Motion Picture Daily (Oct-Dec 1935)

MOTION PICTURE DAI LY Monday, October 14, 1935 U. S. Expects Trust Suit to Go 5 Mouths (Continued from pac/c 1) at 3 :4S P.M. after a total of 10 hours. William R. Gentry, local legal counsel for Paramount, was about to start his transverse questioning when he got tied up in a technical knot, which will be argued Monday when the case resumes. So far 40 hours were devoted to the trial in the first two weeks. In the first six days, most of the 25 hours were spent on objections by defense counsel to the indictments being tried ahead of the civil suit and to opening addresses. Only three hours were given over to Hardy for his direct examination of the F. & M. head. "One Little Episode" Arthur, who has yet to undergo a cross-examination by George Leisure of RKO counsel, has developed for the Government "a very small part of its case." It is "one little episode," it was stated. About 40 other Government witnesses have yet to take the stand, Department of Justice men state. Hardy is very anxious to have the out-of-town witnesses from Los Angeles, Chicago and New York go on as soon as possible so as to obviate business inconveniences. Although Thomas K. Dysart, head of the bondholders' committee for the Ambassador, Missouri and Grand Central, was scheduled to be second, Milton B. Arthur or Jules Levy may follow the F. & M. executive. All 40 witnesses will be interrogated as it looks now unless the Government gets into evidence the testimony it seeks without bringing them to the stand. Fees Reported at $1,000,000 Up to this point, the trial has cost the Government less than $10,000. Defense counsel fees are reported to total $1,000,000, exclusive of other expenses. Several executives have made two trips East at their companies' expense. During the first week, Neil F. Angew and Irving Lesser made the round trip. William T. Powers, Skouras attorney, went to New York and hasn't returned since. Agnew, accompanied by George J. Schaefer, Austin C. Keough, Louis Phillips, Irving Cohen and William Schneider, again made the New York trek, this time by train. The Paramount group will be in court again Monday. Ned E. Depinet, Jules Levy, William Mallard, Spyros Skouras, Jack Partington and Irving Lesser left here by plane Thursday night and, after being grounded in Indianapolis for eight hours, landed safely in New York. They returned via the air route tonight. E. J. Hessberg, Warner attorney subpoenaed by the Government, left for Manhattan Saturday afternoon by plane to rush to his wife who is ill. He has been temporarily excused, but will be on call. This is not the only item of additional costs facing RKO, Paramount and Warner executives. Each company has set up offices at local hotels where executives transact business over long distance telephone and with their local and district managers who come to the hostelries. Telephone calls are made to all parts of the coun Optimism? St. Louis, Oct. 13. — One of the best cracks made here came from an important sales head of one of the three companies indicted. He said: "We have a new drive on. Out of court by Christmas!" try, but the greatest number go to headquarters in New York. Paramount's suite on the 14th floor at the Coronado is the most expensive in the hotel. Queen Marie of Rumania occupied it on her last visit here. Paramount uses the rooms for living and business purposes. May Appeal Case The civil case, which goes on immediately following the criminal suit, is expected to be a prolonged affair in that the Government will submit more evidence than in the current trial. Rulings have been handed down that no testimony may be taken from witnesses on events after Jan. 11, 1935, the day the indictments were handed down. The temporary injunction action followed about six months later, thereby permitting introduction of incidents and conversations up to the time the Government filed the second action. The cost of bringing witnesses here will be paid by the defendants only in the event they lose the final decision. If Warners, RKO and Paramount and their executives are convicted, they may appeal to the Court of Appeals, 6th District, which includes this state, Arkansas, Wisconsin, Illinois, Iowa and Indiana. If the defendants are given a favorable verdict by the jury, the Government may not appeal. However, if the defendants are found guilty and are reversed by the Circuit Court of Appeals, the Government counsel may appeal to the U. S. Supreme Court, a right also enjoyed by the defendants in addition to the Circuit Court of Appeals action. Gentry will probably take two days on his cross-examination of Arthur. Leisure for RKO is expected to take the same amount of time, indicating that the Government's second witness may go on before the week is out. Monday starts the third week of the trial. It is expected to be replete with the same display .of temperament certain lawyers displayed during the first two weeks. The courtroom has its daily fill of witnesses, spectators and lawyers, some to watch ex-Senator James A. Reed in action and others to look in and see what is going on for their own private interest or enjoyment. Industry's Greatest Show William R. Benham, assistant to Hardy and who has been active in the investigation of the two cases, has been forced to spend most of his time in his hotel room during the last few days of the trial. He suffered a nasal hemorrhage which was aggravated by high-blood pressure. He is up and about again and expected to attend the court sessions more frequently this week. It's the greatest show the industry has ever put on, according to many