Dusk at Santa Monica

(See Cover)

One of the many little-known facts about William Randolph Hearst's fantastically tangled affairs is that his rival Los Angeles publisher, Harry Chandler of the Times, holds a mortgage on San Simeon. Last month in Los Angeles, rather than embarrass his strapped debtor, Mr. Chandler agreed to extend the mortgage. But it was not Mr. Hearst who made the request. Mr. Hearst was not. in Los Angeles or San Simeon.

Last fortnight in Chicago, Joseph Vincent Connolly, general manager of all Hearstpapers, and half-a-dozen other Hearst bigwigs were frantically trying to do something about the gasping Herald & Examiner, struck by the Newspaper Guild and thinned by advertisers. The Herex is a favorite paper of Mr. Hearst's. But Mr. Hearst was not in Chicago.

Last week in Manhattan, the directors of Hearst Consolidated Publications Inc. faced their gravest crisis since the company was formed in 1930. Hearst Consolidated (which controls 13 of the 20 Hearstpapers, plus the American Weekly), had passed three consecutive quarterly dividends on its 7% Class A (preferred) stock. If it passed the fourth, due March 15, control of the most valuable Hearst newspaper properties could go out of the hands of Hearstmen and into the hands of some 50,000 small stockholders, who put up $50,000,000 for what Mr. Hearst assured them nine years ago was "an ultra-conservative investment." With dividends $2,625,000 in arrears and $875,000 due this time, and with a committee representing 30,000 shares waiting to pounce on the company, the directors needed somebody to tell them what to do. Mr. Hearst is President of Hearst Consolidated. But Mr. Hearst was not in Manhattan.

Mr. Hearst was with Marion Davies, at her Santa Monica Beach house. The Hearst who mortgaged San Simeon to get $600,000 for spending money has for the past two years been employed as editorial director of his own newspapers, and last year his salary from the Hearst Consolidated papers was cut from $500,000 to $100,000. No longer ruler of the empire he built, Hearst has only two desires concerning it: 1) to have some of it survive him; 2) to keep his job. Nearing 76, the man who was the most spectacular publisher and spendthrift of his time wants to die a newspaperman.

The man responsible for wangling a new mortgage out of Harry Chandler, sending Joe Connolly to Chicago and telling the .Consolidated directors what to do, the man whose tough job it is to hold together what is left of the Hearst empire, is a small, dry Manhattan lawyer named Clarence John Shearn. Though he stepped down from the bench 20 years ago, he still likes to be called Judge Shearn. When Hearst was a liberal crusader in the early 19003 Clarence Shearn was his lawyer. His last big job before he became Hearst's boss 21 months ago was as trial counsel for the Chase National Bank in a series of stockholders' suits (TIME, April 26, 1937), and in handling Mr. Hearst's financial affairs he has worked in close harmony with the Chase, Hearst's largest banking creditor.

Hearst Consolidated and almost everything else Hearst owns are controlled by American Newspapers Inc., top holding company of the bewildering Hearst corporate hierarchy. Mr. Hearst owns 95% of its common stock, but Judge Shearn is his sole voting trustee. As trustee he has irrevocable control over all Hearst enterprises--provided he can keep the Consolidated preferred stockholders happy--until 1947, when Hearst will be 84. Nobody, not even Hearst, knows if Hearst will live that long, and so the trusteeship is a race against death, when the Government may demand up to 20% in inheritance taxes and creditors can no longer be stalled. Even more, it is a race against dwindling confidence. Judge Shearn has abandoned a large part of the Hearst empire, and well he knows how ephemeral is the faith that holds the rest of it together. To restore confidence in a name that for half a century has stood for the exploitation of human gullibility to gratify one man's caprice is a job to make anyone's hair fall out. Judge Shearn was bald when he took the job.

