Book Review of Indecent Exposure: A True Story of Hollywood and Wall Street by David McClintick

This Book Review of Indecent Exposure: A True Story of Hollywood and Wall Street by David McClintick is brought to you from Dane Petersen from the Titans of Investing.

Genre: Humor & Entertainment
Author: David McClintick
Title: Indecent Exposure: A True Story of Hollywood and Wall Street (Buy the Book)

Summary

Originally published in 1982, David McClintick’s Indecent Exposure recounts the story of the 1977 Columbia Pictures embezzlement scandal that “shook Hollywood and rattled Wall Street.”

Through complete transcripts of sworn testimonies and hundreds of hours of interviews with people with firsthand knowledge of the events, McClintick was able to piece together and bring to life the events leading up to and following one of the largest scandals in Hollywood history.

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After actor Cliff Robertson discovered a false record on his IRS Form 1099, the trail of evidence led to Columbia Picture’s President, David Begelman. In a series of discoveries, Columbia’s leadership learned of four embezzlements.

Begelman had forged a series of checks and had no explanation for his actions. When he was caught, the difference of opinions on how to proceed varied widely between the team of executives and the Board of Directors. The Board, led by Herbert Allen and Matthew Rosenhaus, favored giving Begelman another chance while CEO Alan Hirschfield and his team were set on firing him.

The point of McClintick’s writing extends well beyond reporting embezzlement. McClintick uses this story to emphasize the power struggle that was being waged between the executives and Board of Directors. Both sides continually deceived the other, in hopes of getting the upper hand.

The secrets, lies, and greed threatened the health of the recently recovered company. Although the focus was on Columbia’s leadership, the power struggle extended to the various media outlets as they fabricated events to beat their competitors to the next “breakthrough” in the story.

By the mid eighties, the turmoil surrounding these events had completely changed the landscape at Columbia Pictures. Leave it to Hollywood to take a small check forgery and turn it in to a thrilling series of events. While Hirschfield tried to do what he felt was right for the Company, he was unable to exert his leadership because of the influence of the Board. But it was never about whether Begelman stayed or went. It was only about the struggle for power.

Since this book was originally written in 1982 and then republished in 2002, the author was able to write an afterword summarizing the events following the late 1970’s story. David Begelman continued to lie and misappropriate money for the rest of his life.

While working with Gladden Productions, he was stealing millions of dollars. When the debt had grown to uncontrollable amounts, David Begelman took his own life while alone in a Los Angeles hotel room. He died owing $2 million to bookies and gangsters, in addition to the money he owed his business clients.

Hollywood’s job is to create a false environment for the public’s enjoyment. Unfortunately, it seems that some of the business people directly involved fall victim to it and lose sight of what is right in reality.

INTRODUCTION

Originally published in 1982, David McClintick’s Indecent Exposure recounts the story of the 1977 Columbia Pictures embezzlement scandal that “shook Hollywood and rattled Wall Street.”

Through complete transcripts of sworn testimonies and hundreds of hours of interviews with people with firsthand knowledge of the events, McClintick was able to piece together and bring to life the events leading up to and following one of the largest scandals in Hollywood history.

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What seemed at the time to be a simple check forgery by Columbia Picture’s head, David Begelman, turned out to be the “tip of the iceberg,” as the discovery exposed other scandals and shed light on the greedy, arrogant and ruthless nature of Hollywood’s most powerful.

When the book was re-published in 2002, McClintick added the final chapter to the story that followed Begelman’s post Columbia career of lies and fraud to his last hours in a Hollywood hotel room in 1995.

The point of McClintick’s writing extends well beyond reporting embezzlement.

McClintick uses this story to emphasize the power struggle that was being waged between the executives and Board of Directors. Both sides continually deceived the other, in hopes of getting the upper hand. The secrets, lies, and greed threatened the health of the recently recovered company.

Although the focus was on Columbia’s leadership, the power struggle extended to the various media outlets as they fabricated events to beat their competitors to the next “breakthrough” in the story. By the mid eighties, the turmoil surrounding these events had completely changed the landscape at Columbia Pictures.

