by David Nasaw
According to the Film Daily, which provided industry readers with a day-by-day account of the negotiations, directly after the Saturday meeting “Joe left for Cape Cod to see Mrs. Joe and his flock of children. It’s been six weeks since last he made whoopee with them and he was right anxious to go home.” E. B. Derr stayed behind in New York to sort out the details.41
For the fourth summer in a row, Kennedy had rented the sprawling cottage in Hyannis Port at the end of the block, with the large lawn leading down to the water. Joe Jr. had turned thirteen in July (his father had missed his birthday that year, as he had that of his other children), Jack was eleven, Rosemary was ten, Kick and Eunice were eight and seven, and the babies, Pat, Robert, and Jean, were four, three, and six months. That summer, Joe Jr. and Jack got their first boat, which they named the Rose Elizabeth for their mother; they also got their names in the papers for rescuing a young boy whose boat had been swamped a short distance from their front porch. Their father, who had been in New York and Los Angeles through most of the summer, spent a week in Hyannis Port before sailing to Europe with Rose in mid-August.
On Wednesday, August 15, two days before they were to sail, Irving Rossheim, the First National president, wired Kennedy at Hyannis Port with disturbing news. First National directors from all over the country had been calling him long-distance to express their “dissatisfaction with terms of your control outlined at meeting.” Rossheim suggested that Kennedy meet with two of the most powerful dissidents, Barney Balaban of the one-hundred-theater Balaban & Katz chain in the Midwest and Spyros Skouras, who with his brothers owned another forty theaters.42
Kennedy took the train to New York to meet with Balaban and Skouras, who (with other company directors) wanted to change the terms of his contract and require him to consult with an executive committee before making any major decisions. Kennedy emphasized that he could not work effectively under such circumstances. The next day, after the Île de France had sailed with Kennedy on board, Rossheim telegraphed Al Rockett, the head of production in Burbank, that “by mutual consent the Board of Directors of First National Pictures and Joseph P. Kennedy had terminated an agreement under which Mr. Kennedy had been acting in an advisory capacity for First National Pictures and was to continue to do so for the next five years.”43
“Some of the panting has ceased,” the Film Daily reported. “Many of the folks at First National—East and West—are breathing lots easier. For Kennedy, that quiet and provocatively silent man, is no longer gunning on the organization’s preserves, and, it seems, some of the game frequenting those woods will roam freely as of yore. The cheers that greeted news of the break might not have been stentorian in volume, but never doubt the degree of their sincerity.”44
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Kennedy, it appeared, didn’t care in the slightest. He was by now, or so he thought, bigger than any individual studio. Whatever happened at First National, he sat astride the industry as its savior. There would be other studios bidding for his services and he would oblige them, but only on his terms. Or he would cash in his options and walk away to start over elsewhere, this time with millions of dollars in his bank accounts.
Eight
GLORIA AND ROSE
Dear Mr. Joe Kennedy: Aw, come back from Europe! Life is tame when you are gone. You haven’t bought a motion-picture company for days and days.
—HARRY CARR, AUGUST 26, 1928, LOS ANGELES TIMES
The smiling, effervescent, freckle-faced boy wonder had been transformed into a silent man of mystery, but the magnetic field around him had not diminished in the slightest. There was no one like Joe Kennedy in Hollywood; the reporters and columnists knew it and tracked his every move. As the industry appeared at times to speed out of control into the new sound era, as rumors swirled about takeovers, mergers, consolidations, and buyouts, there remained one constant: Joseph P. Kennedy.