For 17 years millions of U. S. citizens, to whom Hearst has been an institution as well as a legendary figure, have wondered what would happen to the institution when William Randolph Hearst was no more. Of late they have ceased to wonder, have realized that the institution has already started breaking up before their eyes. Since Mr. Hearst abdicated two years ago, six Hearst newspapers, one news service and one magazine have been sold or scrapped; Hearst radio stations cut from ten to three; rare Hearst treasures have been knocked down for $708,846; the value of all Hearst properties, estimated (too generously) at $200.000,000 in 1935, reduced to a fraction of that figure.-Just how far the public thinks the Hearst empire has progressed toward dissolution is neatly summed up in this lyric currently sung on Broadway by Funnyman Jimmy Durante:

Mr. Hearst tries to sell me a paper,

But dat don't fit in wid my plan;

I said I will buy a paper from you

If you buy a pencil from me--

I'm just a self-made man/-

Decline & Fall. Hearst's inevitable dissolution was inherent in his career; now that that career is ending, its turning point stands out. In 1922 Hearst was at his zenith as a publisher. He owned 20 newspapers in 13 of the largest U. S. cities, with Universal Service and INS to flash them worldwide news, King Features Syndicate to dish out comics and boilerplate philosophy, the scandalsheet American Weekly to boost Sunday circulation into the multimillions. He had a string of magazines, a newsreel, a motion-picture company. He had the world's highest paid stable of writers and editors. And he made more money than any other publisher before or since.

But his consuming personal ambition had been thwarted. In New York he had campaigned several times in vain to be elected mayor or governor; his papers could make or break small officials, but they never got Hearst farther than two unspectacular terms in the House. In 1922 Al Smith refused to run on the State Democratic ticket with him and at last Hearst knew he would never be President. And so after 27 years in the East he moved back to California and began to surround himself with a grandeur that no other private citizen has ever matched in U. S. history.

He spent money as few princes ever dared to do. He ensconced himself in San Simeon with a zoo, bought St. Donat's castle in Wales, built an elaborate Hollywood publicity machine to glorify Marion Davies, indulged himself insatiably in the purchase of art treasures until he had spent $35,000,000 for what could have been bought for about $15,000,000. For money he used the income of his papers (of which he bought six more), the profits of the mines he had inherited from his prospector father, and a pocketful of promissory notes. Always a worry to his money men, of whom he had half a dozen before he got Judge Shearn, he lost all reason in his spending. By 1924 he was strapped.

That year he began borrowing heavily on his newspapers and real estate, carelessly scrawling his signature as further security for the debts. By 1930 banks had floated $60,000,000 worth of bonds and mortgages personally guaranteed by Hearst. Meanwhile the stockmarket had crashed and Hearst was strapped again.

To cut down his bonded indebtedness he floated stock. In 1930, when San Francisco Lawyer John Francis Neylan was his counsel, Hearst lumped together his six West Coast papers (on which he had previously borrowed $20,000,000), four other profitable newspapers and the superprofitable American Weekly into Hearst Consolidated Publications Inc. He valued "circulation, press franchises, libraries, etc." at $75,000,000, and with a barrage of publicity denouncing phony stock schemes sold $50,000,000 worth of preferred stock to the public.

For seven and a half years the preferred stockholders got their 7% and Hearst got a great deal more. He got over $12,000,000 in common stock dividends. Publicly-owned Hearst Consolidated newspapers paid $2,000,000 a year to King Features, which was owned by Mr. Hearst's privately owned American Newspapers Inc. And in 1935 Hearst sold his Baltimore, Atlanta and San Antonio papers to Hearst Consolidated for $8,000,000 (of which $6,000,000 was for the familiar item of "circulation, press franchises, reference libraries, etc.") in spite of the fact that these same papers had lost $550,000 in 1934. But other Hearstpapers were losing even more (the New York American lost around $1,000,000 a year), and real-estate values had toppled. Hearst was hopelessly mired in extravagance and debt and was squirming to free himself.