THE SCENE

Hollywood in the late 1970’s and early 1980’s was much like the 21st century Hollywood we know today. Columbia Pictures, Warner Brothers, Universal, Disney, Paramount Pictures, Twentieth Century- Fox, and Metro-Goldwyn-Mayer were the big players.

Power has now shifted to different owners and companies have been merged and expanded, but just like the show business attitude and arrogance, the layout and key contributors have remained almost unchanged. While many people today assume independent producers hold the power, the studio system remains very powerful and influential over who “makes it” in the industry.

HOLLYWOOD EAST & WEST

The Hollywood scene in Los Angeles is typically what everyone thinks about when discussing “Show Business,” but there is a whole different side of the industry. Although the actors, directors, producers, and heads of the picture companies reside in California, the decision makers, money and ultimately, the power, reside in New York City or “Hollywood East,” as McClintick regularly referred to it.

While Hollywood lacked a presence from any other industry, Columbia’s New York headquarters was a few blocks from companies like Exxon and McGraw-Hill. When Hollywood needed an injection of reality, New York stepped in to make that happen.

COLUMBIA AND ITS KEY PLAYERS

A successful Wall Street businessman named Alan Hirschfield led the New York-based Columbia Pictures Industries. As President and CEO of the corporation, Hirschfield had brought Columbia back from desperate financial trouble in the early to mid seventies.

Together with a team of executives, Hirschfield oversaw the operations of Columbia Pictures, which was run out of the Burbank Studios in California. David Begelman was the President of the studio and had been a key contributor in Columbia’s recovery as well.

The credit for the recovery was difficult to assign. Was it Hirschfield’s financial management strategies or Begelman’s selection of profitable projects? Regardless of the credit, which both men maintained belonged to them, Hirschfield and Begelman together made big achievements and paved the way for Columbia going into the 1980’s – or so they thought…

Not far removed from the action was Columbia’s Board of Directors. Herbert Allen, Jr. of Allen & Company, which owned a sizable share of Columbia, was the most outspoken and influential member on the Board. Leo Jaffe, the Board’s Chairman, and Matthew Rosenhaus, the largest shareholder of the Company, also played key roles.

While Columbia remained smaller than Warner Communications and MCA Inc. (Parent of Universal), Hirschfield, Begelman and a number of people close to the Company felt that it would be in a strategic position to make several acquisitions late in the seventies.

ALAN HIRSCHFIELD AND HERBERT ALLEN

The Hirschfield-Allen relationship extended back to Norman Hirschfield, Alan’s father, and Charlie Allen, Herbert Jr.’s uncle, who had become close friends in their early years. While Herbert Allen, Jr. and his family brought Alan Hirschfield in to Columbia and had always maintained a comfortable relationship, Alan grew frustrated with Herbert’s willingness to take credit for Columbia’s recovery.

THE PRELIMINARY DISCOVERY

In late February of 1977, actor Cliff Robertson sat on the patio of his Freemont Place home in Los Angeles and opened an envelope from the Internal Revenue Service containing an IRS Form 1099.

Robertson, a unique man for his industry, was a kind and pleasant gentleman who acted independently of the Hollywood stereotype.

As he examined the 1099, he noticed the form indicated he had been paid $10,000 from Columbia Pictures, but had no recollection of receiving any such payment, or even doing business with Columbia which would warrant such a payment.

The Columbia accounting department told Robertson’s accountant, who had no record of the transaction, that the payment was linked to a 1976 film called Obsession in which Robertson played a role. But when Robertson conferred with his assistant and agent, it was clear that he was owed nothing by Columbia.

When Dick Caudillo, the accounts-payable supervisor, investigated and reported the transaction details to Robertson, he failed to mention the full story. Due to the tightening of accounting principles from stricter rules, a substantially greater number of “miscellaneous payments” appeared on the Form 1099, and Robertson’s inquiry was one of many that Caudillo had received.

Months later, Caudillo was still attempting to answer to the assistant of a curious and frustrated Robertson. When he found the check that corresponded to the payment, it appeared that it had not been endorsed by Cliff Robertson, but by the familiar style of handwriting of Columbia Picture’s head, David Begelman.

