financial soundness of both Fox companies.

  The stock market shouted with approval. On Monday, April 7, short sellers in Fox Film rushed to cover, so that opening sales on the New York Stock Exchange shot up 9⅝ points from Saturday’s close to reach 50; the price then settled down to end the day at 48. Fox Theatres stock also rebounded, with heavy trading on the Curb Exchange, yielding a one-day gain of 2⅛ for a closing price of $11, a high point for 1930.

  AT&T was pleased. On April 9, 1930, John Otterson sent a telegram to ERPI’s London office manager that read, “Clarke is friendly to us and refinancing is to be under Halsey, Stuart leadership. Solution of problem is therefore entirely satisfactory to us.”

  Fox would never reconcile himself to the loss of his companies. “I was forced to enter into that [contract] under duress,” he said over and over. “I had not any choice except to sell out.” The only alternative would have been receivership, and “I did not want to see the stockholders of these companies suffer as a result of my not selling out.”

  The worst part, the soul-sickening aspect, Fox believed, was that nobody had won. “There was one thing that I felt certain of throughout this entire controversy and that was that if they ever were able to capture the two certificates of stock that gave them voting control of these companies, that what they really would capture would be just the two pieces of paper—not the Fox Theatres or the Fox Film Corporation. That I felt they never could capture, nor could they ever capture Fox himself. And instinctively I felt [that] without capturing him they were just capturing two certificates of stock, that some day in the future . . . they would come to the realization that what they had really captured would bring them suffering, anxiety, misery, destruction, unhappiness and all other things that go to destroy the hearts and minds of men.”

  PART IV

  DESPAIR

  1930–1943

  CHAPTER 46

&nbs
p; Sorrow and Rage

  After selling his voting shares on April 7, 1930, Fox was exhausted, confused, and profoundly distraught. It was only a mild relief that the vicious warfare had ended. He had lost the central, driving purpose of his life. In less than a year, he had changed from the most powerful man in movies to an outsider looking in.

  He had lost himself, he felt. “My reputation and everything I had in the world were wrapped up in [the Fox companies’] welfare,” he said. Among friends, he wept. He may have been suicidal. Fox Film publicist Victor Mansfield Shapiro heard that when Adolph Zukor and a Guaranty Trust bank executive visited Fox at his Ambassador Hotel suite shortly after the sale, they had to restrain him physically from jumping out the eleventh-floor window.

  Religious faith had failed him. He had prayed constantly to God not to let anyone take away his business, and he had believed that “God knows which side is right.” Yet, if any prayers had been answered, they were those of Clarke. “I probably said, ‘Dear God, I have prayed hard and here you have destroyed me.’ ”

  Rage overtook him. On April 8, 1930, the day after the transfer of power, he wrote a twenty-two-page letter to the Fox Film and Fox Theatres stockholders purporting to answer the attacks leveled against him “as dispassionately as circumstances will permit.” That turned out to be not very much at all. Everywhere he looked he saw targets for scorn and condemnation. AT&T was a “sinister figure” that had spewed forth a “maze of falsehoods, distortions and half truths.” Halsey, Stuart had made “ridiculously false” and “grossly misleading” claims, pretending to be “angels” to the Fox companies while gouging large profits from them. Winfield Sheehan was an egotist of “inordinate conceit,” a brazen liar, and a “beggar on horseback whom I advanced from post to post” and who then betrayed “every tie of decency” to his greatest benefactor. And so on and so on.

  Was it really necessary to say all this publicly? The Fox companies’ new management urged Fox to go away—far away, preferably to another continent. “Fox to Sail for South America,” read a front-page headline in the New York Morning Telegram on Wednesday, April 9, 1930. The article explained that on Saturday, April 12, under an assumed name to avoid publicity, Fox would head across the equator for several months and then travel to Europe for an extended stay. Another rumor, published on April 12, 1930, in Motion Picture News, predicted that at the end of the month, Fox would take the ailing Eva for a water cure in Germany. Neither story was true.

  Yet, Fox did leave town. Around mid-April 1930, he retreated to Atlantic City for about seven weeks. Telegrams sent to him at the studio’s Tenth Avenue offices went unanswered. Returning to New York in the latter part of June, he was somewhat reconciled to present circumstances. He still had some power. He was the chairman of the new advisory board. He was still on the board of directors of both Fox companies. As one journalist wrote, “It is almost inconceivable that William Fox should be through.”

  He also had more reasons than ever to be angry and very little motivation to restrain his feelings. The facts were plain. For five months he had struggled to refinance his companies and had found, ultimately, not one dollar on Wall Street available to him. Clarke had no such difficulty. On April 17, 1930, just ten days after buying Fox’s voting shares, Clarke announced that he had arranged for Fox Film and Fox Theatres to receive $103 million in new money, enough to pay off all their debts. Fifty-five million dollars would come from an issue of one-year, 6 percent Fox Film notes, underwritten by Halsey, Stuart.* Another $30 million would come from a GTE ten-year bond issue, underwritten by the Chase Bank and the W. S. Hammons Company of Boston, and marketed by Chase Securities, along with Halsey, Stuart and three other leading Wall Street brokerage houses. The remaining $18 million would come from the sale of 433,000 new shares of GTE stock, again underwritten by the Chase Bank and to be marketed by a group of leading brokers.