Once more he hoped the public might extricate him. In March 1937 Hearst Publications Inc. (a subsidiary of Hearst Consolidated) and Hearst Magazines Inc. filed registration statements with SEC for $35,500,000 of debentures. But SEC never got a chance to pass on the issues. New York Civil Service Commissioner Paul Kern and a Manhattan accountant named Bernard Reis filed a brief objecting to the registration statements as "tending to mislead the public." Hearst kept deferring the effective date of the issues. Hounded by creditors, in June 1937 he took a train to New York and went to see Judge Shearn. This time Mr. Hearst was more than strapped. This time Hearst was desperate.

Judge Shearn was not only an old friend of Hearst's; he was close to a good source of credit, the Chase, and Hearst had to have cash. He had several long talks with his old friend and on June 23 Mr. Hearst's beloved American folded. On June 27 of 1937 Judge Shearn became indisputable ruler of almost everything that is Hearst's.

The Regency. Trustee Shearn is in almost every physical respect the opposite of shaggy, elephantine Publisher Hearst. He promptly set out to prove himself the opposite, also, in business management. He withdrew the proposed debenture issues, got enough bank credit to stave off the crisis, told Hearst he would have to live on whatever allowance could be spared from, his creditors. He gathered around him a staff of top-flight Hearst executives headed by the Chief's old favorite, Thomas J. White, and consisting of Harry M. Bitner, general manager of newspapers; Richard E. Berlin, publisher of magazines; Joseph V. Connolly, head of features, wire service and radio; Martin F. Huberth, real-estate adviser; Frej E. Hagelberg, auditor; and W. R. Hearst Jr., ablest of the sons, to represent the family.

In rapid succession Executive Bitner and Hearst himself junked papers in Rochester and Omaha, leased the Washington Times to Cissie Patterson (who bought both Times and Herald outright this year), sold Hearst's half-interest in the Pittsburgh Post-Gazette, combined the staffs of morning and evening papers in Milwaukee, folded Universal Service into International News, tabbed the Boston American. This plugged a drainage of nearly $5,000,000 a year. Executives White and Hearst Jr. began liquidating the Hearst art treasures. Executive Connolly got rid of seven radio stations for $1,215,000. Executive Huberth told Hearst real-estate bondholders they could reduce interest charges or take the buildings. The bondholders took the Ritz Tower, where Mr. Hearst lives when he is in Manhattan.

After liquidating much that was unprofitable, Judge Shearn tried to squeeze more profit out of paying properties, to turn a profit with those that were doubtful. But the troubles that beset all publishers in 1938 nearly ruined Hearst. Newsprint went from $42.50 to $50 a ton, upping the Hearstpapers' bill by $5,000,000. Advertising revenue dropped 25%, a staggering $10,000,000 a year. Circulation fell off. In June 1938 Hearst Consolidated passed its dividend. In July the first Hearst subregency fell.

Down went the stars of Executives White and Bitner, up went the star of Joe Connolly. Tom White kept his title but lost his authority, Harry Bitner lost both. Cherubic Joe Connolly became general manager of all Hearst newspapers, responsible directly to Judge Shearn. Photographed looking up at tall Joe Connolly at a Gridiron Club dinner (see cut, p. 49) stubby Clarence Shearn cracked: "That's just the way it is. I'm looking up and saying: 'Save us, Joe, save us!' "

Saved? Joe Connolly's first act was to pile into Chicago, weakest spot in the empire, and turn the Herex into a tabloid. Next he reshuffled publishers in typical Hearst fashion, told them to cut out expensive promotion schemes, raise circulation rates where they could, make each paper pay its own way. To the publishers he granted more autonomy than the Hearst-papers had ever known. For the first time in history a Hearst publisher was conceded to have a head. Blasts from San Simeon began to be disregarded. This year, when France set up a garrison on the Somaliland-Eritrea border, Hearst sent out orders that this was a WARLIKE act against

Italy. Not a paper played the story that way.

Having once threatened to fire Mussolini (who used to write for Hearst) unless he released a jailed correspondent, Joe Connolly was perfectly capable of explaining such lese-majeste to The Chief. And Hearst, thoroughly frightened by the condition he got himself in, is no longer the headstrong, unreasonable publisher he was. Since his papers began to go, he has worked doggedly to help save those that are left. One thing Hearst knows more about than any of the 25,000 other people who work for Hearst is his own peculiar brand of journalism.