THE TRAIL OF THE CHECK

Caudillo alerted Lou Phillips, Columbia’s controller, of his hunch, and Lou confronted studio vice president, Jim Johnson. Johnson, an easy-going and conflict-adverse man, initially thought of Begelman’s secretary, as he searched for a reason to justify why someone would forge a check. There was no way Begelman needed the money. Ten thousand dollars was a small amount relative to his salary and expense account.

Joe Fisher, a senior vice president and chief financial officer of the studio’s parent company, Columbia Pictures Industries, was in town and examined the check.

“That’s David’s signature.”

Searching for an explanation, Fisher and Johnson asked Begelman if he recalled anything about the check. Begelman responded with certainty that he remembered the Robertson check, and assured the two men he would take care of the “misunderstanding.”

Fisher and Phillips accepted the news with little concern and mentioned the confusion to Alan Hirschfield, who shrugged and continued going about his business.

HOLLYWOOD EXPENSES

It should not be surprising that Hirschfield shrugged at the news of the payment “misunderstanding.” Hollywood was known for massive expense accounts, limousines, and fine dining – all of which were usually paid for by the Company. Hirschfield would later argue to the Board that he had strict financial policies, but this statement was only relative to the rest of the industry.

Hirschfield himself insisted on a limousine to go just a few blocks. Misappropriation and personal use of company funds was evident everywhere in Hollywood. This created the perfect environment for theft by many. Unfortunately for Begelman, he chose a cautious and meticulous man to steal from. Without Robertson’s persistent inquiry, Begelman may have never been caught.

THE BEGINNING OF THE LIES

Begelman began his cover-up with a weekend phone call to Cliff Robertson. He explained the misunderstanding to Robertson and, as confident as ever, began to have “small talk” with this man – one with whom he had a legal dispute over a film deal a few years prior.

“Only in Hollywood will an agent (Begelman) betray a client (Robertson) one year and cozy up to him the next as if nothing had happened.”

When Begelman spoke with Robertson’s accountant and agent later that week, he made up a story of a young man who was employed at Columbia and managed to embezzle the money. When Robertson heard the explanation, he discovered the check had been cashed in Los Angeles.

The concerned actor wondered how a kid employed in New York would go about cashing a check in LA.

A call to the bank confirmed that David Begelman was indeed the man who cashed the check in exchange for traveler’s checks. When Robertson reached out to his accountant, Bud Kahaner, and alerted him of the discovery, Kahaner set the scene for the next decade of Hollywood in two sentences:

“It’s possible that this is just the tip of an iceberg. You just may be sitting on a hydrogen bomb.”

And indeed, he was. As Robertson boarded his plane for a trip to New Zealand, he felt relieved knowing the authorities would take it from there.

THE EXECUTIVE DISCOVERY

More than four months after Cliff Robertson’s original discovery, David Begelman was alarmed to receive a call from Detective Bob Elias of the Burbank Police Department.

Begelman explained the confusion as an accounting error that was being handled within the Company.

Later that week, Begelman posed with his Rolls-Royce for a New York Times article titled “The New Tycoons of Hollywood.”

“The expression on his face was serene. He looked like a man at the top of his game.”

Shortly after Alan Hirschfield met with Herbert Allen to discuss David Begelman’s new contract with the Company, he received a call from Detective Silvey of the Beverly Hills Police Department inquiring about the check situation. (The case had been sent from Burbank to Beverly Hills) While many detectives in the area would be unwilling to take on a case involving a mere $10,000, this new detective was eager to prove her worth.

Months removed from Fisher’s comments to Hirschfield regarding the “misunderstanding,” Hirschfield was initially confused about what the detective was referencing. When Fisher returned from a trip to the Beverly Hills Police Department with photocopies of the check and a pile of additional evidence, he was certain of Begelman’s guilt.

“We’re in deep shit,” Fisher said to Hirschfield. “You wouldn’t believe the stuff this cop showed me. It’s obvious David did it.”

Fisher approached Begelman with the evidence, and while Begelman denied any sort of wrongdoing, Fisher knew he was lying, and Begelman knew he knew.

THE SECOND EMBEZZLEMENT

Shortly after the confrontation with Begelman, Fisher learned of another possible embezzlement. Lou Phillips had recalled a check that Begelman prepared for a “Peter Coate” for $35,000 worth of sound consulting.

