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Ronald Reagan, MCA, and the Mob
(Viking Press, 1986)
By Dan E. Moldea
Chapter OnePresident Ronald Reagan's professional life--his acting career, his personal financial fortune, and his rise in politics--has been interwoven with and propelled by a powerful, Hollywood-based entertainment conglomerate named MCA. For nearly fifty years, Reagan has benefited both personally and financially from his association with this sixty-two-year-old company--formerly known as the Music Corporation of America--as well as from his close association with the firm's top executives: Jules Stein, Lew Wasserman, and Taft Schreiber.
Everyone involved has greatly profited from this relationship. MCA helped to make its client, actor Ronald Reagan, a multimillionaire; and the favors that were returned by Reagan, the former president of the Screen Actors Guild (SAG) and the former governor of California, have helped to transform MCA into a billion-dollar empire and the most powerful force in the entertainment world today.
Reagan and his closest friends have portrayed and defended the president's business transactions with MCA, which date back to 1940, as being totally above suspicion. But there remain numerous unanswered questions and allegations about the relationship between Reagan and MCA. These doubts raise delicate issues that involve possible personal and political payoffs--as well as links to major Mafia figures, particularly Beverly Hills attorney Sidney Korshak, who has been described by federal investigators as the principal link between the legitimate business world and organized crime.
In 1962, the Antitrust Division of the U.S. Department of Justice tried to resolve some of these questions, but their secret investigation was settled out of court before the evidence could be presented. The results of the probe were never made public, and no one close to MCA was ever indicted. However, through the Freedom of Information Act, many of these documents have been recovered and are excerpted in this book.
These records show that Reagan, the president of SAG and an FBI informant against Hollywood communists, was the subject of a federal grand jury investigation whose focus was Reagan's possible role in a suspected conspiracy between MCA and the actors' union. According to Justice Department documents, government prosecutors had concluded that decisions made by SAG while under Reagan's leadership became "the central fact of MCA's whole rise to power."
Over the past two decades, Ronald Reagan has refused to answer any in-depth questions about how he amassed his personal wealth--currently estimated at more than $4 million. In 1976, when he first ran for president, and again in 1980 and 1984, Reagan managed to avoid any intense scrutiny of his finances. His financial ties to MCA have been virtually ignored, relegated to the category of ancient history.
Nor has Reagan ever been asked about his personal, financial, professional, or political relationship with Sidney Korshak--who has repeatedly appeared to be involved with Reagan and several of his top advisors throughout their careers.
MCA first began to receive national attention in 1946, when a federal court in Los Angeles ruled against the company for antitrust violations. At the time, MCA was simply a talent agency, booking bands in nightclubs and actors in motion pictures. In rendering his decision, the presiding judge declared that MCA held a virtual monopoly over the entertainment business. This antitrust suit, one of many legal actions filed against MCA over the past fifty years, involved a San Diego ballroom operator who had accused MCA of demanding exorbitant prices from him to book bands for his dances--charging him much more than competing ballrooms were paying for their musical acts. The jury found that MCA's practices had restrained trade in the band-booking business, and it awarded the ballroom owner a $55,000 judgment.
In deciding against MCA, the judge called the talent agency "the Octopus . . . with tentacles reaching out to all phases and grasping everything in show business." The image of "the Octopus" remained and became MCA's nickname in both the Hollywood trade and the press.
Years ago, a motion picture executive commented, "A studio can't exist for any time without some contact with MCA. I would say it's impossible to operate without them. Jack Warner [the head of Warner Brothers] tried it. He couldn't hold out for long."
Today, MCA is still "The Octopus," even though it is out of the talent agency business and now the owner of the largest motion picture and television production companies in the United States, Universal Pictures and Universal-Television. Headquartered in the stark, imposing, black-steel and glass tower at Universal City on the edge of California's San Fernando Valley, the giant, two-billion-dollar conglomerate has offices in major cities all over the world and owns businesses in book and music publishing, a major record company, transportation systems, home video marketing, recreation services, a savings and loan company, real estate, data processing, mail-order purchasing, retail store merchandising, and cable television.
But, far and away, MCA's major business is show business. "They own it," comedian Jerry Lewis once quipped.
During the 1950s, MCA's then-television subsidiary, Revue Productions, became the world's most successful producer and distributor of television film series. Each week Revue supplied the television networks with some forty hours of programming, including such top-rated shows as Wagon Train, Alfred Hitchcock Presents, The Jack Benny Show, Ozzie and Harriet, Dragnet, This Is Your Life, and Leave It to Beaver.
After MCA bought Universal Studios made plans to produce motion pictures as well as television programs, Revue became Universal-Television in 1962, creating such shows as Marcus Welby, M.D., Columbo, McMillan and Wife, Kojak, The Six-Million-Dollar Man, The Rockford Files, The Incredible Hulk, Magnum, P.I., and Miami Vice. Under MCA, Universal Pictures has won three Academy Awards for Best Picture for The Sting, The Deer Hunter, and Out of Africa. And the studio has also produced such financial blockbusters as Airport, American Graffiti, Jaws, E.T. the Extraterrestrial, On Golden Pond, and Back to the Future.