The Hearstpapers' 1938 losses cost Hearst consolidated preferred stockholders $2,625,000 in dividends, but the company managed to pay off $1,600,000 of its funded debt and $600,000 in back taxes. As executive vice president of Hearst Consolidated, Joe Connolly faced a problem last week as the dividend date approached. He had the money to pay this time, but the first principle of the Hearst regency, anxious to preserve its cash, is never to pay anybody as long as you can stall. Rumblings were heard from the frontiers of Hearst. John Francis Neylan had gone east from San Francisco, presumably to protect the stockholders of the company whose birth he attended. Four stockholders' suits were pending. And the stockholders' committee, which included Hearst-baiting Author George Seldes (Lords of the Press), was threatening to vote its 30,000 proxies for a new set of directors if the dividend was passed. Joe Connolly called his directors together. They decided to pay the dividend.

The Empire that Clarence Shearn rules is solvent today but he has kept it from collapsing only by the most drastic retrenchment. Most Hearst enterprises make money; all together they would be highly profitable for Hearst if Mr. Hearst had not loaded them with debt. Selling part of an empire to get money to save the rest is a process that is hard to stop, and nobody knows this better than Judge Shearn.

Burdened as Hearst's properties are with debt, Mr. Hearst still owns three radio stations, nine U. S. magazines and three in England, 20 daily newspapers, 15 Sunday papers, American Weekly, King Features, INS, half a newsreel and a motion-picture company.

Two of the three radio stations make money. So do the magazines as a whole, although Pictorial Review had to fold this year and buxom Good Housekeeping and smart Harper's Bazaar are the only real moneymakers of the U. S. group. The British magazines are a nuisance. Metrotone News earns a profit.

American Weekly, sold to non-Hearst papers for the first time last year, has a circulation of 6.700.000, makes more money for Hearst than anything else Hearst owns. Not only do the Hearstpapers guarantee 5.000.000 of its circulation, but it has held Hearst's Sunday circulation steady while daily circulation declined. Hearstpapers also contribute much of the income of King Features, which prospers, and of INS, which gets along.

Hearst has one close-knit group of generally profitable newspapers: the six on the Pacific Coast. The Los Angeles Herald & Express makes $1,000,000 a year, the Examiner $500.000. The San Francisco Examiner is another $1,000,000 paper. The Call-Bulletin and Oakland's Post-Enquirer earn far less, but stand to get a boost from the fair this year. The Seattle Post-Intelligencer, once the weak sister of the Coast, has been pulling out of the red under Roosevelt Son-in-Law John Boettiger, will make enough in 1939 to offset 1938's losses. These papers will probably survive as a string long after Hearst is gone.

Six other scattered Hearstpapers pay their way and appear safe for Hearst for a while: Detroit Times, San Antonio Light, Albany Times-Union, Syracuse Journal (and Sunday American), Boston Record (and Sunday Advertiser), New York Mirror.

These papers are worries: the N. Y. Journal-American, Boston American,^ Baltimore News-Post (Sunday American), Pittsburgh Sun-Telegraph.

These papers are headaches: Milwaukee News-Sentinel, Atlanta Georgian (Sunday American), Chicago American (which lost $500,000 last year) and Herald & Examiner. Badgered by the Guild strike (which, however, appeared near settlement last week), the Herex has lost $500,000 in advertising since December. For years the Herex has been able to pay interest on its bonds only because it collects $750,000 a year rent from the American. But its Sunday edition sells 1,000,000 American Weeklies. Joe Connolly is working desperately to save Chicago for Hearst, and his success or failure may determine whether Hearst remains a national publisher of newspapers.