The problem was that no one actually ever saw Coate. Hirschfield tried to remain focused on business as he and Columbia had been in important talks with IBM over a new software development.

As a strong leader and a top executive, he was able to separate the classified events from each other and the different people involved. In the meantime, Mickey Rudin, Columbia’s attorney, was focusing on investigating the Begelman issue further.

By late September, Rubin confirmed the second embezzlement and Hirschfield finally felt compelled to alert Herbert Allen. Allen, concerned, reminded Hirschfield that the annual report was already set to go out, filled with words of praise for Begelman. It was too late to edit the report though, and in an attempt to keep the issue internal, Hirschfield praised Begelman’s great work at the annual meeting.

THE STRUGGLE FOR POWER

As mentioned, the struggle for power in show business was of the utmost importance to producers, studio heads, and New York executives and board members. Of those producers, none were more influential on Columbia’s operations than Ray Stark.

Ray Stark was one of Hollywood’s most successful producers and played a huge role in the Allen & Company takeover of Columbia Pictures Industries.

Stark was one of Herbert Allen’s closest friends, so his opinion mattered to Allen. Stark also had a past with Begelman. Although the relationship was not always positive, they respected one another and Stark had a clear admiration for Begelman. When Herbert Allen heard of the embezzlements, he called Stark right away.

Several days later, Herbert Allen called a meeting with Ray Stark and Alan Hirschfield. While Hirschfield had a good relationship with both men, he always felt Herbert Allen had too much control over the Company.

He was also constantly bothered by Stark’s tendency to go way over budget on his films. When Stark heard of the embezzlements, he offered to take Begelman’s position. To Hirschfield’s surprise, Allen agreed with the idea.

Already concerned with Stark’s power and influence at Columbia, he respectfully declined the offer. Hirschfield was unaware that Stark had begun to convince Herbert Allen that Hirschfield’s motive, although untrue, was to take over Begelman’s position and gain authority in the Company. This was the first sign of clear sides beginning to develop within Columbia.

THE FIRST BIG MEETING

Joe Fisher and Herbert Allen were tasked with taking Matthew “Matty” Rosenhaus, the largest investor in Columbia, to lunch to share the news of the embezzlements. Rosenhaus had never contested with Allen for control of the Company as his $1.5 million investment in the Company had quickly grown to over $10 million. Instead of being angry at the news of David Begelman’s acts, he felt a deep sense of sadness. He stood firm, through his tears, in protecting Begelman.

These feelings of sadness had been most closely aligned with those of Ray Stark and Herbert Allen. Hirschfield and Fisher, on the other hand, had the Company and its image at the forefront of their minds and were angry with Begelman, rather than sad.

Later that week, in September of 1977, when Allen confronted Begelman about the possible embezzlements, he showed his first signs of honesty.

He looked tired and depressed when he spoke with Allen and could not give him a solid answer on why he did it. In a meeting with legal teams and several Columbia executives, Begelman swore he did not remember committing the acts.

“I swear, I don’t remember doing it.”

“There’s no other check or anything else is there?” Allen asked.

“On my honor, there is nothing. This is it. Period.”

THE THIRD EMBEZZLEMENT

During a formal meeting between the Board, legal team, and several top executives including Fisher and Hirschfield, it was decided not to fire David Begelman. While Hirschfield, Fisher and a few others were in favor of firing Begelman right away, Herbert Allen and Matty Rosenhaus were strongly against it.

Rosenhaus had an almost unexplainable passion for “helping David.” Instead, an investigation would be conducted by Todd Lang, Columbia’s general counsel, and Peter Gruenberger, a Weil, Gotshal & Manges partner who specialized in litigation and the conduct of sensitive inquiries for corporate clients. The Board and executive team would reconvene to discuss the results of the investigation.

During these proceedings, Begelman was on the phone with one of his closest friends, Sy Weintraub. He requested to borrow $25,000 and, without hesitation or questions, Weintraub agreed. Begelman returned to his office where he began to cover up a third embezzlement.

Lou Phillips noticed the attempted cover up and learned of the third embezzlement. The locks were changed on Begelman’s office and the investigation went into high gear.

