The information on Donovan’s ties to the underworld was then concealed from the Senate panel investigating Donovan.
Other Reagan appointments included William French Smith as attorney general and William Casey as director of the Central Intelligence Agency. Casey later appointed his assistant during the presidential campaign, Max Hugel, as his deputy director of operations, which conducted sensitive covert actions and clandestine intelligence-gathering abroad.
Reagan also announced that he was going to appoint William E. McCann, a New Jersey insurance executive and a friend of Casey’s, to become the ambassador to Ireland. The McCann confirmation hearings were held up because of the discovery of McCann’s ties to organized crime, which eventually forced the White House to reluctantly withdraw the nomination. Specifically, McCann—who had co-chaired the $200,000 Reagan fund-raiser with Ray Donovan during the presidential campaign—had been an associate of convicted stock fraud and insurance swindler Louis Ostrer, who had been indicted with mob bosses Santos Trafficante of Miami and Tony Accardo of Chicago for bilking the health and welfare fund of the Laborers Union. McCann’s firm, Foundation Life Insurance Company, was also being investigated by the New York State Insurance Commission for selling insurance without a license to Teamsters Local 295 in New York City.
Senator Paul Laxalt also had some of his people appointed to top administration posts. One was Reese Taylor, Jr., who was appointed chairman of the Interstate Commerce Commission. Common Cause, the citizens’ lobbying group, charged that Taylor had been handpicked for the job by the Teamsters Union because of his opposition to the proposed deregulation of the trucking industry, which would hurt the organizing abilities of the Teamsters. A former law partner of both William French Smith and Paul Laxalt at different periods during his legal career, Taylor was helped in his successful confirmation bid by Nevada senator Howard Cannon—who was the earlier target of Teamsters bribe offers from Roy Williams and Allen Dorfman for his assistance in blocking total deregulation. Cannon’s watered-down version did finally pass. Williams, Dorfman, and Chicago Mafia figure Joseph Lombardo were later indicted for their attempts to bribe Cannon, who was not indicted.
Another appointment brought about by Laxalt was that of James Watt as the secretary of the interior. Watt was the head of a “public interest” law firm, the Mountain States Legal Foundation. An anti-environmentalist group, Mountain States received major financial contributions from such Nevada gambling interests as Harrah’s, Inc.; Bally Distributing Company; Harvey’s Wagon Wheel; the Sahara Nevada Corporation; and the Union Plaza hotel/casino. Three of the lawyers in Watt’s firm represented the Riviera; the Dunes hotel/casinos; the Horseshoe club/casino; the Pioneer Club; the Summa Corporation; Del E. Webb; Caesar’s World; Circus-Circus; and Slots-a-Fun, Inc. Several of these businesses were connected to organized crime.
Perhaps the biggest party for Ronald Reagan’s victory before his inaugural was held on December 12, 1980. The place was Rancho Mirage near Palm Springs, California, at the desert home of Frank Sinatra. The official occasion was Sinatra’s sixty-fifth-birthday celebration. In attendance were two hundred guests, who included Walter Annenberg,* other members of Reagan’s Kitchen Cabinet, and an array of Hollywood luminaries. Although the Reagans had been invited but could not attend, the president-elect’s attorney general-designate, William French Smith, did attend. Smith—who had been named as attorney general the day before the affair—had known Sinatra since 1970 after being introduced to him by Reagan Kitchen Cabinet member Holmes Tuttle.
At the time of the party, Sinatra was still being investigated by a federal grand jury in New York which was trying to determine whether Sinatra was involved in the skimming operation at the Westchester Premier Theater during his appearances there in April and September 1976 and in May 1977. By the end of 1980, eight people had been convicted for their involvement in the Westchester scheme. Sinatra himself was not indicted.
Later Sinatra renewed his efforts to regain his gambling license from the Nevada Gaming Commission. He was hoping to “participate in management” of Caesar’s World, Inc., in Las Vegas. Previously, the New Jersey Casino Control Board had rejected Caesar’s admission into Atlantic City because its president was known to be associated with top organized crime figures. As a reference for his application in Nevada, Sinatra—who was organizing the entertainment for the new president’s inaugural gala—used Reagan’s name.
