by Coll, Steve;
AT&T’s chairman began the meeting by announcing that in a matter of days, the phone company would likely agree to a consent decree ordering the divestiture of all the operating companies run by the men now seated in this room. It was not clear, Brown said, how many new operating companies would be formed—that was a question AT&T’s top executives would answer together. Brown explained the franchise of the new operating companies: local service only. The new companies would not be permitted to sell phone equipment or long distance or any other “enhanced” service. All of that would be the franchise of the new AT&T, made up of Long Lines, Bell Labs, and Western Electric.
“What are the chances that the agreement will go through?” one of the presidents asked.
“Eighty percent,” Brown answered. By the end of the day, after Hershey had reported Baxter’s approval of the documents back to Ron Carr, that estimation had moved close to one hundred percent.
It was, typically for AT&T, a somber group of executives who began to absorb the devastating implications of Brown’s words even as they were spoken. The operating company presidents were all white males in their forties and fifties. Like Brown, they had almost all worked for AT&T since their early twenties, and most had never been employed by another company. Gradually they had risen through the Bell System’s management ranks, moving from job to job, city to city, back and forth between Long Lines, Western, corporate headquarters, Bell Labs, and the various operating companies. Now, without warning, their careers were being presented to them as a game of musical chairs in which the record had just been turned off. Suddenly, their jobs at the operating companies were no longer just a rung on the Bell promotion ladder. This was it. This was the end of the line. This was the future—regulated local service, utility functions, nothing more.
It was a shock that AT&T would agree to such a settlement, but it was not so shocking that the operating company presidents did not immediately see that they might be getting the raw end of a major business deal. As soon as Block and Trienens were finished with their respective short briefings about the upcoming publicity campaign and the legal background of the settlement, the questions began.
“I really see a problem, looking ahead,” one of them said. “I mean, we’re out of the equipment business, we’re out of the long distance business, we’re out of a lot of other things …”
They wanted more detail. Would they have the opportunity to negotiate? Yes, they would, both internally and before Judge Greene. Would it be possible to expand the operating companies’ franchise to make them more viable, more diverse? Possible, but not likely, was the answer. Almost uniformly, the presidents’ questions reflected their fear and concern that they had been been abandoned to the low technology end of the phone business while 195 Broadway, plump and ready with Bell Labs, Western, and Long Lines, raced off into the information age. As the discussion flowed, it became clear that that was a plausible interpretation of the deal with Justice, but it was even more clear that the details of the local companies’ franchise were yet to be negotiated and were, in effect, up for grabs. Anything was possible. By the end of the day-long meeting, one or two of the operating company presidents had even begun to joke, “Free at last!”
Watching the meeting progress, Ed Block, the philosophical public relations man, was astonished by one aspect of the presidents’ reactions. Even after their initial agitation over the future viability of the operating companies had been quelled by answers to their many questions, the presidents did not wax nostalgical about the end of the century-old Bell System. There were no tears shed or fists pounded on the desks or even any wistful remarks about what might have been if it weren’t for Bill McGowan, or Bill Baxter, or Jim Baker, or Tim Wirth, or Harold Greene, or the fact that Attorney General Bill Smith once sat on the board of Pacific Telephone. The presidents were engineers, by and large, very task-oriented and disciplined. Instead of pausing to reflect about the breakup of their company, they moved immediately to the challenge of completing the job ahead in the time allotted. In some way, then, the most compelling tribute to the service-driven, centenarian Bell System culture—which was hopelessly inappropriate in the new age of competition—was the lack of any tribute at all.
The next morning, Charlie Brown flew to Washington to pay tribute to those Reagan administration officials who had gallantly supported the phone company during the political intrigue of the previous summer. He met with Caspar Weinberger at the Pentagon and explained the terms of the settlement, emphasizing that steps had been taken by AT&T to ensure that the Defense Communications Agency would experience as little disruption as possible. Weinberger was not asked to intervene in any way; it was too late for politics. Brown’s visit was mainly a courtesy call, as were his meetings the next day at the White House with Ed Meese and counselor Fred Fielding. All three meetings were brief, and Brown did most of the talking.
In addition, the Commerce department officials who had developed the dismissal proposal and had fought against Baxter and his allies were informed about the terms of the inter-intra settlement deal. They, especially, expressed regret that it had come to this.
Gerry Connell’s courtesy call came on Wednesday afternoon from Ron Carr. “Can you drop over later this afternoon?” he asked.
Neither Connell nor his Justice trial staff, who had given up vacations to work on the case over the Christmas holiday, had been informed about the negotiations between AT&T and the Antitrust front office. In part, that reflected the tight secrecy about the deal insisted upon by Howard Trienens. In part, too, it was due to the ever-widening gulf between the trial staff and Baxter and his front office lieutenants. On New Year’s Eve, the front office had released a cryptic statement saying that settlement talks between the two parties had resumed, but hinting at no details about the terms. The statement had also expressed pessimism about the prospects for an early agreement. The Justice trial staff had assumed that the talks referred to in the statement were the ongoing S.898 injunctive negotiations being handled by Richard Levine. The trial lawyers regarded that nondivestiture solution as a sellout of major proportions, and after the front office statement was released, they had become gloomy once again about the future of their case.