For years, MCA has been viewed by its clients, rivals, and the business press as the General Motors of Hollywood. Despite the company's vast power within the entertainment industry, most Americans have never heard of MCA. Since the company was founded in 1924, it has cultivated an air of mystery about itself. In an industry that thrives on publicity, MCA's executives have thrived on anonymity. The guiding credo at MCA has always been that publicity is for the clients, not the company.
It is a show business legend that one of the ways MCA agents tried to remain anonymous was to dress extremely conservatively--in black or dark-gray suits, white shirts, and dark, narrow ties. The top executives set the example, which everyone followed. MCA's management team was credited with bringing a correct, Ivy League dignity to a profession that had previously been characterized by plaid-jacketed, cigar-smoking agents who did nothing more than "peddle flesh." MCA believed agents should look, dress, and act like other businessmen and bankers. With the MCA dress code came the reputation for ruthless efficiency. During the 1950s, competitors derisively called MCA's aggressive agents "the black-suited Mafia."
The brains behind MCA was Jules Stein, a Chicago ophthalmologist who discovered that he could make more money booking bands. When Stein and an associate, Billy Goodheart, founded the Music Corporation of America in 1924, they began empire-building--with the help of James Petrillo, the head of the American Federation of Musicians, with whom MCA maintained a sweetheart labor-management relationship. According to Justice Department documents, Petrillo was paid off in return for favors to MCA. Taft Schreiber and Sonny Werblin were among the first two top MCA assistants, followed by Lew Wasserman, who was groomed as Stein's heir and was named president of the company in 1946; Stein then became MCA's chairman of the board.
The rise of MCA and its move to Hollywood paralleled the rise of the Chicago Mafia and its infiltration of the motion picture industry. While MCA was representing some of the top motion picture stars, Chicago mobsters took control of the International Alliance of Theatrical Stage Employees (IATSE), the major Hollywood labor union--through Willie Bioff, a small-time hood, who was supervised by Chicago mob lieutenant Johnny Rosselli. The studios made payoffs to the underworld for labor peace--and to keep their workers's wages and benefits to a minimum. But when the studios' payoff man was caught for evading federal income taxes, he plea-bargained with the government, implicating Bioff, but not the Mafia, in the extortion scheme. Bioff was indicted and convicted--and then turned state's evidence against his cohorts, who were also convicted and sent to prison.
The Chicago Mafia's role in Hollywood did not end with the convictions; it simply changed. Chicago's new liaison in the motion picture industry became attorney Sidney Korshak, who had represented Bioff. Charles Gioe, a top Chicago Mafia figure, had told Bioff that Korshak was "our man . . . any message he may deliver to you is a message from us."
A close friend of Stein's and Wasserman's, Korshak quickly became one of the most powerful influences in the entertainment industry and in California politics. One of his key political connections was another former Chicagoan, Paul Ziffren, who at one point was California's delegate to the National Democratic Committee. (He would not seek reelection after his ties to major organized crime figures were exposed by a national magazine.) Korshak also associated himself with top Republican leaders to hedge his bets--and always have friends in power.
In the late 1940s, Hollywood shifted its attention away from the Mafia's infiltration of the film industry to its infiltration by communists. Ronald Reagan, a young actor who was represented by Wasserman and MCA, was a star player during the investigation and hearings by the U.S. House Un-American Activities Committee (HUAC), serving as both an informant for the FBI and a friendly witness for the committee.
After his performance in the war against communism--which included support for IATSE, the union formerly controlled by Bioff that was still run by his same executive board--Reagan was rewarded by being elected as president of the Screen Actors Guild, serving for five consecutive one-year terms.
In 1952, during his fifth term, Reagan engineered a "blanket waiver," exempting MCA from SAG rules prohibiting a talent agency from also engaging in film production. Reagan's second wife, actress Nancy Davis, was also a member of the SAG board of directors at the time the MCA-SAG deal was made. MCA was the only such firm to have been granted such a favored status, giving it the ground floor in television production. It placed the company in a position where it could offer jobs to the actors it represented. Other talent agencies complained that this situation gave MCA an unfair advantage.
Soon after Reagan's tenure as SAG president ended, he found himself in serious financial trouble. With his film career on the skids, Reagan was saved by MCA with jobs in Las Vegas and on television. According to Justice Department documents, several government sources believed that the preferential treatment Reagan received from MCA was a payoff for services rendered while Reagan was the president of SAG.
In 1959, the SAG membership reelected Reagan as president of SAG for a sixth term to lead an impending strike against the studios--despite the fact that Reagan had been producing episodes for MCA/Revue's General Electric Theater. According to SAG's by-laws, producers, even if they were primarily actors, are disqualified from serving on the SAG executive board. Previous board members faced with similar situations had resigned; Reagan refused to do so.
Although MCA and a handful of smaller studios made an early, separate peace with SAG and continued production, the major motion picture companies held out, causing the strike to last six weeks. In the end, according to the president of IATSE, Reagan's final settlement with the big studios came with the help of Sidney Korshak--with whom Reagan had allegedly been associated. The 1960 contract was so unsatisfactory to the SAG membership it has since been called "The Great Giveaway." Reagan resigned in midterm soon after the strike.
