Irwin Kramer:
"...
I am personally offended by Mr. Hirschfield's attack on me and his characterization of the exercise of my responsibility as a director and chairman of the audit commit
tee as 'a studied program of har
assment.' . . ."
Samuel Tedlow:
"...
I am allergic to veiled threats and ultimatums, and I doubt that they can contribute to the necessary atmosphere of good faith. Never before in the more than forty years that I have been in the business world have my motives or integrity ever been questioned.
I
find it exceedingly offensive and insulting to have it happen at this time. . . ."
Dan Lufkin: ". . . Sometimes I wish you'd just write/say what you feel rather than always posturing for legal effect, for the record, and in so doing weaving truths and half-truths together in ways to present misleading conclusions. Be that as it may, your letter was asinine—somewhere you've missed the point—the board is
very legitima
tely
concerned about the control/organizational st
ructure of Columbia. And I feel
correctly so. No one is trying to oust you—that's
why
it was expressly stated that the board wanted to give you a new contract and move down the road together, working for an improved Columbia. . . . What you are doing, Alan, and I am not even sur
e what it is that you are doing
leads to division and distrust—among management, among board members, among employees—and in my judgment—does severe damage to Columbia. Speaking frankly, as a friend, but also as a board member with serious public responsibility,
1
don't like it one bit."
Herbert Allen's reply naturally was the longest—an eight-page letter rebutting twenty-five passages in
Hirschfield
's letter that Herbert found objectionable. He concluded:
"...
I find it unfair, unwarranted, and most serious of all, untrue to imply that
1
have interfered in any way, shape, or form with Alan Hirschfield's ability to function as president. . . . Under (he circumstances, the complaint of interference is an outrage! . . . Certainly all the demeaning, insulting, untrue, and outrage
ous statements about the board—
and there are many in his letter—lead me
to believe that he really doe
s not wish to have us negotiate a new contract, and how under the circumstances can he expect the company to do so?"
Despite its profound anger, the board backed down and stopped short of firing
Hirschfield
. The sudden gathering of the executive group from two continents obviously had made a strong impression. The board also retreated from the Robert Stone issue, Herbert Allen acknowledging that the executives' opposition to Stone would "negate his effectiveness" in surveying the company's control systems. The directors voted instead to place the control
study in the hands of Price Waterhouse and Samuel Te
dlow, the least prominent member of the board.
Herbert Allen demanded, however, that Alan Hirschfield retract the letter he had sent to the board. Herbert insisted that the retraction be in writing and that it address specifically each allegation in the letter.
Hirschfield
,
feeling victorious overall, and very relieved at not having been fired, agreed to "compose something more temperate."
After the meeting was adjourned.
Hirschfield
was jolted from his state of relief almost immediately when he found himself momentarily alone in Leo Jaffe's office with Matty Rosenhaus. Having barely held his temper during the board meeting. Rosenhaus exploded with rage:
"You're a liar! A liar! A liar!" he screamed at
Hirschfield
, his face flushed, spittle spewing from his mouth.
"Matty, calm down," Hirschfield said. "I'm going to write another letter, but I have a right to be emotional like everyone else."
"Liar! Liar!" Rosenhaus screamed.
Hirschfield
walked down the hall to his own office where several of the executives awaited him.
"You asshole, why did you write that letter?" said Dan Melnick, who had not had a chance to confront
Hirschfield
since seeing the letter in Herbert Allen's office.
"Every word of it is true."
"Truth has nothing to do with this." Melnick declared. "It's truculent, and it could only inflame them."
"Why can't I be inflammatory once in a while. Why is only the board allowed to be inflammatory?"
"Alan, your
job
is at stake! We're trying to save your
job.
I'm schlepping back and forth from Europe to try to help save your
job.
Now you owe it to us to cooperate. If you rescind the letter you won't be fired. So rescind the fucking letter."
"They'll fire me anyway. They'll find some other excuse."
"Give them the benefit of the doubt. I understand the substantive points you're making and I'm not saying you're wrong. But this is no time to be trying to prove your cock is bigger than Herbert's. If taking back the letter can be a device for buying more time, and in the course of time, tempers and issues and egos can cool, then maybe we can get through it all."
"For legal reasons." said Hirschfield. "I have to declare myself formally, on the record, on certain issues, or they can claim that I'm implicitly going along with them. But I've agreed to submit a more temperate letter to replace the other one, and I intend to do it."
Later in the day, Herbert Allen and Matty Rosenhaus assured Robert Stone that he would be paid a fee for the study of Columbia's control system—$60,000—even though the board had decided, in the face of opposition by management, to have someone else conduct the study. Allen also said he would see that Stone was pa
id a salary, apart from the fee,
until he had a permanent job. Fay Vincent was put on hold.
The management group dispersed, gratified by their impact, but uneasy about the future. Dan Melnick was driven back to Kennedy, flew back to Paris, back to Nice, and drove his Mercedes back to St. Tropez. arriving about noon Thursday. He had been gone just over forty-eight hours.
"You are all insane." said Marie-France.
