Motion Picture Daily (Apr-Jun 1935)

Friday, June 14, 1935 MOTION PICTURE DAILY 4 Purely Personal ► BILL FITELSON, attorney for independent film companies, is recovering from a breakdown from overwork at LeRoy Sanitarium, but expects to be able to transfer to his Jersey country home in a few days. • > Walter Gould has resigned from Columbia to rejoin United Artists as division manager for Central and South America. He was with the company from 1926 to 1935. • Ralph B. Austrian has been appointed special representative for RCA Photophone by Edwin M. Hartley, manager, and he will make his headquarters here. • Harry Martell, who was picked as the best amateur competing on Fred Allen's hour, begins a week's engagement at the Roxy today, a Lily Pons came in on the Bremen yesterday. She will leave shortly for the coast to start work in a Radio picture tentatively titled "Love Song." • John Masefield has been assigned by M-G-M to "Romeo and Juliet." He will come to this country soon. • Sophie Tucker will play hostess to members of her "Life Begins At 40" club at the Capitol next Monday. Kenneth Macgowan, Radio producer, has flown in for the opening of "Becky Sharp." J. Von Herberg is in town from the Pacific Northwest. At the Savoy Plaza. • Eddie Dowling will be guest star on Al Jolson's radio hour, Saturday. • . . . Baltimore Herbert Zimmerman, proprietor of the Echo and DeLuxe, is recovering from an operation at Sinai Hospital. Moe Kohn, operator of the Leader and Dainty, is in the same institution with an infected throat. Paul Caplan has closed the New Elektra for the summer. J. Louis Rome has started work on the new Stadium. Sam Clarke, publicist attached to the "Anchors Aweigh" unit working at Annapolis, has been a busy man about town. Remove Pat Drew's Leg Hollywood, June 13. — Pat Drew, Paramount plane crash victim, underwent amputation of one leg below the knee in an effort to save his life today. Infection set in and he weakened in spite of several blood transfusions. The operation was performed by Dr. H. J. Strathearn, Paramount surgeon. Drew refused to submit to the operation at Macon, Mo., following the plane crash. Marcus Made Producer Hollywood, June 13. — Lee Marcus, formerly head of shorts at Radio, has been promoted to associate producer. His first assignment is "The Rainmakers," featuring Wheeler and Woolsey. Time ' Buyer of RKO Notes, Casey Pathe Suit Reveals {Continued the sale of the RKO notes at 20 cents on the dollar constituted a wastage of Pathe's assets, and that the value of the notes was greatly in excess of the sales price, the defendant directors and officers of Pathe countered that the sale of the RKO notes was "of great benefit to Pathe" and "an exercise of sound business judgment" "The RKO notes," the reply states, "were offered to various security houses and investment trusts who might reasonably have been expected to make a bid lor the same, including the Atlas Securities Corp., who were working on a plan of reorganization for RKO and were thoroughly familiar with that company's situation. The best bid that Atlas would make was 17. A bid of 20 was finally made by the magazine Time, to whom they were sold." The reply further points out that no interest has been paid Pathe on any of the RKO notes since July 1, iy32, and that $774,000 principal amount of the RKO notes were past due and unpaid last Sept. 29. The reply further points out that while reorganization plans for RKO have been discussed for almost the entire two years since the company's receivership, no plan has yet been announced. The notes were sold, the reply adds, "in order to reduce to cash what otherwise would have remained an asset of dubious value, and which represented obligations of a defunct company." Says RKO Notes Unsecured It also states that the RKO notes are unsecured and in a junior position to $13,000,000 of additional first and second RKO liens, believed to be secured by "substantially all of the important assets of RKO," and that these latter notes have sold in the market for as low as 26J4 since the first of the year. The notes held by Pathe, the reply states, rank with approximately $45,000,000 of claims filed by RKO creditors. "It would seem apparent," the reply concludes, "that a sale of these notes at a price of 20 was fair and reasonable, if indeed not more than their reasonable market value and actual worth." Casey's application for a receiver declares that Pathe's rise attracted the attention of Wall Street speculators, who eventually brought about the company's sale to RKO, the sale price being paid in large part by the latter company's unsecured notes. Thereafter, the application says, Pathe's dominating group of directors who brought about the sale left the company "helplessly floundering." In spite of this, it states, Pathe staged a recovery through some of its assets which were "troublesome to pry loose," at the time of the sale and again attracted Wall St. attention and became the "prey of market manipulators." The complaint alleges that loans and advances of $200,000 made to First Division by Pathe will result in a total loss, and declares that the advances were made for production financing to a company which had neither "producing experience nor world wide distributing facilities." It from page 1) also charges that loans totaling $150,000 were made to "one Rowland" to finance the production of "The Girl Friend" and that as a result of Columbia's rejection of the picture for distribution "the loans will be a total loss." The complaint