Saturday, 06 December 2003 14:50

Capital Cities Before it Bought ABC

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Jim DiEugenio writes about the history of Capital Cities during its run up to the purchase of the ABC television network.

Thomas E. Dewey

The communications company Capital Cities was born in 1954 with the purchase by CEO Frank Smith of a UHF TV channel and a small radio station in Albany, New York. And until it purchased ABC in 1985, Cap Cities repeated that paradigm over and over: it bought stations that were performing below par due to management ineptitude and managed to change the management style by keeping operating and labor costs low and turn the station into a profitable asset.

Another important factor in Cap Cities growth chart --- as Andy Boehm points out --- was its ties to government insiders and the information they could provide. For instance, when Smith bought WROW in Albany, he realized that the FCC was about to approve a VHF station in the area, the frequency to which he later switched WROW to, thus making it much more profitable and attractive to investors. Smith's most famous partner at the time was Lowell Thomas, the famous journalistic figure who the Arthur Kennedy character in Lawrence of Arabia is modeled upon. Thomas was a member, with William Casey, in the Bohemian Grove, a kind of Trilateral Commission of the West Coast. He was also a member of the Creel Committee, the infamous propaganda camp set up by President Wilson to psychologically motivate the U.S. to take part in World War I. Meanwhile, Frank Smith, while in graduate school, had been a friend and classmate of Allen Dulles. Dulles first became the father of the Central Intelligence Agency, and then it's Director until he was fired by President Kennedy over the Bay of Pigs fiasco. As Boehm also points out, Dulles was very friendly with another investor in Cap Cities, Thomas Dewey, to the point of serving as a manager of his presidential campaign in 1948 (both Earl Warren and McGeorge Bundy worked with Dulles on that campaign.)

There was another important intelligence-related partner with Capital Cities in 1954, namely William Casey. Casey's legal advice on how to reply minimally to tax, investment and FCC laws allowed the company to proceed quickly with its acquisitions strategy. One of the milestones in Capital Cities growth was securing the rights to broadcast the Adolf Eichmann trial, a gem of an acquisition that must have been aided by Casey or Dulles, or both. Even though Cap Cities owned only a small number of stations it was chosen over many larger and more appropriate networks to become the world producer and broadcaster of this event by the government of Israel. The incredible publicity given to the trial of the former Nazi gave the young company credibility and recognition.

Two future leaders of Capital Cities, Thomas Murphy and Dan Burke, furthered the original paradigm of Frank Smith: a decentralized management plan and connections in high places. In the former regard, this means a bottom to top organizational plan which stresses cost-cutting and decision making at a lower level and rewards employees for achieving those ends. Murphy once said that his company, "doesn't like to have more personnel than it needs. Too many people with too little to do lead to office politicking and other behavior that's destructive for an organization." Consequently, Cap Cities developed a 'lean and mean' corporate image. This meant that performance was tied to rewards in stocks and bonuses. The performance of the company was very good to its executives. In 1983, Murphy made six million dollars and Burke 4.3 million. An easy way to achieve low-cost programming --- and increased profits --- is to concentrate on local cop stories and shoot-em-ups. Cap Cities pioneered the genre.

To ensure that Capital Cities would acquire more stations, the company almost never paid a dividend to stockholders. Instead it plowed all profits into more purchases. By 1970, Cap Cities had become a mini-major, owning VHF stations in Philadelphia, New Haven and Fresno. When it reached the then limit on the number of stations it held, it began to sell its stations in smaller markets. It also began to expand its holdings into print media through the purchase of Fairchild Publications. By 1977, Cap Cities also had bought a few important newspaper holdings e.g. The Fort Worth Star Telegram and The Kansas City Star. It also bought into cable companies in the seventies. And through these latter two acquisitions, it began another popular modern practice: cross-platforming of the news. That is, having its print companies provide copy for its cable news outlets. This of course rapidly accelerated to the point that today many stories, across many media platforms --- cable news, newspapers, Internet --- differ very little in content and phrasing.

One of the most revealing acquisitions of Capital Cities was its purchase of The Wilkes Barre Times Leader in 1978. This episode in the company's history is described in detail in the book by Thomas J. Keil entitled On Strike! Capital Cities and the Wilkes Barre Newspaper Unions. Like many major media companies, although Cap Cities had little difficulty paying executives like Burke and Murphy millions, it repeatedly denied union requests for higher wages, benefits, and better working conditions. Yet, it managed to keep negative publicity of these denials to a minimum. Except in the Wilkes Barre case.

As Keil writes, the newspaper had to "control costs, increase productivity, improve the quality of the paper, and expand its market" in order to justify the Cap Cities expenditure. But the union in this small Pennsylvania town saw a secret agenda at work. They felt that by moving the paper's editorial policy and news agenda in a more conservative direction, Cap Cities was attempting to lower wages and working conditions in the entire area, which was heavily unionized. (One of the company's demands was for more "objective" journalistic practices.) Since the area had been historically involved in serious industrial strikes in coal and steel, it recognized a past corporate parallel in this case. From the conflict that followed, they seem to have been correct.

During the contract struggle, Cap Cities hired security guards, used surveillance cameras, tried to get local authorities involved on their side, and built a 12 foot high fence around the newspaper building. Predictably, it hired the infamous Wackenhut Corporation as its security and investigative arm. (Wackenhut is so tied into the national security state that it is sometimes called The CIA's CIA.) Casey played a large role in this conflict by serving as the Cap Cities counsel and the former counsel for Wackenhut. Therefore Casey was probably key in implementing one of the more controversial practices Wackenhut used leading up to the strike: the employment of virtually all African-American guards over the nearly all-white union ranks. This, of course, tended to foment racial tensions and exacerbate labor-management problems. In addition, Cap Cities wanted to hire part-time workers and install a merit system, thereby weakening the hold the union had in the workplace and increasing their own.

When the strike escalated, and the inevitable violence broke out, Cap Cities grew angry that the local authorities did not help it end the strike by interceding on their side. So they used the newspaper to print a story that there was an FBI investigation pending of the local police for its failure to protect the replacement workers the company had hired. (Wackenhut employed many former employees of the Bureau.) The FBI looked into the matter yet ultimately took no action on the printed charge.

When Keil interviewed some executives on the scene they admitted that the company had badly mishandled the strike. They learned a valuable lesson though. Namely to use more clandestine surveillance in order to remove popular union leaders before the strike reached a crisis stage. This, of course, is what the CIA does for major American corporations abroad.

Last modified on Sunday, 02 October 2016 18:56
James DiEugenio

One of the most respected researchers and writers on the political assassinations of the 1960s, Jim DiEugenio is the author of two books, Destiny Betrayed (1992/2012) and The JFK Assassination: The Evidence Today (2018), co-author of The Assassinations, and co-edited Probe Magazine (1993-2000).   See "About Us" for a fuller bio.

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