Just as the Columbia employees began to figure out something was wrong, Sy Weintraub approached Herbert Allen, whom he known for many years, and defended Begelman.

Weintraub had just finished an extensive conversation with Begelman and was sure the most recently discovered embezzlement had been the final one. He guaranteed to pay Columbia back for any misappropriations discovered in excess of the three that had been uncovered.

Allen was impressed and invited Weintraub to plead his case to the others. Columbia issued a press release regarding the “certain unauthorized transactions” involving David Begelman, and announced they would be forcing him to take a leave of absence from his position. Begelman met with Frank Rothman, his attorney, and decided he would seek psychiatric help and plead his case from that point of view.

Outside the commotion from the internal investigation, Columbia continued to operate under Alan Hirschfield. While Hirschfield had his eye open for Begelman’s replacement, Hirschfield was careful with his approach to Herbert Allen, since Allen was unhappy that Hirschfield had rejected Ray Stark for the position.

A close friend of Hirschfield warned him that Stark might be working against him, but Hirschfield did not seem concerned. Dan Melnick, the capable head of motion picture production, had become the interim head of Columbia Pictures during Begelman’s absence.

Hirschfield continued deliberations with IBM and was excited about the possibility for Close Encounters of the Third Kind, an upcoming movie, to bring the Company back to full financial stability.

HIRSCHFIELDS LEADERSHIP IN QUESTION

Leading in to the Begelman discoveries, Alan Hirschfield had been the popular New York executive who brought Columbia back from the brink of disaster. Since the investigation though, Hirschfield began to lose support – and not just for one reason.

The Hollywood stars and important people in the community, many of whom had no idea what Begelman had done, criticized Hirschfield for his persecution of Begelman for seemingly minor indiscretions. His fellow chief executives, on the other hand, felt Hirschfield had handled the situation with far too much leniency for a public company.

The pressure from the Board limited Hirschfield’s effectiveness in being assertive, but it was nothing compared to what they were going to throw at him in the future. Hirschfield took several “doubters” with important business relationships with Columbia to dinner, and attempted to repair any damages that had occurred.

More important to Hirschfield than any Hollywood talent was the pending deal with General Cinema Corporation, which planned to invest upwards of $26 million in the Company. Richard Smith, who led the deliberations with Hirschfield, made it clear the deal would never go through if Begelman remained at Columbia. Hirschfield stood firm that, pending the investigation, Begelman would be out.

THE FOURTH EMBEZZLEMENT

Nearing its fourth month, the investigation of David Begelman had not uncovered anything else. This changed dramatically when a junior investigator working on the case discovered a check for $5,000 that had an endorsement with eerily similar handwriting to Begelman’s. Ray Stark, through a series of phone calls, was notified and called Begelman. Begelman called Peter Gruenberger and apologized profusely, claiming that he had totally blocked it from his mind.

This fourth embezzlement and a 2-day interrogation of Begelman by Gruenberger, wrapped up the investigation in early November.

Weil, Gotshal & Manges prepared a document with the legal options that Columbia could take. The material was presented at the Wednesday board meeting. The board meeting went on with no changes of heart by anyone. Herbert Allen, Matty Rosenhaus, and several other board members continued to back Begelman and support his reinstatement even after the new findings.

Hirschfield, now furious and confused, stood by his assessment of the situation and reiterated the need for Begelman to go. While Hirschfield told the Board he would reconsider his position, a conference call the following week showed no movement in his decision.

Hirschfield bashed the Board for allowing themselves to be influenced by Ray Stark and begged for their support. With the Board furious, Hirschfield hung up the phone, elated and relieved the situation had finally ended. Little did he know that his battle with the Board was only beginning.

THE BATTLE WITH THE BOARD

Irwin Kramer, a board member and Charlie Allen’s son-in-law, who was initially strongly in favor of firing Begelman after the first reported misappropriation, dug up an old record involving Alan Hirschfield and his wife, Berte, who worked for a consulting firm Columbia hired.

In a clear attempt to threaten Hirschfield and demonstrate the Board’s power over him, he opened an investigation of the details. Hirschfield, furious and in disbelief, fired back at Kramer, knowing he had cleared everything with compliance when the potential conflict of interest had arisen.