of the witnesses here, and undoubtedly will have a long, long run at the rate things are going, they say. Judge Moore and Hardy have both made statements to that effect in the record. Para. Paid Out $50,000,000, States Zukor (Continued from par/e 1) tion of all charges. He pointed out that at the time the contract was drawn neither he nor the company had known that profits would be as large as they were, and that when business went bad after 1931 he voluntarily reduced his contract terms. Zukor told the committee that his present salary is $80,000 per year, and that he has no participation in bonuses. In reply to a question put by a member of the committee as to the present condition of the company he said that Paramount is in "better and better shape every day." "You're to be congratulated on the way the Paramount bondholders and creditors fared under that plan," the committee member remarked to Zukor. Zukor "Had No Quarrel" Zukor said in reply to another question that he "had no quarrel" with the 'financial crowd" identified with Paramount's history as a result of his executive experiences. "I believe that everything they did was done for the best interests of the company," Zukor said. Sir William Wiseman, partner in Kuhn, Loeb & Co., bankers for Paramount for many years, who followed Zukor on the stand, estimated that his firm had marketed $100,000,000 in securities for Paramount and had earned in commissions about $1,300,000, "or less than one and one-half per cent." Questioned by counsel for the committee about the election of John E. Otterson as president of Paramount, Sir William said that he had advised the reorganization groups against Otterson's election. Pressed for a reason, Sir William replied, "Because this is show business and should be run by showmen." He added that there was "nothing personal" in his stand, that he had the "highest regard" for Otterson. Thomas D. Thacher, special counsel for Paramount, who opposed the applications for $3,000,000 in reorganization fees last June, was another witness, as was Alfred Cook, of Cook, Nathan & Lehman, attorneys in the reorganization for the Paramount stockholders' protective committee. B. & K. Turns Down New Clearance Move Chicago, Oct. 13. — November booking clearances set up Thursday at a meeting of independents have been turned down by B. & K. The big circuit insists upon seven days' clearance between C week and first week of release, and asserts the fact that Columbia, Paramount, Warner, M-G-M and Fox product is being played shows agreements have been reached with exchanges. Exchange managers say clearance has not been promised and point to the fact that more than 300 deals have already been signed on the old basis. Notice was served on B. & K. Friday by the Film Board of Trade that the extra week would not be allowed. Another meeting is scheduled. Quick Revamp Of RKO Seen In Bond Deal (Continued from page 1) proposed by or under the direction of the two. Atlas, either alone, or in conjunction with Lehman Bros., also will undoubtedly underwrite whatever new security issue is provided for under the reorganization plan. The Atlas-RCA negotiations have been conducted throughout on the basis that, if consummated, Aylesworth would become the active management head of reorganized RKO. Nothing has been reported in the meantime to indicate that this understanding has been upset in any particular. It is believed likely that this would impel Aylesworth to withdraw as president of NBC. Also, with or without the exercise of the Atlas-Lehman Bros, option to purchase the remainder of RCA's holdings in RKO, it is believed that the substantially reduced investment of the Radio company will result in the replacement of Sarnoff by Odium as chairman of the board of the new RKO company. Atlas Dominant Factor Atlas, by this move, becomes a dominant factor in industry financing and influence, having, in addition to its new RKO holdings, appreciable investments in both Paramount and Fox. Odium is a member of the Paramount board, as is John D. Hertz of Lehman Bros., which also has an appreciable investment in Paramount. The investments of both were made during the reorganization of that company. Lehman Bros., however, were bankers for RKO for several years prior to the company's receivership in Jan., 1932, and had two representatives on the old RKO board. Indications are that they would also be represented on the board of a reorganized RKO. The negotiations for the sale of the RCA interest were temporarily suspended last July, after having been in progress for almost five months, due to the departure of Sarnoff on his annual European business and vacation trip. Talks were resumed immediately upon Sarnoff's return less than two w'eeks ago, ending with the agreement of last Friday. McDonough Here for Talks J. R. McDonough, president of Radio Pictures, arrived from the coast Friday for conferences with M. H. Aylesworth and other home office executives pertaining to the sale of a large part of RCA's interest in RKO to Lehman Bros, and Atlas Corp. Ned E. Depinet, president of RKO Distributing Corp., and William Mallard, RKO general counsel, also came on from St. Louis for the conferences. It is understood that reorganization plans for RKO were also discussed at the meetings. McDonough will return to the coast in about a week. Depinet and Mallard are due back in St. Louis today. SMPE to Hear Wolf S. K. Wolf, director of the acoustic division of Erpi, will be one of the speakers at the fall meeting of the S.M.P.E., to be held at the Hotel Pennsylvania Thursday. His topic is "Recent Advances in Acoustics."