Later, in his glowing letter of recommendation on Sinatra’s behalf addressed to the Nevada Gaming Commission, Reagan described his friend as “an honorable person, completely honest and loyal.” When asked by a reporter about Sinatra’s ties to the underworld, Reagan simply replied, “Yeah, I know. We’ve heard those things about Frank for years, and we just hope none of them are true.” Sinatra* was granted his “key employee” license by the gaming commission.
Smith had the same reaction when the press questioned his judgment in attending the Sinatra party, adding that he was “totally unaware” of Sinatra’s associations to the underworld. New York Times columnist William Safire chided Smith, writing, “[T]he involvement of the designee for attorney general in the rehabilitation of the reputation of a man obviously proud to be close to notorious hoodlums is the first deliberate affront to propriety of the Reagan administration.”
Despite the uproar over Smith’s association with Sinatra, Safire and the rest of the media—with the exception of Washington Post columnist Maxine Cheshire—missed the fact that a jubilant Sidney Korshak was also present at the party. A Smith aide said that if his boss talked to Korshak, “it was purely accidental.”10
*In 1974, when Reagan was again being considered as a likely future presidential candidate, his attorney, William French Smith, was asked by reporters to provide additional data cm Reagan’s taxes and real estate deals, but Smith declined to cooperate. “We’ll worry about that when he becomes president,” Smith replied.
*During his tenure at the SEC, Casey had discussed a commission suit against Vesco with former attorney general John Mitchell, who was concerned about the political embarrassment of a $200,000 cash contribution Vesco had made to Nixon’s reelection campaign. Casey made this admission during his testimony at Mitchell’s Watergate trial.
*The Maritime Workers Union and the Air Traffic Controllers were two smaller unions endorsing Reagan for president.
*Walter Annenberg’s wife, Leonore Annenberg, was later appointed as chief of protocol at the Reagan White House. Mrs. Annenberg had been previously married to Beldon Katleman, the owner of El Rancho Vegas, and former bootlegger Lewis Rosentiel, the head of Schenley Industries. She and her third husband, Walter Annenberg—the owner of the Daily Racing Form, Seventeen, and TV Guide—were close friends of the Korshaks’.
*Reagan later awarded Sinatra and Walter Annenberg with Presidential Medals of Freedom and appointed Sinatra to serve on the sixteen-member President’s Commission on Arts and Humanities. Of Sinatra, Reagan said, “His love of country, his generosity for those less fortunate, his distinctive art … and his winning and compassionate persona make him one of our most remarkable and distinguished Americans … and one who truly did it his way.”
EPILOGUE
LEW WASSERMAN
“Hollywood” is no longer in Hollywood. Few movies are now made there; few stars live in Hollywood Hills. The corner of Hollywood and Vine is just another rundown commercial area. There is little magic in the air, and the local glitter is mostly supplied by the motorcycles that line Hollywood Boulevard and the punk rockers who hang out in front of cheap T-shirt shops. With the exception of Paramount, most of the big movie and television studios—including Universal, Columbia, Warner Brothers, NBC, and Disney Studios—have moved from Hollywood to the San Fernando Valley, where, just on the edge of the valley, the MCA Black Tower remains the symbol of the awesome strength and power of the new Hollywood.