Trying to contain his anger toward the Board, Hirschfield told several executives close to the situation there was no way Begelman was coming back. The power struggle between Hirschfield and the Board now became the major storyline of the embezzlements.

With the Board nearly forcing Hirschfield to reconsider his position, Hirschfield consulted Todd Lang and Peter Gruenberg on the ramifications of bringing Begelman back. Hirschfield felt that it was his only option at this point. Tension reached an all-time high and neither party was willing to back down.

Hirschfield considered resigning several times, but could not imagine leaving all of his hard work and supportive fellow executives behind. As Hirschfield considered the possibility of bringing Begelman back, he received a call from the man himself.

To Hirschfield’s shock, Begelman decided he would rather not return but would pursue an independent producer contract with the Company instead.

Hirschfield was thrilled. He thanked Begelman for his consideration and called Herbert Allen. All the tension seemed to be gone as Allen was satisfied with Begelman’s request.

Allen reminded Hirschfield that he was only trying “to help [Begelman] get what he wants, after all [he’d] done for us.” Hirschfield shared his joy with Joe Fisher (for a second time) and was thrilled at the thought of actually being able to run the Company again.

Just like the previous time, Hirschfield’s feelings of resolution were short lived as Matty Rosenhaus called requesting a meeting. Hirschfield, confused at this point, phoned Herbert Allen. Allen had not called Rosenhaus and asked Hirschfield what his decision was regarding Begelman.

It was as if he had completely forgotten their phone call from the previous day. Hirschfield was dumbfounded. Just a day ago everyone was happy and now the Board was back to wondering if Hirschfield had reconsidered his stance. Of course, he had not, since Begelman had given him no reason to.

In a stunning series of events, Begelman was reinstated to his position at Columbia.

The Board fought Hirschfield for a production and consulting deal to be granted to Begelman and then made sure Hirschfield consulted with Begelman on everything. Extremely frustrated, Hirschfield decided there was no difference in letting him come back since he was basically the de facto president of the studio.

Hirschfield felt completely belittled by the Board and felt little hope moving forward. As Hirschfield had predicted at the beginning, the media would soon punish Columbia for bringing a known embezzler back in to a public company.

THE MEDIA

For months after the initial press release, the media had not taken a strong stance on the events at Columbia. They had been preoccupied with the articles about Close Encounters of the Third Kind, one of which bashed the unreleased movie and caused a drop in the stock price.

Shortly after the decision to bring Begelman back, the Wall Street Journal released an article that reported the check forgeries for the first time.

Cliff Robertson, who had been quiet since his original discovery, was in disbelief that Begelman had been brought back to the Company. His anger resulted in a Washington Post article. By the end of the year, Columbia’s image was being tarnished.

Almost every major newspaper and magazine was doing not just a story on the Columbia embezzlements, but a front-page story. The tension between Hirschfield and the Board grew as they all watched the stories come out. Hirschfield blamed the Board for their unwillingness to see the possibility of damage by bringing Begelman back.

The media frenzy even caused the Securities and Exchange Commission and law enforcement agencies to take a second look at the events. A New West article published a picture of a 1961 check that was allegedly forged by Begelman. While the Board at Columbia chose to ignore the “evidence” since it was not during his tenure at the Company, the public’s opinion, and that of the SEC, was certainly influenced.

In early 1978, when Hirschfield was aboard a plane to reconcile his relationship with Rosenhaus, he read an article in which the Board, and Rosenhaus himself, blamed Hirschfield’s leadership ability. Needless to say, their meeting left their relationship as rocky as ever.

To combat the news coming out about Columbia (which had now moved away from the embezzlements and toward analyzing every problem Columbia faced), Allen and Hirschfield planned to write a press release stating their excitement for the future and “ice everything over.”

Unfortunately for them and the Company, tensions were so high by this point, they could not even agree on what the press release would say. It was never released. The media made mistake after mistake reporting stories, grasping for new angles, but even with corrections, the public was influenced heavily by the headlines alone. Lawsuits were filed but dropped. The damage was done.

A BUYOUT?

