United Artists, Volume 1, 1919–1950: The Company Built by the Stars

12. The End and the Beginning of UA: 1949-

12 The End and the Beginning of UA [1949-] THE BRINK OF DISASTER Something had to be done-and quickly-to solve the predicament of the United Artists Corporation. A four-member committee of the board was asked to bring in recommendations for the owners to consider. At a stockholders ' meeting early in 1949, it set out these options: (1) that the stockholders appoint an underwriter to sell treasury stock in an amount sufficient to guarantee proper working capital; or (2) that United Artists merge with one of the existing motion picture companies; or (3) that a person be given full authority to replace the present management with people who have the confidence of the banks and/or producers; or (4) that the stockholders guarantee an adequate supply of working capital. Rather than take steps to implement any of these recommendations, Chaplin and Pickford decided merely to exchange options to purchase one another's stock, which was, as everyone knew, a delaying action. After ninety days during which little of constructive value took place, the options lapsed, in June, 1949. So far that year the company had lost $400,000. Sears reported that "as of June 10, 1949, there are but four additional pictures completed and undelivered, and only two pictures in production. Beyond this our prospects for future production are highly dubious. The corporation's working capital is non-existent and its bank balances are perilously low." 1 Sears' closing advice was to dissolve United Artists if none of the committee's recommendations were implemented within sixty days. By now, the trade papers were tossing out rumor after rumor of a sellout , which demoralized management and thoroughly confused VA's remaining producers. Actually, one deal was nearly consummated when the Nasser brothers almost mustered $5.4 million to buyout the two partners. Selmer Chalif, Miss Pickford's nephew, who was employed by the company , told Sears that Miss Pickford was "very depressed about the situa- [ 230 ] The End and the Beginning: 1949- [ 231 Mary Pickford and husband Buddy Rogers (1949) 232 ] U NIT E DAR TIS T S tion and from what she has told me about her meeting with Chaplin I think he was badly hit by the collapse of the deal."2 Other offers were made, studied, and ultimately rejected. In August, Chalif reported to the home office that "I've had several conversations with Madam and she seems to still be playing around with mysterious plans. She now says there are two situations that might mean something but she always winds up with a little touch of discouragement. This, of course, makes me feel that she is simply going through the various possibilities . . . which were deemed impractical. I don't know what her ultimate goal is . . . but I do have a distinct feeling that both she and Chaplin are waiting for a miracle."3 McNUTT'S ATTEMPT TO SALVAGE UA United Artists' producers and the bankers were not willing to wait for divine intervention, however, which meant that the company had to look to its assets to satisfy the demands of its creditors. The first to go was the $1 million life insurance policy the company had taken out on Joe Schenck. The cash value for the policy was swallowed up by the $200,000 deficit in 1949. To raise additional working capital for the year ahead, the board out of desperation wanted to make an offer of the company's treasury stock. But to its surprise, the owners had negotiated a deal on their own. On July 11, 1950, they announced that a new management group headed by Paul V. McNutt would take over the management of the company. McNutt, former governor of Indiana, United States High Commissioner to the Philippines, and American Legion Commander, was named chairman of the board; Frank L. McNamee, Philadelphia lawyer, took Sears' job as president; Miss Pickford became vice president; and Max Kravetz, movie promoter, confidant to Miss Pickford, and the intermediary in the negotiations, came in as secretary. In essence, Pickford and Chaplin brought in the McNutt group to operate the company until July, 1952, during which time it could exercise an option to purchase 90 per cent of their stock for $5.4 million. The deal had been negotiated over a ten-month period, making it one of Hollywood's best-kept secrets. McNutt inherited a deficit of $465,000. Neither instituting drastic economies nor...