“The most intriguing personality in the motion picture world this autumn,” according to the New York Herald Tribune’s Sunday magazine, “is not some newly discovered beauty from the corn belt, a new Valentino rescued from the obscurity of a tent show in Czechoslovakia or some hatchet-faced actor with the voice of a Barrymore to whom the ‘talkies’ have opened the door. . . . The person who now monopolizes conversation in the studios and on locations is not an actor, but one of the executives of this highly important new industry. His name is Joseph P. Kennedy.”1
Kennedy’s departure from First National had ended the speculation that the company would be merged with Pathé, FBO, and/or K-A-O, but it had set in motion a new set of negotiations—and rumors. In September, Warner Brothers bought First National and acquired hundreds of theaters in which to exhibit its Vitaphone talkies. David Sarnoff, worried that without a Hollywood studio in which to film RCA Photophone talkies or theaters to exhibit them, RCA would be shut out of the picture business forever, opened negotiations with Elisha Walker to buy and merge the FBO studio and the K-A-O theaters into a new corporate entity, known as Radio-Keith-Orpheum, or RKO. Though Kennedy was president of FBO and chairman of the board of K-A-O, the negotiations were initiated while he was abroad.
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Friday. The Aquitania nosed into its berth today and off the gangplank stepped Joe Kennedy,” the Film Daily reported in its September 30 roundup. “Joe is peeved that anyone should start a deal to nab control of K-A-O without his knowledge and furthermore, while he was visiting such inexpensive pleasure haunts like Deauville and Le Touquet. Now he’s back and almost anything you like may happen.”
Kennedy wasted no time getting his name in the headlines. On Sunday, September 30, he was a guest on the weekly Collier’s Radio Hour, broadcast live from WJZ in New York City at 8:15 P.M. He opened his talk with a strangely complicated introduction that managed to be both self-deprecating and boastful. “To tell you what little I have learned of the enormous activity we call show business,” he declared, “would take so long that I tremble to think how much of your time, and my own, I could consume if I knew all there was to be known about the art of providing profitable and entertaining amusement to the masses.” He proceeded to give his own capsule history of the medium before concluding that the days of “poor plots and pretty faces” were at an end because the “intelligent public . . . want substance to stories and real acting.” With remarkable foresight, he predicted that television, the new entertainment medium that Sarnoff and RCA were experimenting with, might one day vanquish moving pictures, as the pictures had vaudeville. “Perhaps the time will come when television will carry the best of entertainment into the home. I don’t know. The entire amusement industry is in a state of flux and experimentation. Novelties of today become obsolete tomorrow. But one thing I do know, and everybody who has any business in the amusement business should know—that sophistication is on the increase, and that prizes in the form of profits only go the way of producers who bet their brains and money in the long run on popular intelligence.”2
He said nothing about his future in the industry or about the negotiations going on to sell his companies out from under him.
On October 4, six days after his return from Europe, Sarnoff and Walker finalized RCA’s purchase of K-A-O and FBO. Three days later, the Los Angeles Times, the New York Times, the Film Daily, and others reported the sale. The $300 million “Giant Born to Amuse” was destined to become “the General Motors of the entertainment field,” predicted the Los Angeles Times. The Film Daily highlighted its story with a front-page banner: KENNEDY QUITTING AS RCA ACQUIRES K-A-O, FBO.
Sarnoff did not ask Kennedy to stay with the company; had he, Kennedy would not have accepted. He had nothing but respect for Sarnoff as a businessman, and the two would remain friendly, though never intimate, for the rest of their lives. But Sarnoff had his priorities and Kennedy had his. Sarnoff was committed to the future of RCA, Kennedy to the future of Joseph P. Kennedy and his family. In response to Sarnoff’s perfunctory request “for yo
ur suggestions on anything you feel requires immediate action,” Kennedy suggested with all the authority of his two years in Hollywood that before proceeding, Sarnoff should decide on “the type of production you want to make and the field of competition you want to enter.” He added that he would be “glad to advise you on anything I think would be of any value whatsoever to you.” His choice of personal pronouns was notable. He would advise Sarnoff on what he, Kennedy, considered of “value.”3
When a reporter from the Boston Daily Globe asked about his future plans, he responded almost perfunctorily—but honestly—that he had never had any intention of remaining forever in the picture business. “I entered the amusement business with the viewpoint of a banker. If, after the organization of the new corporation it is running smoothly, I look around and get a good offer for my holdings, I will make a trade. I have wanted to get out of this business for some time.” In the end, the sale of his companies to Sarnoff was a business deal, not a repudiation of his leadership. This was how he presented it to the press, and this was how he perceived it.4
On October 16, he sold the 5,500 shares of K-A-O he owned outright for a profit of $63,820. Two days later, he exchanged his option for 75,000 shares of K-A-O common stock for an option to purchase 75,000 shares of RKO. In December, he exercised the new RKO option and purchased 50,000 shares, which he then sold in several accounts, including one in the name of C. J. Scollard, his accountant, another in Rose’s name, and a third in the name of his old friend and business partner Steve Fitzgibbon. His profit was $786,988.69. He would exercise his option on the remaining 25,000 RKO shares over the next two years for an additional profit of $489,494.10. In the end, he would emerge with a total profit of $1,276,482.79 on his K-A-O options, equivalent in today’s currency to more than $15 million—for three months’ part-time labor as chairman of the board.