MCA’s lobby is unglamorous, cold, and sparse. A uniformed guard, sitting at a large desk, is responsible
for checking visitors in and out of the building and generally keeping the peace. To his right is a bronze bust of Jules Stein and beyond that several elevators. On the top floor, where the MCA high command works, “corridors have disappeared or widened into lushly carpeted indoor avenues, deep and soft enough to turn an ankle, so hushed that no one would hear [a] scream,” wrote author Saul David. “The furnishings here are European antiques of immense value and astonishing discomfort. Everything is the wrong height—the great desks and ornate tables meant to serve people who either stood or perched on stools. There are wonderful cranky cabinets with doors, tall chests and short chests and doubled chests with twinkling rows of little drawers and pigeonholes.… Wasserman’s office was large but not especially ornate—tending to the austere in shades of gray, black, and white, like Wasserman himself.”1
Toward the end of the Carter administration, MCA and Lew Wasserman were seething after its new cable television network, named Premier—a consortium of Hollywood studios, including MCA-Universal, Twentieth Century–Fox, Columbia Pictures, and Paramount—was closed down, after an injunction was filed against it by the Carter Justice Department, less than four months after the joint venture was announced. With MCA still haunted by its nemeses, Antitrust Division attorneys charged that the project was “anticompetitive” and that it would be engaging in price-fixing and group boycotting. Premier had promised subscribers that it would offer motion pictures from its participating studios at least nine months before the same films would be offered to Home Box Office, Inc., or Showtime Entertainment—which were taking in twenty to thirty percent of the pay-TV subscription fees for distribution while the studios were getting only about twenty percent versus the forty-five percent they received from the box office. The studios stood to make an additional $450 million a year in the long term had Premier gone into operation. Those companies involved in Premier lost over $20 million as a result of the antitrust action while profits in cable television had jumped from $192 million in 1978 to $400 million in 1979.
More bad news came for MCA in mid-1980, when the Screen Actors Guild struck against the film industry over demands for actors’ participation in revenues from cable television. The thirteen-week strike caused MCA-Universal’s lucrative television programs to be postponed or cancelled. MCA lost millions of dollars in television revenues as a consequence of the strike. However, a Directors Guild of America strike was averted when Wasserman was called in by both the directors and the producers to mediate a settlement.*
Soon after becoming president, Ronald Reagan began moving toward deregulating the communications industry, proposing to strip the Federal Communications Commission of much of its authority. “Under Reagan era ‘deregulation’ of radio and television,” wrote author Ronnie Dugger, “existing stations are to be protected from challenge by new competitors, and people are going to have to watch more and more commercials as the price for seeing and hearing the programs they like. [Mark Fowler,] Reagan’s chairman of the Federal Communications Commission (FCC), is proposing to give present TV station owners permanent title to their licensed access to the publicly owned airways, immune from competitive challenge, and to remove limits on how many radio and TV stations one company can own. On the other hand, the Reaganized FCC is opening some new communications technologies [like cable television] to free competition.”2
That same year, MCA, Paramount, and Time, Inc., bought a one-third interest in the USA Network, another part of the cable-TV broadcasting system. And later, MCA-Universal negotiated a deal with HBO, whereby HBO was required by contract to buy all of Universal’s motion pictures.* There were no antitrust problems, and, under Reagan, none were anticipated.
Deeply affected by the antitrust problems experienced by MCA and General Electric, Reagan told Business Week in 1980, “We don’t want to give up our protection against monopoly at home, but why can’t we make it possible for American concerns to compete on the world market and not have it called collusion or restraint of trade?” Attorney General William French Smith chimed in, “Bigness in business does not necessarily mean badness.… The disappearance of some should not be taken as indisputable proof that something is amiss in an industry.” To further the cause, one of the most outspoken critics of U.S. antitrust laws, William Baxter, a former law professor at Stanford, was appointed as head of the Justice Department’s Antitrust Division. With the signals clear and a new Republican majority in the U.S. Senate, Republican senator Strom Thurmond, the new chairman of the Senate Judiciary Committee, completely abolished its once-effective antitrust subcommittee.
The Reagan Justice Department also began considering challenging the 1948 Supreme Court “divorcement” decision in the Paramount case, which forced the studios to divorce themselves of their theatre chains. Upon hearing the news, studio heads in Hollywood were described in published reports as being “enthusiastic.” Baxter, who spearheaded the campaign, said that the review of the decisions made by the Supreme Court against the major film companies had resulted from “the age, significance, and complexity of those judgments, their apparent success in destroying the cartel to which they were originally addressed, and the many profound changes in the motion picture industry since the judgments were entered.” Just the previous year, a federal court in New York had denied a motion to vacate the decrees against the studios.
On Tuesday, April 28, 1981, at 5:00 P.M., eighty-five-year-old Jules Stein was rushed to UCLA Medical Center—where he had given millions of dollars for the internationally renowned institute to prevent blindness that bore his name—suffering from what was thought to be a badly inflamed gall bladder. At about midnight, while receiving treatment, Stein suffered a massive heart attack and was pronounced dead at 12:20 A.M. on April 29.