Judge Shearn may have to sell something else. He would undoubtedly like to sell a few more papers (though he denies it). But with total daily circulation of the Hearstpapers down from 5,153,676 in 1936 to 4,368,086 last year (Sunday circulation was up slightly to 6,714,430), the retrenchment of Hearst is almost over and Trustee Shearn's main task for a good many years will be to pay bills, reduce bonded indebtedness and get Hearst's real estate out of hock. Whether he can do that depends on readers, advertisers and creditors. Readers are fickle and advertisers scary, but the banks and newsprint manufacturers who are Hearst's largest creditors cannot afford to let Hearst fall apart yet.

The Great Hearst. Hearst's career spanned exactly half a century, and more than any other career in history it proved the power and privileges of a free press. No other press lord ever wielded his power with less sense of responsibility; no other press ever matched the Hearst press for flamboyance, perversity and incitement of mass hysteria. Hearst never believed in anything much, not even Hearst, and his appeal was not to men's minds but to those infantile emotions which he never conquered in himself: arrogance, hatred, frustration, fear. But while Hearst dragged his readers vicariously through every depravity from jingoism to sex murder, he also helped to perpetuate a nation's songs, its humor and its heroes.

It was in 1887 that Hearst took over his father's San Francisco Examiner, published Casey at the Bat. Nine years later he was in Manhattan, buying a stable of Pulitzer writers for his Journal, whooping it up for Bryan and the Cubans. A few months before Richard Harding Davis started sending his naming dispatches from Havana, Hearst got a press that would print 16 pages in color, and the same generation that grew up to worship Dewey and Hobson and T. R., and went around whistling There'll Be a Hot Time in the Old Town Tonight, got many a laugh out of the Yellow Kid, Happy Hooligan and the Katzenjammer Kids.

By 1908 Hearst had newspapers in New York, Boston, Chicago, Los Angeles and San Francisco, had started buying magazines, and was easily No. i U. S. publisher. That was the year he printed the famed Standard Oil letters revealing bribery of U. S. Senators, high point in Hearst's career as a liberal muckraker.

In the War decade he became more powerful, lost his fervor for reform. He would embrace any policy to enhance his prestige, but his prestige slowly waned. He was bitterly disappointed when his efforts to keep the U. S. from siding with the Allies proved unpopular with the public.

In the 1920s his policies grew ridiculous. He published documents charging bribery of Senators by Mexico, saw them exposed as forgeries. He was expelled from France after engineering the theft of a secret Anglo-French naval pact. He established himself as No. i exponent of the Red Scare.

He had a brief return to power in 1932 when he swung the Roosevelt-Garner nomination. But Roosevelt would have none of Hearst, so Hearst turned to snarl at the "Raw Deal" and even boosted his old enemy, Al Smith, for President. Hearst staked his "reputation as a prophet" on Landon's election in 1936. When Roosevelt was reelected he tried to do a turnabout, but nobody cared any more.

In 50 years Hearst made a thousand city room legends, hired & fired many thousands of men. He spent fortunes for trained seals, but he never gave a leg man a decent wage if he could help it. Most people hated him and he had to take his name off Metrotone News, but the few who are still close to Hearst love him with Irish sentimentality. Paul Y. Anderson called him "a horse-faced man with a squeaky

voice."

Four years ago Hearst said of himselt:

"At my time of life you just sit here and people bring you final decisions to make."

But for nearly two years he has just sat there, no longer absolute boss even of his papers' policies. He still owns fabulous Wyntoon and San Simeon (subject to Mr. Chandler's mortgage), still dines celebrities from silver plate in medieval splendor (on his allowance from Judge Shearn); but at 75 the bad boy of U. S. journalism is just a hired editorial writer who has taken a salary cut.

From the lead editorial in Bernarr Macfadden's Liberty:

INTELLIGENCE!!

FOR GOD'S SAKE

GIVE US INTELLIGENCE!

* Last week Hearst Consolidated Class A stock, par value $25, was selling for $6.25; Hearst-Brisbane (real estate) $1,000 bonds for $535.

/-Reproduced by permission of the copyright owner, Chappell & Co. Inc.

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