And this was only the beginning of his profit taking.
On October 26, 1928, he agreed to swap his 37,500 shares of FBO for 37,500 shares of RKO, which he then sold for $35 a share on November 26, 1928. His minimum profit on this transaction alone (assuming he had actually paid $6 per share for his FBO stock) was $905,772.97, worth more than $11 million today. Additional shares of FBO and K-A-O stock registered in Kennedy’s name or Honey Fitz’s or in the name of the Gower Street Company, which Kennedy co-owned with Guy Currier, were also exchanged, one for one, for RKO shares and then sold for substantial profits.5
Although he remained employed by Pathé and would be for some time afterward, Kennedy sold short the options for the 50,000 shares he was to receive later that year, for a profit of another $310,000, worth almost $4 million in today’s currency. That he was selling stock in a company in which he was an executive and doing it because of “insider” information may have been unethical, but it was not illegal and would not be until the SEC ruled it so under its first chairman, Joseph P. Kennedy.6
He had entered the industry a rich man, but he departed a multimillionaire with more than enough money in his and Rose’s accounts and in the children’s trust funds to support them all comfortably for the rest of their lives. He had been a good baseball player and a better than average shipping company executive, broker, banker, and studio executive, but when it came to making money, in up markets and down markets, good times and bad, Joseph P. Kennedy was in a league by himself.
For more than a decade, wherever he might happen to be, he had traded stocks, bonds, and options over the telephone with Mike Meehan, E. F. Hutton, Gurnett & Co., Palmer & Co., Hallgarten & Co., W. K. Johnson & Co., Halle & Stieglitz, Blair & Co., Lehman Brothers, Hayden, Stone, and others. He made his money as a trader, not an investor; he bought on bad news, sold on good news. During his years in the picture business, he stepped up his trading activity, taking full advantage of the insider knowledge he was privy to. He generated rumors, planted stories, spread gossip to drive prices up or down, depending on whether he was selling or buying. Rarely, if ever, did he hold on to a stock or bond for very long. He preferred getting out with generous profits to waiting for windfalls.
On November 30, 1926, after ten months in the film business, his “capital account” held $373,394 and his real estate holdings were limited to his modest house in Brookline. Less than three years later, on October 31, 1929, after the stock market crash, his capital account held $1,740,494 (more than $22 million today) and he had bought two new houses for the family. His net worth was five times what it had been three years earlier. And that didn’t take into account his real estate holdings.7
A fabulously wealthy man now, he shifted his investment strategies, focusing more attention on preserving his fortune than on adding to it. He knew, from the inside, how easy it was to manipulate stock prices, that there was no necessary connection between share prices and the value or viability of companies. He had never trusted the market, and now, having put enough away in trust funds to support his family, he began to diversify and invest in real estate.