  Furthermore, the Chase Bank had loaned Clarke the $15 million* he needed to buy Fox’s voting shares. (The money would be repaid within two weeks through another Chase Bank loan, this time for $27 million advanced against the anticipated proceeds of the $30 million GTE bond sale.) The Chase Bank, then, had effectively installed Clarke. As Clarke told Harry Stuart over the phone, “If it had not been for the Chase [Bank], I could not have gotten the money.”

  This was the same Chase Bank (then the largest commercial bank in the world, with more than $2 billion in deposits, capital, and surplus) that three months earlier had denied Fox’s request for an extension on an overdue $400,000 loan. On January 6, 1930, Fox had written to Chase Bank chairman of the board Albert Wiggin asking that his “good bank” lend “a kindly helpful hand” to Fox Film as it tried to get back on its feet after the stock market crash and offering to secure the loan with his personal real estate holdings. Two days later, a Chase Bank vice president wrote back saying that “the indebtedness of the Fox Film Corporation to this bank cannot be permitted to run along indefinitely” and that to recover the loan’s remaining balance of $353,740.21, the bank had instructed its lawyers to take action. The next day, the Chase Bank served Fox Film with a complaint, and at the end of January 1930, it filed a default judgment with the county clerk.

  Why was Harley Clarke so much more appealing than William Fox, to be trusted with $103 million when Fox couldn’t be trusted with $400,000—Clarke, who knew nothing about the motion picture business, while Fox knew everything about it? There was no reason to suppose, nor did anyone even suggest, that the Fox companies would benefit by inclusion in Clarke’s General Theatres Equipment portfolio.

  Fox’s lawyer Samuel Untermyer suspected anti-Semitism. That probably was a factor, not directly, but as aligned with social class. Jews such as the Warburgs, Jacob Schiff, Otto Kahn, and Bernard Baruch, who came from prosperous, refined backgrounds, were quite welcome on Wall Street, but Fox wasn’t that sort of Jew. He had risen from the squalid Lower East Side ghetto, had only a third-grade education, and belonged to a new industry that still wasn’t entirely reputable. His Jewish faith was emblematic of his otherness and, in this notoriously intolerant decade, a warning sign to the Protestant ruling class. For his part, Fox had never made a great effort to assure establishment forces that, outward appearances to the contrary, he was really one of them. He was too steeped in the nineteenth-century romantic myth of rugged individualism to make such compromises and too determined not to fall back into poverty to give anything away that he didn’t have to.

  Fox himself discounted anti-Semitism. After all, Jewish-run banks had also failed to help him. Greed, he believed, had driven the campaign against him. In these desperate times, Harley Clarke needed the Fox companies’ money, and to get it, he had forged a web of corrupt alliances in upper-level financial circles.

  The Chase Bank’s chairman, Albert H. Wiggin, had long been associated with Clarke, having backed him since the early 1920s. With Wiggin’s help, Clarke had expanded his Utilities Power and Light Corporation from a small regional operator into a $400 million worldwide holding company. When Clarke entered the mainstream movie industry by starting General Theatres Equipment in July 1929, Wiggin poured Chase Bank money into the company through Chase Securities and helped finance a series of stock-trading pools that artificially boosted GTE’s share price from $20 to $65 within nine weeks.

  Wiggin wasn’t being a good banker, piling up money for his company. He was, in effect, stealing. As he funneled some of the bank’s money into Chase Securities to make stock trades (a legitimate action) he cut himself in for a substantial share through his six private corporations. To finance their participation in these and other trading pools, Wiggin’s corporations borrowed from the Chase Bank—in 1928–1929, his Shermar Corporation received fifteen loans totaling $11.8 million. Nobody complained for two main reasons. First, Wiggin had been Chase’s chairman since 1918 and was widely considered one of the best bankers in the business. Second, those who knew about the operations—Chase Bank and Chase Securities officials—also participated in the
trading pools. Over the years, Wiggin and Clarke had made millions together. From the GTE trading pools alone, between July 9 and September 18, 1929, Shermar reaped nearly $800,000. (When later scrutiny brought such misconduct to light, Wiggin paid a $1 million settlement to Chase Securities and conceded, “we have made mistakes.”)

  Tightly tied together, GTE was essentially a Chase company. One of GTE’s five directors, who had assisted in its formation, was Chase Securities vice president Murray W. Dodge.* Thus, Chase executives well knew how much hot air had been pumped into the GTE stock and well understood that to prevent collapse, it was crucial to lasso a large, wealthy customer such as the Fox empire.

  Similarly, by pledging to use the Fox companies to benefit the phone company’s interests, Clarke had won the support of AT&T, then the world’s largest corporation, with $4.25 billion in assets. Out of the 20.1 million phones in the United States in 1930, AT&T had a financial interest in all but 100,000. Phone service rates, however, were tightly regulated by most states and by the federal Interstate Commerce Commission. Among all AT&T’s activities, motion picture sound equipment manufacturing represented the only road to potentially unlimited profits.