At 5:30 P.M., Connell arrived at Carr’s office over in the main Justice building. Carr showed him the consent decree documents and asked for his comments. He also asked if Connell would be willing to sign the final decree, which would serve as evidence that the trial staff supported the settlement, but the request was also a courtesy to Connell, the man who had carried out Justice’s triumphant case in court.
But Connell refused to sign the decree. He told Carr that without consulting with his trial staff colleagues, he could not satisfy himself before Friday as to whether the decree “had been done right.” Ever cautious, Connell did not want to be affiliated with a potential political disaster not of his own making. Also, he was loyal first to his staff, not Baxter’s front office. Even though he was immediately pleased by the relief Baxter had obtained, it was possible that the decree itself had been improvidently drafted. But Connell acceded to Carr’s request that he present the deal to Judge Greene in court on Friday. Carr told Connell that he should be at Baxter’s office Friday morning at 8:00 A.M. for the signing ceremony.
When he left Carr’s office, Gerry Connell walked to his car and drove straight home to Virginia, even though there was plenty of work left to do at the now-illuminated trial staff headquarters up on 12th Street. Connell knew himself well enough to fear that if he returned to work, he might not be able to keep from his colleagues the secret that, after seven years of hard work, the Justice department’s humble trial lawyers had defeated George Saunders, Sidley & Austin, and all the resources of the American Telephone & Telegraph Company.
Chapter 31
January 8
Friday morning dawned clear and cold, and once again Gerry Connell was driving north along the George Washington Parkway toward Washington, his Plymouth Horizon weaving a
mong the homogeneous capital commuters, his car radio tuned to the comic disk jockeys on WMAL. The icy Potomac River to his right glistened in the sunlight; beyond it, the familiar monuments on the Mall appeared conspicuous in the early glare. Almost exactly one year before, Connell had traveled this route through confounding fog and snow to begin the trial of U.S. v. AT&T, a case whose outcome had seemed as dubious as the weather. Today Connell’s twelve-month courtroom triumph would be clearly revealed, if not universally acknowledged, and the pensive satisfaction of that event could perhaps only be appreciated by someone of Connell’s redemptive maturity, someone who had tackled the biggest challenge of his life at age fifty, who understood even as he met it that nothing could be so sweet again.
Indeed, as he drove to the consent decree signing ceremony, Connell had already decided that his two-decade-long career as a government lawyer was over. After winning the biggest antitrust case in American history, it would be impossible to return to the routine investigations and obscure trials of everyday Justice department work. Jim Denvir, the young lawyer on Connell’s trial team who was in charge of the relief section of the case, was the obvious person to succeed Connell during the Tunney Act proceedings, wherein the exact terms of the inter-intra split would be approved by Judge Greene. After such a long, communal, and invigorating ordeal as the trial of U.S. v. AT&T, Connell faced an inevitable period of postpartum adjustment. Perhaps he would spend some time skiing, a passion he had developed only recently, almost as a complement to the renewed energy he devoted to his work. And later, of course, he could enter private practice, where his new reputation would command a lucrative partnership.
At 8:00 A.M. in Baxter’s cavernous office, the mood was also reflective, but for reasons as various as the crowd gathered there. For Justice, there was Baxter, Levine, Carr, Connell, and one or two other front office lawyers. That morning, Howard Trienens and George Saunders had come over from the Madison. Morris Tanenbaum, the corporate planning executive at 195 Broadway who had worked out the final details of the inter-intra split, was also there, as were Bob McLean and Jim Kilpatric, the AT&T lawyers who had been negotiating the S.898 injunctive settlement with Levine—the pair had recently been informed that their client had cut a rather different sort of deal with Justice. Once assembled, the group gathered around Baxter’s desk. Some stood attentively; others, like George Saunders, seemed numb or distracted, as if they did not believe such a portentous event was about to occur before their eyes, and they sat casually on the red leather chairs scattered about Baxter’s office, remote from the group. Tanenbaum was crying gently, and by the look on Charlie Brown’s face it seemed that even he might break his cool veneer with a tear of mourning for the once proud, glorious, and unified Bell System.
The consent decree document was laid out on Baxter’s desk, and the Antitrust chief, feeling that somehow this was all too good to be true, signed it. There were no speeches or jokes, not even from the normally gregarious Saunders. As Baxter moved aside, Trienens stepped behind the desk and signed the deal for AT&T. And with that, everyone shook hands. If the executives and lawyers had been generals at the Appomattox courthouse, the room would have been no more still or solemn.