also alleges that Robert R. Young, of the investment firm of Young & Kolbe, dominates Pathe presently and that Frank F. Kolbe, Pathe president, and Robert Atkins, executive vice-president, are "dummies" of Young. It charges that Young bought up Pathe debentures in the market at advantageous prices after the company itself had been obliged, "because of improvident loans and advances," to halt such buying. It further charges that Stuart Webb's replacement as Pathe president was made to appear to stockholders as a reform move, whereas in reality the new management plans to continue the same policies of "dissipation of Pathe's assets." The complaint charges that the pledging of Pathe's 49 per cent stock interest in Du Pont Film Mfg. Co. for a $2,000,000 loan which requires the payment of interest and principal on certain due dates places the stock in a position where, in the event of defaults, it might have to be dumped on the market, causing the loss of Pathe's most valuable asset. It states further that the Du Pont stock has a book value of $4,000,000 and that its actual value is believed to be much more. It adds that its value will probably be greatly enhanced by current "valuable" experiments being conducted by Du Pont which are expected to "greatly lessen the cost of manufacturing raw stock." See Derr Behind Action Reflecting the reports which identified E. B. Derr, former Pathe production head, as the figure behind Casey's action, the reply of the defendants advances the belief that Derr is using Casey's name to bring the action, and that he, Derr, "is hostile to Pathe" because of "facts which took place" at the time that he was an employe of the company and who "has anything but the best interests of the company at heart." The answer further states that Derr recently "had the audacity to ask that the management of Pathe be turned over to him." The defendants state that the production loan for "The Girl Friend" would amount to less than $50,000, rather than the $150,000 alleged and that it has been learned from "officers of Columbia" that it will be repaid "at least in part" and may "net a profit." In a separate reply filed by Young denial is made that he dominates the company or rules its officers and sets forth that he owns 2,000 shares of Pathe's 8 per cent preferred, or 25 per cent of that issue, and more than 25,000 shares of the Class A stock, or about 10 per cent of that issue. In this connection Young points out that if, as alleged, his intentions were to encouraere the mismanagement of Pathe "and ruthlessly destroy the rights of stockholders, it is apparent that, as the largest stockholder, I Loew's and RKO Plan No Summer Closings Loew's and RKO will not close any theatres for the summer, it was learned yesterday. The former circuit operates on a 40-week rental basis and has already paid rents for the 10-week warm period. While RKO previously followed the same procedure as Loew's in charging off rents for the summer months, this practice has been discontinued. Loew's recently closed the Lyric, Bridgeport, Conn., and unless circuit officials change their minds later, the theatre will remain dark after Sept. 1. Mrs. Julia Baker Dead Kansas City, June 13. — Mrs. Julia Baker, 76 years old, mother of A. F. Baker of the Electric, Kansas City, Kan., and grandmother of George F. Baker, manager of the Newman, died the afternoon of June 12 at the Baker home in Kansas City, Kan. Mrs. Baker had lived there 51 years. Roxy Beats Brooklyn The Roxy nine yesterday beat the Brooklyn Paramount team by a score of 10-3. would be injuring myself most of all." He adds that the only dealings his firm had in Pathe securities occurred in 1933, involved a few hundred shares and resulted in a loss of $586.75. Young also denies that his purchase of Pathe debentures was for speculative purposes or to hold for redemption by the company at par, and points out that the debentures were selling at above or slightly below par for six months before they were called for retirement. The answers defend the $2,000,000 loan from Bankers Trust and the pledging of the Du Pont stock as security for it in pointing out that the loan which made possible the calling in of Pathe's debentures carries interest of only four per cent, whereas the retired debentures were at seven per cent interest. In addition, the answer says, the entire debenture issue matured May 1, 1937, whereas only $500,000 of the new loan now matures on that date, another $500,000 one year later and the remaining $1,000,000 on May 1, 1939. "By making this loan," the answer concludes, "Pathe has both materially reduced its fixed interest charges and has extended the maturities of its fixed obligations." Replying to the charge that the pledging of the Du Pont stock in any way jeopardized it as a Pathe asset, the defendants' answer points out that dividends on the stock in the past have been sufficient to meet the obligations set by the loan. The answer charges that all of the allegations in Casey's application are unsupported by fact and are inconsistent. "The appointment of a receiver under these circumstances," it concludes, "would be a terrible calamity to the corporate defendant, would undoubtedly reduce the market value of the preferred stock to a fraction of its present price, destroy the credit of the company, place all of its assets in jeopardy and work irretrievable injury." Justice Dore gave Casey s attorney until tomorrow to file an answer to the reply, following which he will rule on the application for the receiver.