In February 1982, MCA announced that it was selling its Disco-Vision operations, which had cost the corporation nearly $100 million, to Japan’s Pioneer Electronics Corporation. Despite all of its research and marketing, MCA had sold only 35,000 video machines. MCA refused to disclose the purchase price, but MCA president Sidney Sheinberg permitted himself to say, “Bargain basement you don’t get from MCA.” The sale of Disco-Vision ended MCA’s biggest corporate nightmare and the company’s biggest failure. Earlier, in September 1979, MCA had formed a joint venture with International Business Machines, Inc. (IBM) to build and market video discs. The move was a break from IBM tradition, because it had thrust the company into the consumer market rather than its usual business market. The Dutch-based N. V. Philips Corporation had remained a partner in the enterprise—although MCA had complained that Philips was not producing enough machines while Philips charged that MCA was not delivering on the video discs. In the spring of 1980, MCA and IBM found themselves facing more competition when General Electric and Japan’s Victor Company (JVC) introduced their own video-disc products, which were incompatible with Disco-Vision. In the end, despite its investment and because videocasette recorders, particularly the Sony Betamax, were outselling video disc machines, MCA had no choice but to sell.
Getting the Disco-Vision monkey off MCA’s back was just part of the good news in 1982–83 as Universal came up with the biggest winner of all, Steven Spielberg’s relentlessly charming E. T. the Extraterrestrial, which shattered all box-office records, earning almost $3.5 million a day.
In Washington, D.C., the Motion Picture Association of America, still run by Jack Valenti, ran a blitz of Capitol Hill, trying to secure congressional approval for a percentage of the home video rental market for the film industry. The crusade began in February 1984, just one month after the U.S. Supreme Court ruled that home video recording was legal. Hired to lobby the Hill was Senator Paul Laxalt’s thirty-year-old daughter, Michelle, who had previously been in the State Department’s congressional relations office. Senator Laxalt sat on the Senate Judiciary Committee, which was debating the matter. Michelle Laxalt, who had been placed on staff the previous fall, told The Washington Post, “I don’t touch Laxalt. That’s been my modus operandi as long as I’ve been in this town.”
At the end of 1984, MCA appointed former Republican senator Howard Baker to the MCA board of directors. Baker joined Robert Strauss, the former chairman of the Democratic National Committee, who had earlier been appointed to the board.
Going into the 1985 television season, MCA-Universal had several potential hits on its lineup, including Miami Vice, Simon & Simon, Airwolf, Murder She Wrote, Knight Rider, and Magnum, P.I.—and mid-season replacements shows such as The Misfits, The Equalizer, The Insiders, Alfred Hitchcock Presents, and Amazing Stories. In all, the company had eleven hours of prime-time television programming. Also, Universal Pictures was producing more blockbusters like The Breakfast Club, Back to the Future, Mask, Fletch, Out of Africa, and Brazil, which became a major embarrassment for Sidney Sheinberg.
Terry Gilliam, the director of two Monty Python black comedies, found that the American opening of his film Brazil, which played well in Europe, was being postponed by Universal, its U.S. distributor. The problem was the film’s ending. In Gilliam’s sophisticated and sometimes eerie update of George Orwell’s 1984, the film’s central character, Sam Lowry, meets a horrible end. But Sheinberg, who reportedly liked the picture but thought it could be better, refused to distribute it in the U.S. without a happier ending. Gilliam drew the line and told Sheinberg and Universal that the ending “is not negotiable.” Under the terms of his contract with Universal, Gilliam gave the studio approval over the final cut. Also, according to the agreement, Gilliam was not permitted to be critical of the studio. Instead, he purchased a full-page ad for $1,400 in Variety, asking, “Dear Sid Sheinberg, When are you going to release my film, Brazil?” Gilliam then held two unauthorized screenings of the film in Los Angeles. Brazil immediately received raves from reviewers and won Best Picture from the Los Angeles Film Critics Association, bringing more pressure on Sheinberg and Universal to relent. Soon after, Sheinberg, who, like Wasserman, loves success, backed off and released Brazil—with Gilliam’s original ending.*
Toward the end of 1985, MCA had remained a steel monolith in the entertainment industry, untouched by the scandals and corporate shake-ups other studios had experienced. By the end of the year, it had achieved revenues of $2.1 billion and a net income of $150 million. Despite the fact that its stock was selling at least $10 a share below the company’s asset value—at 64¾ at one point—no serious takeover bids had threatened the corporation.
