The Deal of the Century

by Coll, Steve;

  Onward and upward Greene went, seeking out new questions and new dilemmas, determined above all to make the “system” work. Recommended by Kennedy’s successor as attorney general, Ramsey Clark (Kennedy was now a senator), Greene was appointed in 1967 as chief judge of the District of Columbia’s Court of General Sessions, Washington’s municipal court system. The court was then in a horrific state, plagued by scandal: poor litigants were often not represented at all by lawyers, cases were delayed for months, even years. Greene’s charge was to straighten out the system as quickly as possible. With some help from Ramsey Clark, who helped appropriate needed money from Congress, he accomplished the task mostly through voracious hard work. When thousands were arrested during the 1968 riots following Martin Luther King’s assassination and the 1970 May Day disturbances, for example, most municipal courts processed the defendants in groups of about fifty at a time. Greene wouldn’t have it. He ordered his court to remain open twenty-four hours a day, and he tried each case individually, advising everyone of his rights and providing public defenders when necessary. By the mid-1970s, the Washington, D.C., municipal courts were running smoothly, and Greene was being talked about in legal publications as “one of the best judges in America.”

  With the Republicans in power after 1968, however, there was no place for Greene to move, and so it was not until after Jimmy Carter’s election in 1976 that he was plucked from the relatively obscure municipal courts and appointed for life to the federal bench in Washington. Technically, Greene was replacing Judge John Sirica, of Watergate fame, who had moved to senior judge status. But when he arrived at District Court in 1978, Greene also inherited cases from two other judges, including the late Joseph Waddy. Thus was Robert F. Kennedy’s protégé, “the guy who had the answers,” introduced to U.S. v. AT&T, a multibillion-dollar dispute between the federal government and the largest corporation in the world.

  When they privately discussed the background and character of Harold H. Greene, some of AT&T’s lawyers referred to him as a “liberal activist judge.” It was a label that had come into wide use by conservatives in the late 1970s to describe some judges, mostly Democratic appointees to the federal bench, who seemed more interested in the political ramifications of their decisions than in whether those decisions were properly made under the law. One measure of whether a judge was more “active” than “judicial” was how often the judge’s decisions were reversed on appeal, and some of the “liberal activist judges” were reversed quite frequently. But the label was really too simple to fit Judge Greene. Certainly Greene was a liberal. And it was also true that he was an activist, in the sense that he devoted great energy to his work and tried to effect political changes by it. But Greene’s first commitment was to the fair working of the legal system itself, not to some scattered agenda of “liberal” issues. What he believed in, what he knew, what he cared about was the law. Clearly, what Greene meant by “the fair working of the legal system” was different from what a conservative meant. He believed strongly in due process and in the strict preservation of constitutional rights. Unlike some conservatives, he thought that a strong, independent judiciary was an important check on the excesses of Congress and the executive branch. Greene believed, for example, that if it hadn’t been for the federal courts, the civil rights revolution which he had participated in might never have gotten off the ground. But the essence of his ideology was that the American system of law and government was a great one in theory, and that the first duty of a judge was to improve the way it actually operated, day after day, in his own courtroom.

  And what better test could there be of Greene’s commitment to the legal system than U.S. v. AT&T? In the summer of 1978, when Greene first began to read the briefs that had been filed in the case, a commission appointed by President Carter was reporting to the public that complex antitrust litigation such as U.S. v. AT&T was being hopelessly mismanaged by the federal courts and that unless judges developed new, innovative methods to expedite such cases, the danger existed that large companies would conclude that the nation’s antitrust laws were basically unenforceable and might as well be disregarded. The president of the commission was John Shenefield, Ken Anderson’s boss and the chief of Justice’s Antitrust division. His report was well-received in Congress, where the judiciary committees in both the House and Senate were making considerable noise about the slow progress of Justice’s two major antitrust cases, those against IBM and AT&T. Could Harold Greene do for major antitrust litigation what he had done for the Washington, D.C., municipal courts? Could he take charge of the AT&T case and prove, once and for all, that the government could sue large corporations and successfully bring them to account in court?

  Greene was determined to do exactly that—he was going to find the answers. From the outset, he told both AT&T’s and the government’s lawyers that his overriding goal in the case was to prove that the federal courts could handle complex antitrust litigation. To do it, he said, he would develop new, expeditious methods to push the case to trial. In George Saunders and Ken Anderson, Greene was fortunate to have two lawyers willing to go along for the ride: Anderson, because he had won the Otter Tail case by using similar methods, and Saunders, because his client, Charlie Brown, wanted to win the antitrust suit quickly so that he could dispose of AT&T’s phone industry competition problems.

  For AT&T, though, there was a chilling aspect of Greene’s brand of judicial activism. It came in the form of a question that lingered on the lips of the company’s attorneys in 1979, as Greene pushed relentlessly to bring U.S. v. AT&T to trial. To make his point, to prove that the federal courts could effectively manage a major antitrust case, wouldn’t Greene be more inclined to rule in the government’s favor and break up AT&T? If he pushed the case to trial, and then agreed with the phone company that Justice’s allegations were baseless, wouldn’t his “example” be undermined? Judge Greene had declared that he was staking his reputation on this case. Would he use it to “make” a reputation, too?