SIXTY-ONE
"You gotta retract that fuckin' letter," Marty Ransohoff said to Hirschfield early Thursday morning on the phone from California.
Having refused at the height of the
Begelman
dispute to carry any more messages between the combatants, Ransohoff had talked with Alan and Herbert only occasionally through the spring. As the crisis deepened through June, however, he was drawn back into the fray, and when he heard about Hirschfield's letter, his reaction was the same as Dan
Melnick
's: Whether the contents were true, false, or a combination, the letter was an unwise and unnecessary provocation.
"Alan, you gotta face up to the fact of who runs the company— who's got the tickets," Ransohoff declared. "You're nuthin' but a fuckin' employee, and if you don't face that soon, baby, you're gonna be in real trouble. I don't care how many bankers and Wall Street types are applauding you. They aren't even in this game. In reality, there
are
only two players in this game—you and the board. And the board runs the fuckin' company."
"I'm not totally without the ability to fight," Hirschfield said. "You should have seen what happened here yesterday."
"I know what happened there yesterday, and it's only temporary. That was no victory. All you won is a little time."
"That may be all I'll need. There are other people who own stock in this company, and who are capable o
f buying stock, besides Herbie
and Matty,"
Hirschfield
said.
"That's wishful thinking."
"We'll see
."
Ransohoff was right about at least one thing. Hirschfield was proud of his good reputation among the bankers and Wall Street analysts who monitored the entertainment industry. He still hoped that these people could be marshaled against the Columbia board of
directors—perhaps in a proxy fight. On the day of Ransohoff's call, Hirschfield kept a date with several of Wall Street's most prominent entertainment-in
dustry analysts—Harold Voge
l of Merrill Lynch; Lee Isgur of Paine, Webber, Mitchell Hutchins; and others. The analysts knew nothing of
Hirschfield
's letter to the board, the crisis over the weekend, and the confrontation on Wednesday. Hirschfield chose not to enlighten them or mention the possibility of a proxy fight. Instead, over lunch in a private dining room at Laurent, he stuck to generalities; Columbia's financial health and prospects couldn't be better.
Close Encounters
had nearly freed the company of debt and it likely would begin soon to pay cash dividends on its common stock for the first time since 1970.
California Suite
promised to be a very big picture; there had been problems with the ending of the film but they had been solved. As for
Hirschfield
's status at the company, the board of directors had committed itself to negotiating a new contract and he was hopeful that it would be completed soon.
Daily Variety
appeared Friday with a page-o
ne story which began: "Leo Jaffe
, chairman of Columbia Pictures Industries, said today that negotiations with president and chief exec Alan Hirschfield on a contract renewal
are
continuing 'in good faith.'
"Jaffe added that he hopes talks will be concluded 'shortly' and further hopes that Hirschfield will be retained. Asked why all of Columbia's lop divisional executives were
in New York on Wednesday, Jaffe
said that they were there for business meetings unrelated to Hirschfield's talks with the board."
Hirschfield
guessed—there was no way to be sure—that the Fourth of July gambit had bought him perhaps two months within which to maneuver. The dog days of summer had arrived. The board members and everybody else in the company would be spending extended periods of time out of t
he city on vacation. Even Herbie
Allen relaxed a little in the summer, and precipitous action seemed somewhat unlikely for the next several weeks.
Hirschfield
, therefore, gave himself until Labor Day to devise a solution.
The daily flow and range of telephone calls into
Hirschfield
's office
did
not abate just because the company was gripped by a crisis of control and management. Could
Hirschfield
gel for William Demare
st a
print of an old film in which De
marest had appeared? He would try. Would he be willing to speak to a group of institutional investors to be assembled by the
investment house of Bache Halsey
Stuart Shields in Boston on August 2? Yes. Could he arrange for his sister and her family to tour a working gold mine in Colorado? Yes. Would he be interested in purchasing some tax-exempt. New York State, A-rated bonds? No. Could he arrange to get two Barry Manilow tickets for a Wall Street friend? His secretary would take care of it.
On Monday, July 10, a report on Columbia Pictures Industries clattered out across the vast, international teletype network of Merrill Lynch. Pierce. Fenner & Smith. The nation's largest brokerage firm estimated that Columbia's earnings for the fiscal year just ended, which would not be computed for a month or two yet, had been about S5.50 per share of common stock, up more than 300 per
cent from the previous year. "The company has begun its fiscal
1979
year with a major film hit,
The
Cheap Detective,
comparable in profitability to last summer's
The Deep
and
in our opinion, prospects seem favorable for continued long-term earnings growth in feature-film production, television syndication, recorded music, pin-ball machines, and TV commercial production," wrote Harold Vogel.
"We believe that there is now a somewhat heightened probability of renewal of [Alan
Hirschfield
's] contract, which has been in some doubt due to strong differences of opinion with significant stockholders on the board of directors. Such differences have arisen as a result of the well-publicized
Begelman
peculation.
...
If there is no renewal, we believe that a question of management stability, and ability to plan long-range growth strategy, would undoubtedly arise, thereby creating investor uncertainty and potential for pressure on the stock."