The only potential challenge came from the Golden Nugget, Inc., a gambling concern in Las Vegas and Atlantic City owned by forty-two-year-old Stephen A. Wynn.† The Golden Nugget had quietly amassed 2.3 million shares or nearly five percent of MCA stock, valued at $95 million. Under SEC regulations, the purchase of more stock would then require public disclosure of the investment. Wasserman warned that if Wynn and the Golden Nugget did buy any more stock it would be viewed as a hostile act, and that MCA would do “what was necessary” to protect itself. Wynn eventually sold his shares and abandoned his takeover bid. “Since then,” according to one report, “MCA has increased its credit line to $1 billion—a war-chest that could be used to block a takeover—and amended its bylaws to reduce the power of dissident shareholders. Sheinberg described these steps as ‘anti-unfair takeover’ measures.
“He refuses to discuss merger rumors, which include a report that MCA has held talks with RCA. Responding to gossip ‘can be a full-time job,’ Sheinberg said.”5
The talk circulating about MCA’s possible merger with RCA was more than mere gossip. On October 20, 1985, a month after Wasserman shared center stage with First Lady Nancy Reagan at a star-studded Los Angeles dinner, New York Times reporter Geraldine Fabricant wrote: “Now there is evidence that Mr. Wasserman’s era is coming to an end. The first indication surfaced last summer with the disclosure that Mr. Wasserman had discussed the possibility of the RCA Corporation acquiring MCA [making it RCA’s largest division]. The talks broke off in September, but given Mr. Wasserman’s age and the current merger mania, many in Hollywood are guessing that MCA’s chairman will soon sell out—even possibly to RCA.”
Fabricant estimated that the purchase price for MCA would be $3.6 billion, based upon MCA’s stock alone, then valued at a low $48 a share. She added that just the previous month, communications mogul Ted Turner had bought MGM–United Artists for only $1.6 billion, “the most expensive entertainment industry acquisition to date.” By 1988, MCA would make $750 million solely from the syndication of its more recent television series, with another 12,000 episodes of other, older series. Universal Pictures further boasted the second-largest film library in the industry, with over 3,000 motion pictures.
In the wake of the New York Times story, the RCA-MCA merger was believed to be not only possible but imminent. But then, on December 11, 1985, after over a month of negotiations, Ronald Reagan’s former employer, General Electric, bought RCA for $6.28 billion—the biggest and most expensive non-oil purchase in American history. A member of the RCA board of directors who voted to approve the deal was former attorney general William French Smith.* In a joint statement, the chairmen of the boards of both GE and RCA, John Welch, Jr., and Thorton F. Bradshaw, declared that the merger is an “excellent strategic opportunity for both companies that will help improve America’s competitiveness in world markets.”
Welch added, “We don’t envision any government [antitrust] problems that would stop this in any way.” The Justice Department’s Antitrust Division approved the purchase on May 21, 1986. Ironically, fifty-two years earlier, U.S. antitrust chief Thurman Arnold had forced GE out as RCA’s principal stockholder because the relationship was viewed as “monopolistic.” The Carter administration had blocked a proposed merger between General Electric and Hitachi, both maj
or television manufacturers, because of possible violations of the Sherman Antitrust Act.