But there was still business to be conducted, and the sober ambiance was soon disrupted by a general discussion about strategy for the day’s events. The mechanics of how the decree would actually be filed with the court were complex and required precise coordination. The plan was for Ron Carr and Bob McLean to fly immediately to Newark, New Jersey, on an AT&T corporate jet. The pair would then travel to the Newark courthouse, where the 1956 consent decree was filed. At the same time, Gerry Connell and another Antitrust front office attorney would drive over to the district courthouse at 3rd and Constitution, where the case before Judge Greene was being tried. Another attorney would take the Metroliner train to Philadelphia, where a Justice department appeal of an FCC decision about the phone company’s right to sell computers was pending. At exactly ten-thirty, the lawyers at all three courthouses would call back to the main Justice building in Washington. Then, at the same moment, Carr and McLean would file the inter-intra split as a modification to the 1956 decree while Connell in Washington and the other lawyer in Philadelphia dismissed the cases pending in those districts. In Newark, Carr and McLean would also file a request that Judge Biunno, who was in charge of the 1956 decree, transfer his case immediately to Judge Greene in Washington. There was a certain amount of lawyerly paranoia from Justice about making sure that everything was filed at the same time. The way things had been arranged, if Connell dismissed the case in Washington before the inter-intra modification was filed in New Jersey, it would be technically possible for AT&T to back out of the settlement at the last minute and claim that the case before Judge Greene was over because Justice had dismissed it. That no one involved in the settlement considered such a nefarious move by AT&T to be even a remote likelihood did not lessen the Justice attorneys’ concern that all the papers be filed simultaneously. After all, there were lawyers involved.
A more realistic concern was how Judge Greene was going to react to the unusual filing procedure. It was Trienens who had insisted on this fire drill, because, as Charlie Brown saw it, one of the main selling points of the inter-intra split was that it eliminated the computer-selling restrictions of the 1956 settlement. But once the procedure had been proposed, Justice agreed to it not only to make AT&T happy but also because Carr and Baxter wanted to establish a peculiar legal precedent having to do with the Tunney Act, the law that required a judge presiding over an antitrust case to determine whether a settlement was in the public interest before he approved it. It was Carr’s belief that the Tunney Act only applied to ongoing antitrust cases, not to modifications of previously existing consent degrees. This was an important point because modifying consent decrees was a routine method by which the Justice department enforced the antitrust laws, and Carr was concerned that if Greene applied the Tunney Act to this modification, a precedent would be set for all others. Carr thought such a precedent would severely restrict Justice’s ability to make deals in minor or routine antitrust cases, because any modification would have to be approved by a judge. In a case as far-reaching and controversial as U.S. v. AT&T, where the public’s stake in the outcome was obvious, some “Tunney-like” proceedings before Judge Greene were necessary, Carr and Trienens agreed. But while they were willing to abide by the “spirit” of the Tunney Act, Carr wanted to avoid submitting the modification to the letter of the law. Trienens went along. It was a trade-off: AT&T got rid of the 1956 decree, while Justice avoided setting a restrictive precedent.
The danger, of course, was that Judge Greene would not appreciate the subtlety of Carr’s and Trienens’ thinking. To him, it might very well appear that the whole charade had been designed to circumvent his own and the public’s role in the outcome of U.S. v. AT&T. And that would hardly be an unreasonable conclusion. While Justice’s willingness to abide by the “spirit” of the law sounded noble, it was a little like a burglar arguing that in the “spirit” of justice, it was all right to steal as long as the pilfered goods were distributed to needy folks such as himself.
To avoid such a misunderstanding, Gerry Connell and George Saunders were supposed to arrive at the courthouse early and explain to Judge Greene exactly what was about to happen and why. Greene clearly liked and trusted the two trial lawyers, so perhaps the judge would be at least temporarily mollified by their assurances.
So around ten, Connell and Saunders rode over to the courthouse and walked up to Greene’s chambers on the second floor. They asked a secretary if the judge was in.
“Judge Greene is on vacation in the Caribbean and won’t be back until Monday,” they were told.
A few minutes later, Connell called over to Baxter’s office and relayed the bad news. There was nothing they could do, everyone agreed, but go ahead with the plan and wait to explain it to the judge on Monday.
At ten-thirty-eight, with lawyers in
three cities on the line, Richard Levine instructed, “OK, do it.”
Connell walked down to the clerk’s room on the ground floor of the courthouse. He stepped up to the filing clerk and handed over a piece of paper dismissing U.S. v. AT&T. “We’ve got something to file here,” Connell said.
The clerk took the document, looked it over, and said, “Oh, yeah, we’ve been waiting for you.”
“You have?”
The clerk smiled, stamped several copies, and handed one back to Connell. In the place where it was supposed to say, “Filed with the clerk of the court, January 8, 1982,” it instead read, “Lodged …”
“Lodged? What the hell does that mean?”
That was the question on the lips of the lawyers back at the main Justice building as soon as Connell called. What was Judge Greene up to? Where was he? Apparently, Connell had determined, the judge had left instructions with the clerk of the court not to accept any dismissal filing of U.S. v. AT&T while he was on vacation. The judge’s apparent interpretation was that if a dismissal was “filed,” then it might be irrevocable, but if it was “lodged,” then Greene could later decide whether he would allow it to be filed. At noon, less than two hours away, a press conference announcing the settlement was to begin at the National Press Club on 14th Street. Did this mean the settlement was in doubt?