  Such nagging questions, as well as the natural suspicions aroused by the judge’s background in Bobby Kennedy’s Justice department, convinced some AT&T lawyers that Greene was going to be a very difficult man to persuade of the phone company’s benign intentions during its disputes with MCI during the early 1970s. George Saunders, however, was not one of those lawyers. Saunders was a man who thought he could charm the skin off an alligator’s back. He believed—no, he knew—that AT&T was right and that the company would be vindicated in court. The government’s suit, Saunders said frequently, boiled down to the MCI story, particularly the controversies over FX lines and Execunet. And that story, Saunders drawled, was the tale of “the biggest rip-off of the century.” Harold Greene was an intelligent man. He was a hard-working judge. When the case was laid out before him, Saunders believed, Greene would see the light, liberal bias or no liberal bias.

  And to see the judge in court was to sense that Saunders might be right about one thing, namely that Harold Greene decided a matter on its merits. He was such a friendly and unassuming man that it was hard to imagine him in the vanguard of a PTA revolt, never mind America’s civil rights revolution. He was a short man, slightly rotund, with gray hair, tortoise-shell glasses, and a prominent nose. His voice was unabrasive, and it was still tinged by a distinct German accent. His smile came quickly, and it expressed deep and unaffected warmth. This was no shrill dogmatist determined to stoke the embers of yesterday’s political fires. Indeed, Greene was a typical, upper-middle-class Washington professional, a man who lived in a comfortable home in the residential northwest section, an “intellectual” who spent long hours watching escapist television shows, a sports fan who owned Redskins season tickets, a gourmet who made a point to lunch at Washington’s best restaurants, a Jewish father who could be heard to say proudly, “My son, the doctor …” George Saunders liked Harold Greene, and soon Greene would come to like Saunders. Perhaps, Saunders believed, that would be enough to overcome the weight of any bi
ases the judge still carried with him, enough to right the balance for AT&T.

  In the meantime, though, the government’s Ken Anderson was getting the best of Saunders in the increasingly frequent pretrial courtroom skirmishes before Greene. That was mainly because Anderson and Greene had the same idea about how to deal with the normal methods of pretrial discovery under the Federal Rules of Civil Procedure: both wanted to throw them out. Saunders said he did not want to hold the case back, but he didn’t seem sure about where Anderson and Greene were going to take him with their “innovative” methods. While discussing alternative approaches, the part-time farmer Anderson would explain concepts to Greene by saying things like, “It is just like growing peas. If you want a good crop of peas, you’ve got to really prepare the ground.…” Other times he would talk about how he wanted to “truncate” and “shortcut” the discovery process, and about how the government was “taking a big risk” in order to speed the case to trial.

  Greene, in turn, would occasionally make long speeches about the necessity of swift action. “Some suggestions have been made that the case be postponed,” he said during one of them. “I am unwilling to do that. The public has a right to have this important case started with dispatch. There just is generally too much delay in complex antitrust litigation. I am unwilling to let this case fall into that pattern.”

  By 1979, between the expedient approach of Ken Anderson and the activism of Judge Greene, U.S. v. AT&T had been transformed from a moribund embarrassment to the Justice department into a case that might well be resolved in court before the IBM suit, which had been filed almost six years before the AT&T case. His delaying tactics now abandoned, Saunders narrowed his discovery requests for documents from government agencies—he was no longer trying to drown his Justice department adversaries in paper. Anderson had waived the usual document discovery in exchange for the right to look at all the documents in the private antitrust cases against AT&T filed by MCI and phone-equipment maker Litton. In effect, Anderson was saying that the government’s effort to break up AT&T was going to be a piggyback ride on Bill McGowan’s shoulders; the MCI case was now nearing trial in Chicago, and millions of documents discovered by McGowan’s lawyers had become part of the record there. The same was true of the Litton “PCA” equipment case in New York. At the same time, Judge Greene had developed his own version of Anderson’s Otter Tail “stipulation” system, wherein both the government and AT&T would be required to negotiate lengthy sets of agreed-upon facts for use at trial. The stipulations would eliminate the need for a great number of witnesses who would ordinarily be called to establish undisputed facts. The stipulations would also make clear exactly what the two sides agreed and didn’t agree on, when it came to telling the story of the American telecommunications industry in the early 1970s. For better or for worse, U.S. v. AT&T was going to go to trial—soon.

  Judge Harold Greene was going to make the system work.

  The Deal

  Chapter 13

  The New Realism

  Early in 1979, John deButts cleared out his personal belongings from his luxurious suite of offices on the twenty-sixth floor of 195 Broadway. Charlie Brown, the new chairman, was ensconced in a considerably smaller and less ornate office around the corner. Most people assumed that Brown would do what every new chairman had done before and move into the vacant suite. After all, deButts’ office, with its spectacular view of Manhattan on three sides, its antique tables, couches, and silver service, was both an opulent perk and a potent symbol of authority and leadership. But weeks passed, and Charlie Brown stayed put. When some of his fellow executives asked him about the suite, he said that he liked his own office just fine. That was all there was to be said on the subject, too. Charlie Brown did not elaborate on his personal likes and dislikes, even to colleagues with whom he worked closely day-to-day. So for a time the plush deButts suite just sat there, unoccupied, like a didactic museum depicting the excesses of a renounced historical episode.