Predictably, Reagan’s top advisers in his cabinet and at the White House advised him to seek fundamental changes in U.S. antitrust laws in an effort to bring these statutes in tune with the new “economic realities.” Reagan press secretary Larry Speakes insisted that these “reforms” would be chiefly “to allow those companies in the United States who are severely affected by foreign competition to have a better opportunity to merge. We believe it would put U.S. commerce on a more competitive footing and in the long range be beneficial to consumers.” Specifically, according to one report, “A key proposal would ask Congress to change the seventy-one-year-old Clayton Act, one of the two pillars of antitrust enforcement, to lessen uncertainty over the legality of mergers. The language in Section 7 of the Sherman Antitrust Act prohibiting mergers that ‘may’ lessen competition or ‘tend to create a monopoly’ is so vague that it inhibits some mergers that would improve competition and strengthen markets and industries, administration officials say. The goal would be to remove this barrier.”*6
Meantime, as things looked up for MCA on the antitrust front, other matters were still hanging. One was a $22.5 million lawsuit filed against MCA–Universal-Television by actor James Garner, who charged in 1983 that the studio had defrauded him in its handling of The Rockford Files, Garner’s popular television series. Even though the program had been in the national syndication markets for several years, Universal had claimed that the show had yet to become profitable. “If that didn’t make a profit,” Garner told Washington Post reporter Tom Shales, “what makes a profit? You’ve practically got to go get your money from these guys. You’ve got to go get it with a gun practically.… I feel like I worked with the Charlie Manson family working for Universal. They’re a bunch of crooks, and they always have been, and they always will be.”
Garner continued, “I feel like I’m in a business with the biggest bunch of crooks you could ever put together. The Mafia’s not as big as these people. They don’t hold a candle to them. They can do it with a pencil.”7
Although the running dispute between Garner and MCA-Universal had been going on years before he filed his suit against them, the shooting war began on January 16, 1980. Garner was driving his car on Coldwater Canyon in the Hollywood Hills, near the intersection of Mulholland Drive, when another car, driven by a free-lance photographer, tried to pass him on the right-hand side. Because there was no right lane, the two cars collided. Garner sat in his car, stunned, as the photographer jumped from his vehicle and ran to Garner. Seeing Garner’s window open, the photographer punched the still-dazed actor in the face. Garner struggled to get out of his car and defend himself, but the photographer was too fast and too tough. Garner was badly beaten. According to a close friend and fellow actor of Garner’s, “Right after the fight, Jimmy was helped up by an aide to a top MCA executive, who just happened to be in the traffic at the scene of the fight.”
While he was recuperating from the assault in the hospital, MCA-Universal filed a $1.5 million lawsuit against Garner for failing to complete the entire season of Rockford episodes. The litigations between Garner and MCA-Universal are still unresolved, and the corporation has refused comment on Garner’s charges while the cases are pending.
However, the dispute with Garner did not attract the attention that MCA Records did At the end of 1979, MCA Records had suffered nearly $10 million in losses. After some corporate personnel shuffling, the new management turned the record division around, reporting nearly $16 million in total gains by the end of 1980. This was primarily due to drastic reductions in staff and an overhaul in the day-to-day operations of the division. Frills like big industry parties, and even general spending, were cut while prices on records rose. MCA Records also began making distribution deals with other record companies. In 1984, MCA took control of the distribution of Motown Records, helping Lionel Richie’s “Can’t Slow Down” shatter Motown’s sales record for a single disc.
While MCA Records appeared to be riding high, another payola scandal, a throwback to the late-1950s scams, broke wide open. Once again, record promoters were paying to get their clients air time. According to an NBC Nightly News report in late February 1986, record companies, including MCA, had become involved with independent record promoters who had ties to major Mafia figures. MCA and the other companies quickly got off the hook by simply denying any knowledge of wrongdoing and divorcing themselves from certain independent promoters.
At the time the payola matter was revealed by NBC, there was no official federal investigation into either payola or the use of independent promoters—despite NBC’s claims to the contrary. In fact, a congressional investigation into the matter in 1984 failed to find any evidence of such practices, and recommended against further investigation.
However, according to federal investigators in Washington, D.C., the official investigation of the record business concentrated on the practice of counterfeiting in the industry and the sale of five million cutout (out-of-date) albums from MCA to Out of the Past, Inc., a Philadelphia-based discount record company. The FBI and the IRS uncovered a major counterfeiting operation in which 20,000 phony record albums were discovered. The owner of Out of the Past, John LaMonte, began cooperating with the FBI after serving time in prison for record counterfeiting. He entered the Federal Witness Protection Program, telling government investigators that he was allegedly the victim of extortion demands by Salvatore Pisello and Morris Levy, the president of New York’s Roulette Records. Both Pisello and Levy have been tied by federal documents to organized crime. Pisello, in particular, has been identified as “a ‘suspected’ member of the Carlo Gambino family of La Cosa Nostra” and an alleged narcotics trafficker.