After several abortive attempts to investigate MCA for antitrust violations, the federal government--upon the election of John Kennedy as president and the appointment of Robert Kennedy as attorney general--began a concentrated probe into MCA's business affairs. The government had evidence that MCA had engaged in numerous civil and criminal violations of law and empaneled a federal grand jury to hear the specifics of its charges, which included restraint of trade, conspiracy with SAG to monopolize talent and film program productions, extortion, discrimination, blacklisting, and the use of predatory business practices.
Among those called to testify was Ronald Reagan, who displayed a remarkable loss of memory while on the witness stand. Soon after, the federal income tax records of Reagan and his wife were subpoenaed for the years following the MCA-SAG blanket waiver.
In the midst of the grand jury's investigation, MCA purchased Universal Pictures and its parent company, Decca Records. The government immediately went to court, seeking to block MCA's takeover of the corporation. However, after lengthy negotiations between attorneys for the Justice Department's Antitrust Division and MCA, a consent decree was issued and the case was considered closed. The litigation forced MCA to choose whether it wished to be either a talent agency or a production company. Considering that its production efforts yielded nearly ten times more money than the talent agency, the decision was an easy one: MCA dissolved its talent agency.
Reagan has admitted that the government's breakup of MCA affected his political beliefs, inclining him toward a more conservative, antigovernment stance. Beginning with the Barry Goldwater presidential campaign in 1964 and then with his own bid for governor of California in 1966, Reagan's reactionary tone enhanced his image with other conservatives but nearly cost him his job with General Electric Theater. Among the guiding forces in the shaping of Reagan's political philosophy were MCA's Jules Stein and Taft Schreiber. According to law-enforcement authorities, several of Reagan's campaign financiers were close friends and associates of Sidney Korshak.
Stein and Schreiber--as well as Reagan's personal attorney, Los Angeles labor lawyer William French Smith--made several questionable transactions on Reagan's behalf, making him a multimillionaire overnight. Once governor, Reagan made executive decisions that were greatly beneficial to MCA and other corporations with motion picture studio interests.
The same year that Reagan was elected governor of California, Paul Laxalt was elected governor of Nevada. Both Laxalt and Reagan had been heavily involved in the Goldwater campaign. The two men, as governors of neighboring states, became close friends while the latter tried to "clean up" Nevada's image. However, during Laxalt's tenure, a scandal broke out in Las Vegas over a corporation that owned several casinos. Korshak was the major target of the federal investigation that followed. Although Laxalt has been linked with Korshak's associates and clients, he has denied any association with Korshak.
Although Laxalt chose not to seek a second term as governor, Reagan did and was reelected. Laxalt returned to practicing law and then opened a gambling casino in Nevada--which failed. Laxalt then ran for the U.S. Senate and won. While serving as a senator, Laxalt ran Reagan's campaigns for the presidency in 1976 and again in 1980. Laxalt then became general chairman of the Republican National Committee.
Meantime, Stein removed himself as MCA's chairman of the board and was replaced by Wasserman--who was succeeded by the head of Universal-Television, Sidney Sheinberg. MCA grew enormously under Wasserman and Sheinberg. Its only major failure was an attempt to mass-produce a home entertainment system-- consisting of video discs, containing motion pictures and other programs, which could be played on machines hooked up to standard television sets. However, MCA's idea was eclipsed by a similar product marketed by its rival RCA and another system developed by Sony, utilizing videocassettes that could do everything the MCA and RCA systems did as well as record television programs. Nevertheless, MCA continued to shatter box-office records with its blockbuster motion pictures while its television productions soared in the network ratings.
Wasserman also became increasingly involved in politics. He had supported President Jimmy Carter but then had a falling out with him after Reagan announced his 1980 candidacy. Korshak, a Democrat who had supported Reagan during his 1970 reelection bid for governor of California, ha been the target of a four-part series in June of 1976 in the New York Times, which described him as "a behind-the-scenes 'fixer' who has been instrumental in helping criminal elements gain power in union affairs and infiltrate the leisure and entertainment industries." Although Korshak was not on record as supporting either Carter or Reagan in 1980, his close associate, Democrat Paul Ziffren, became a law partner of William French Smith, who later became Reagan's attorney general.
During the presidential campaign, Reagan met privately with known associates of organized crime and appointed others to his personal campaign staff. Several of these people were later given high positions in the Reagan administration after his election. President Reagan talked tough about the organized crime problem in the United States, while surrounding himself with many who were closely linked to those who have created it.
To illustrate this web of power and manipulation, this story has been organized chronologically, minimizing whatever reader confusion might result from the proliferation of names, events, and dates contained in the narrative. The common thread through this story is the corporation MCA. In tracing its history, I have concentrated on the parallel and sometimes intertwining careers of Ronald Reagan, Lew Wasserman, and Sidney Korshak--and how these three men have affected political, business, and labor history in America.
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