Nearly six hundred people, including some of the biggest names in show business, attended a celebration of Stein’s incredible life on the east patio of the Jules Stein Eye Institute on UCLA’s campus. Henry Mancini and a twenty-piece band were joined by former Tommy Dorsey singer Helen O’Connell in a tribute to Stein. Among those songs played was Stein’s favorite, “Alexander’s Ragtime Band.”
Grief-stricken, Wasserman described Stein as “a singular being,” adding that Stein’s death had left him “bereft … in ways that defy the power of language to express. He was my mentor, my partner, and my closest friend for more than forty-five years.”3
Among Stein’s seventy-six honorary pallbearers were President Reagan, former American Federation of Musicians boss James Petrillo,* producers Mervyn LeRoy and Hal Wallis, actors Jimmy Stewart and Cary Grant, and talent agent Irving “Swifty” Lazar. Stein’s wife, Doris, died in April 1984.
Stein’s death had come in the midst of a rare corporate crisis for MCA. During the first quarter of 1981, MCA’s operating income dropped by thirty-seven percent, which followed a twenty-two-percent fall in 1980. To deal with the problem, Wasserman and Sidney Sheinberg dramatically cut Universal’s film budget by thirty percent, reducing its annual movie production to only a dozen films, compared to twenty-two in 1980. Several disasters at the box office had contributed heavily to the decision. The Blues Brothers, starring Dan Aykroyd and John Belushi of NBC’s Saturday Night Live, skyrocketed over budget, costing the studio over $30 million. Dino de Laurentiis’s Flash Gordon, which cost nearly $20 million, also bit the dust soon after its release. The only bright spots were Coal Miner’s Daughter, a film based on the life of country singer Loretta Lynn, and Steve Martin’s The Jerk. Each had gross receipts in excess of $30 million.
With MCA’s stock dropping, there was still little concern about a hostile takeover of the corporation. Wasserman still controlled 8.1 percent of its stock and, as executor of Stein’s $150 million estate in the wake of his death, controlled the 15.8 percent owned by Stein. In view of the fact that seventy-five percent of MCA’s stockholders still had to approve any takeover bid, Wasserman alone could almost singlehandedly block any unwanted takeover attempt.
MCA’s problem, according to
corporate analysts, was that it had failed to diversify aggressively, depending too much on its film production, which comprised 84 percent of MCA’s profits in 1980. But Wasserman had already realized that and embarked MCA on massive real estate development, which would eventually be separated from MCA’s other operations. First, MCA announced that it planned to build a $175 million, 312-acre theme park in Orlando, Florida,* near Disney World and Sea World, which would be a semi-clone of its Universal City tour.† It also planned to build the new $100 million headquarters of Getty Oil in Universal City and a second $65 million, 500-room Sheraton Hotel. The project was to yield MCA an additional $15 million annually for leasing arrangements when it was completed in 1984.
The following year, in August 1982, Universal, Paramount, and Warner Brothers, Inc., nearly purchased a twenty-five-percent interest each in The Movie Channel, a cable-television company valued at $100 million and owned by American Express and Warner Communications, which would retain the remaining twenty-five percent. Although there was hardly a threat of possible antitrust action from the Justice Department, the deal fell through when the studios failed to come to terms among themselves. “You try to get three movie companies to meet for lunch, and you’re going to get arguments,” said Thomas Wertheimer, an MCA vice-president.4
Meantime, MCA resumed its steady growth, with nearly $1.5 billion in assets. Universal-Television led all production companies with seven hours of prime-time programming while Universal Pictures began leasing studio space to outside producers as it raked in twenty percent of the total revenues of Hollywood’s 1981 film releases. Universal’s hits were The Four Seasons and Bustin’ Loose, along with Endless Love, An American Werewolf in London, and The Great Muppet Caper.
To everyone’s surprise, the box-office smash of the season was Universal’s On Golden Pond, featuring Henry Fonda, Katharine Hepburn, and Jane Fonda. As the crowning achievement to a long and distinguished career in motion pictures, Henry Fonda won the Academy Award for Best Actor just prior to his death, although the film itself was beaten out for Best Picture by Chariots of Fire.
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