According to a sentencing memorandum filed in April 1985, in which Pisello was sentenced to two years in prison for income tax evasion:
Pisello convinced MCA Records of Universal City to distribute the Sugar Hill label. Sugar Hill Records of New Jersey specializes in soul and rock ’n’ roll music, including the recordings of Chuck Berry. According to MCA, Pisello put the parties together and received the rights to 3 percent of the net proceeds due Sugar Hill. MCA states that Sugar Hill soon had “cash flow” problems and remains in arrears to MCA for $1.7 million. Pisello personally received $76,530 in 1984 from MCA in commissions on the Sugar Hill deal. It remains unclear what Sugar Hill paid Pisello for his efforts.
Pisello also sold MCA a large quantity of breakdancing mats. After paying Pisello’s company, Consultants for World Records, Inc., $100,000 for the mats, MCA took a $95,000 loss when they did not sell. MCA also advanced Pisello $30,000 in 1984 for expenses involving his expertise in delivering a Latin music line and $50,000 in 1985 for future income on the Sugar Hill deal.
In a fourth deal Pisello arranged for MCA to sell two of his clients 60 truckloads of out-of-date record albums and cassettes worth $1.4 million. Although [these were] shipped a year ago, the clients have yet to pay. Most of the trucks left the records and tapes at a company called “Out of the Past, Ltd.,” in Darby, Pennsylvania; much of the rest went to Arkansas and South America.
In total MCA paid Pisello over $250,000 in the past year for various deals. Yet Pisello told the Probation office that he has but $2500 in the bank, has earned but $50,000, and owes MCA and Sugar Hill $330,000.
LaMonte and Out of the Past had complained to both Pisello and Levy that the truckloads of records sent him by MCA were nothing but “junk” and completely worthless. As a result, LaMonte refused to pay Pisello and Levy, through Pisello’s Consultants for World Records, Inc. Consequently, Pisello and Levy could not pay MCA. Soon after LaMonte’s refusal to pay, he was badly beaten by Gaetano Vastola, a New Jersey Mafia member and an associate of Frederick Giovanielo, who was also present at LaMonte’s meeting with Pisello and Levy. Giovanielo, a member of the Genovese crime family in New York, was charged in February 1986 with the murder of a New York Police detective. The FBI, w
hich had LaMonte under surveillance at the time, was able to capture the attack on film. Federal investigators have indicated that they believe that the Mafia might have been attempting to infiltrate MCA Records.
An MCA spokesman told Los Angeles Times reporter William Knoedelseder,* who first broke the MCA/Pisello cutout story, “Sal Pisello is a representative of Sugar Hill Records, an independent record company that MCA distributes. Additionally, he represented a buyer who purchased records discontinued from the MCA catalogue. MCA had no prior knowledge of the circumstances leading to Mr. Pisello’s conviction.… MCA has been in constant contact with the Justice Department during this investigation and has cooperated fully and will continue to do so.”8
RONALD REAGAN
A report released by the U.S. General Accounting Office, the watchdog of the federal government, in December 1980 stated, “Organized crime is flourishing.… [It] is a billion-dollar business which affects the lives of millions of individuals and poses a serious problem for law enforcement agencies. The effects of organized crime on society are pervasive.”
The underworld during the 1980s has continued to cost the public billions of dollars each year. Organized crime’s grip on industries ranging from construction to food processing and trucking to record companies, among other legitimate businesses—as well as some of the unions representing their workers—has only increased. This is apart from its traditional illegitimate enterprises in gambling, narcotics, prostitution, and loan-sharking, among others, which yield billions more. The tremendous rise in mob-owned garbage companies, the underworld’s illegal dumping of dangerous chemicals, and its virtual takeover of the toxic waste industry have made its activities literally a public health hazard.
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