Throughout Hirschfield’s fight with the Board, he considered the possibility of organizing a buyout of the Allen & Company and Rosenhaus shares. Allen Adler, a Columbia executive and a friend of Hirschfield, had brought up the idea of a buyout and had pursued options in secret. With private shareholders, a buyout was a legitimate option.

Unfortunately for Hirschfield, word got back to Allen that he was shopping the Company amid the deliberations over Begelman’s future. Although the finding did not amount to anything tangible, it was just one more thing that drove Hirschfield and Allen further apart. Although Hirschfield and Adler got close with several potential buyers throughout, nothing came of their efforts.

THE FALLOUT

Amid the media storm, Cliff Robertson’s agent began receiving anonymous threats over the phone. His business as an actor would never be the same following his initial discovery and reporting of the forged check. Producers, who were friendly to Begelman, chose others over Robertson.

After all the fighting and deliberations, Begelman elected to resign, as he was unable to handle the media firestorm.

Hirschfield and Allen spoke on the phone and agreed the resignation was best for the Company. This agreement did not make their relationship any better though. It was still all about the power and control, and Allen clearly owned that.

The SEC launched an investigation in to the 1977 events at Columbia about the time that Begelman agreed to his new production contract with Columbia. He had even been given the lead role for Annie, as Rosenhaus and the Board argued he at least deserved that. Begelman was eventually charged by the authorities and placed on probation.

All of the outside candidates Hirschfield had been recruiting for Begelman’s position had essentially been scared away by the media exposure and uncertainty at Columbia. Hirschfield ultimately came back to Dan Melnick for the job. Although Hirschfield preferred someone with more experience, Melnick was more than capable to do the job.

Herbert Allen phoned Hirschfield, after everything had been quiet for a while, and informed him that he would be selling 250,000 shares to Sy Weintraub, Begelman’s close friend. Hirschfield advised strongly against the move, knowing Weintraub would have a seat on the Board and Allen’s power would grow, but Allen would not reconsider.

In a completely unrelated series of events, another embezzlement at Columbia was discovered.

A woman working in the accounting department at Columbia had embezzled hundreds of thousands of dollars from the Company since 1974. The issue was handled internally for the most part, but the woman disappeared and was never found.

Through all of the fighting and tension, Alan Hirschfield’s job was undoubtedly in jeopardy by the end of it. Although he had brought the Company back from the eve of bankruptcy and fought to do the right thing about Begelman’s affair, the Board never saw his side.

The pro-Hirschfield executives in the Company came together in New York to confront the Board and demand that Hirschfield remain at the Company. Although the Board temporarily decided to keep Hirschfield, he was fired shortly after. The relationship between Hirschfield and the Board was not repairable and the trust was gone.

CONCLUSION

Leave it to Hollywood to take a small check forgery and turn it in to a thrilling series of events. While Hirschfield tried to do what he felt was right for the Company, he was unable to exert his leadership because of the influence of the Board.

A lesson in company management can be found here. Everyone must be allowed to do the job they were hired to do, to the fullest of their ability. The Board hired Hirschfield to do a job, but then forced him to make decisions he did not think were right. It was never about whether Begelman stayed or went. It was only about the struggle for power.

Interestingly enough, since this book was originally written in 1982 and then republished in 2002, the author was able to write an afterword summarizing the events following the late 1970’s story. David Begelman continued to lie and misappropriate money for the rest of his life.

While working with Gladden Productions, he was stealing millions of dollars. When the debt had grown to uncontrollable amounts, David Begelman took his own life while alone in a Los Angeles hotel room. He died owing $2 million to bookies and gangsters, in addition to the money he owed his business clients.

Hollywood’s job is to create a false environment for the public’s enjoyment. Unfortunately, it seems that some of the business people directly involved fall victim to it and lose sight of what is right in reality.

HookedtoBooks.com would like to thank the Titans of Investing for allowing us to publish this content.  Titans is a student organization founded by Britt Harris. Learn more about the organization and the man behind it by clicking either of these links.

Britt always taught us Titans that Wisdom is Cheap, and principal can find treasure troves of the good stuff in books.  We hope only will also express their thanks to the Titans if the book review brought wisdom into their lives.

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