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76 MONEY BEHIND THE SCREEN
scale. Among other moves it acquired a controlling interest in the Columbia Broadcasting sj^stem, the second national radio service in the country, and estabUshed a production unit for talkies in France. In 1933 this company was thrown first into receivership and later into bankruptcy. It was reorganised m June, 1935, as Paramount Pictures Inc., control passing from Kuhn, Loeb & Co. to a group consisting of the Wall Street investment bankers Lehman Bros, and the Atlas Corporation, an investment trust within the Morgan sphere of influence. It appears that the Morgan telephone trust also acquired an interest in the companj^ and their uifluence was further strengthened by the appomtment of J. E. Otterson, former chief of Erpi and prime mover in the struggle with Fox, to the controlling position of president of the new company.,
Commenting on this change Representative A. J. Sabath, chairman of the Congressional Committee investigating real estate bond reorganisation, stated : " The reorganisation of the Paramount Publix Corporation, now Paramount Pictures Inc., was marked by ' collusion, fraud and conspiracy '. This is a case where control of the company was grabbed by the American Telephone and Telegraph Company and other interests " {New York Times, 11th October, 1935). From the report into the company's afi"airs presented by J. P. Kennedy in June, 1936, and not made public until recently, it appears, however, that the new management did not materially improve the standards of efficiency of its predecessors. In the first place, after a preliminary survey, Mr. Kennedy considered it a waste of time and money to continue his enquiry, unless far-reaching changes in the management of the company were effected. " At the time when any well-managed picture business should be making substantial profits. Paramount is not making money and, as now managed, gives no hope of domg so," he wrote (see Time, 27th July, 1936). " While current unsatisfactory results are cumulative effects of a chain of incompetent, unbusinesslike and wasteful practices to be detected in every phase of production, this pervading incompetence is directly traceable to a lack of confidence in the management and direction of the company's affairs in the New York office."
One of the results of this report appears to have been the removal from the board of J. E. Otterson and his replacement by an experienced showman, B. Balaban, It would be a mistake, however, to conclude from such organisational changes that the ultimate Morgan control of the company had thereby been removed.
Warner Bros.: The present financial control of this concern cannot be completely ascertained from the information at our disposal. The former banking affiliations, Goldman, Sachs & Co. and Hay den Stone & Co. appear to have been dropped, and it is reported that at one time Western Electric had an interest, though