On November 6, 1928, he purchased in his and Rose’s names the Hyannis Port house they had rented for the past several summers. According to Ted Kennedy, his father had had his eye on the larger, grander house on the edge of the water, but Rose preferred the smaller one they eventually purchased because it had room for a large lawn where the children could play in full sight of whoever was delegated to watch them from the front porch. The house was uncannily sited at the same distance from the sea as Kennedy’s childhood home in East Boston had been. Because it was barely large enough for the family and Kennedy was not lacking in money to spend, he hired the Boston architect who had built it in 1903 to enlarge it to fourteen rooms and add a home theater in the basement.8
From this point on, the Hyannis Port house would be the Kennedy family’s primary residence, though they seldom spent more than a few months together there every summer. Kennedy could well have afforded a larger, more luxurious house, even a mansion, in a more exclusive, high-end resort community. But he chose to stay in Hyannis Port. For the children, it was perfect. “Our whole lives were centered in this one place,” Ted Kennedy recalled in his memoirs. “We didn’t really go out to other places to play. We didn’t go off to other kinds of events. It was all here, all here: all the playing, all the enjoyment, all the fun.” They played games and cards and read and gossiped in the living room and on the porch and spent a good part of every day on the big lawn in front of the house: calisthenics in the morning, ball games in the afternoon, and after dark, the Kennedy family variation of “flashlight” tag, which they called “murder.” At night, they watched first-run films in the basement, with fixed chairs for the children, a more comfortable easy chair in front for Kennedy. The bedrooms were on the second floor. Downstairs, in the kitchen, dining room, large living room, and porch, the children ruled, and the scene was one of barely controlled chaos, with young bodies flying madly back and forth, Rose trying to maintain order, and Kennedy, when he was there, taking it all in from his perch on his balcony outside his upstairs bedroom or his favorite chair in the corner of the living room.9
The family home in Riverdale was large and comfortable, but not for eight children, and it was rented, not owned. In May 1929, six months after he bought and remodeled the Hyannis Port house, Kennedy closed on the purchase of a “large brick Georgian residence” described by the New York Times as “one of the most imposing” in Bronxville. He paid $250,000 for the property, equivalent in today’s currency to over $3 million. For it, he got a three-story colonnaded mansion on a crest of land, “its red-tiled roof,” according to Ted, “catching the sun above a thick scattering of tall old trees.” There were twenty rooms on six acres of landscaped gardens and playing spaces, a gardener’s and a chauffeur’s cottage, a basement billiards room, “such modern wonders as shower baths, an oil-burning hot water heater, and a number of enclosed porches,” and a five-car garage. The younger children occupied the second floor. The older children had rooms on the third floor, whi
ch also contained a large playroom, the governess’s bedroom, and a train room, where Joe Jr., Jack, and later Bobby ran the Lionel cars round and round. Ted, when he came along, was permitted to watch as long as he positioned himself away from the switches.10
Kennedy had a room of his own, on the ground floor, with a large sofa bed. When he was home, which was seldom, his door was always open to his children, who would spend time with him, sprawled on his sofa bed. Upon his return to Bronxville from wherever he might have been—New York City or Boston or Hollywood on business or Palm Beach for his winter vacation—he would pepper each of them with questions about friends, teachers, sports, their siblings. And they would talk, uninterrupted, about this and that and the other, while their father heard them out, his blue eyes focused directly and solely on the child in the room with him. He dispensed advice occasionally but listened more than he spoke, accepted what he was told as gospel, and was unfailingly supportive and sympathetic, especially when it came to problems with teachers.11
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In mid-September 1928, Kennedy received an odd letter from Franklin Delano Roosevelt, who was managing the presidential campaign of New York’s Irish Catholic governor, Al Smith: “Information comes to me, that, having weighed the attitude of the two candidates you have decided to support Governor Smith. I sincerely hope this is correct and if so, won’t you write me confidentially, as there are some matters upon which I would appreciate your suggestions and counsel. . . . This is a personal letter. I am not writing you as a member of the Democratic National Executive Committee, nor am I leading up to the matter of a campaign contribution.”12