  And very quickly it became obvious that the changes at AT&T under Charlie Brown’s reign would extend far beyond the style of the company’s new leader. The blue team was in control now, and its first objective was to end AT&T’s rearguard battle against competition, especially in the phone equipment business. Just weeks after formally taking office, Brown laid out his plans in a speech to a group of telephone executives. “Already it has been a decade since the Carterfone case opened the telephone network to equipment competition,” he said. “But the world has not come to an end. Nor does the sky show imminent signs of falling. Competition is here and it’s growing. As a consequence, there has developed in our business a ‘new realism.’

  “The new realism has changed the way we look at the world. No longer do we see the telephone industry as locked in mortal struggle with the equipment industry on the one hand and the specialized common carriers on the other. Rather, we see ours as a single industry encompassing all of us.…

  “Ma Bell is a symbol of the past. No longer is a steady dividend sufficient. Today’s investor looks to the prospect of improvement. Today’s employees reject maternalism; they’ll take care of themselves. Today ours is a business that knows that it is not we, AT&T, but the customer who knows best. Mother Bell simply doesn’t live here anymore.”

  The central problem that Brown faced was that, while he might be willing to forget the past, Bill McGowan, Ken Anderson, and Harold Greene were not. Brown understood this well, and he knew that to disentangle his company from its sticky antitrust problems, he must be willing to pay a price. From his meeting with Howard Trienens, Ken Anderson already suspected Brown might be willing to make a deal—even a “severed limbs” deal—in order to extricate AT&T from the threat of the government’s case. But Anderson was not yet ready to consider such a solution. With Greene now running the case, things were moving in Justice’s favor. For his part, Brown still faced obstacles to a settlement within AT&T’s corporate ranks. The biggest problem was that Mark Garlinghouse, deButts’ chief legal advisor and a staunch red team holdover, had not followed the mentor’s lead by retiring early. That meant Howard Trienens could not yet take full control of AT&T’s legal strategy. For a decade, Garlinghouse had stood hard and fast with deButts against any compromises on the competition issue. Some lawyers with the Justice department felt that it was really Garlinghouse, not deButts, who was the root cause of the phone company’s antitrust problems. If Garlinghouse had urged more caution during the early 1970s, the government lawyers thought, then deButts might have been able to get away with his “public interest” objections to competition. As it was, AT&T had made itself look foolish: it had gone way overboard when it did things like disconnect MCI’s customers and insist that all “foreign attachments” be equipped with PCAs. The government lawyers believed that if Garlinghouse had thought through the antitrust implications of such actions, and if he had been able to persuade deButts that the actions were unwise, Justice might not have a case at all, and AT&T might still have held off some competition. In any event, the hard-liner Garlinghouse was about the last person at AT&T who was going to go looking to make a deal with the government. Until Trienens took full control of the legal department in January 1980, when Garlinghouse was due to retire, it would be difficult for Brown to pursue a settlement actively.

  Just a few months before then, however, a series of events inside the government created an unexpected opportunity for AT&T to dispose of the antitrust suit. As would often be the case during the next three years, the settlement opportunity derived as much from the personal lives and internecine relationships of the government’s lawyers as from the substantive economic and antitrust issues caused by telephone industry competition.

  During the summer of 1979, Ken Anderson’s vigorous and bucolic life on his Virginia farm took a turn for the worse. A child who lived next door to the Andersons died unexpectedly. Then, just a few weeks later, a neighbor was killed when he fell off his tractor. The events triggered some painful feelings in
Anderson’s wife, a woman who had known a very difficult childhood in the Bedford-Stuyvesant section of Brooklyn, New York. As the summer progressed, she began to have difficulty sleeping, and she felt anxious and depressed. Anderson tried to talk with her, but he was distracted by his heavy workload at the office: not only was he in charge of U.S. v. AT&T, he was also still chief of the Antitrust division’s Special Regulated Industries section. Often he was unable to leave the city until well after dinner time. As the summer gave way to fall, the condition of Anderson’s wife deteriorated. To pay for her medical expenses, Anderson began to borrow heavily from the Justice department’s credit union. By November, Anderson was emotionally drained and deeply in debt. Perhaps irrationally, he felt that the long hours he worked at Justice had contributed significantly to his wife’s problems. Most of Anderson’s colleagues were unaware of his distress. Occasionally one of them would find Anderson standing bleary-eyed in front of the office coffee machine early in the morning and would ask how he was doing. When Anderson unburdened himself of his problems, he seemed a far different person from the tough-talking, gutter-fighting litigator his colleagues knew professionally. So when Anderson announced in November that he was resigning his Justice position to take a more lucrative, less demanding job in private practice, it was a decision that some of his colleagues understood and respected.