The Pellicano Affair: Fear, Loathing & Contingency Planning In Hollywood

April 3, 2006

by Edward Jay Epstein

The Hollywood Economist

The numbers behind the industry.


     While Hollywood awaits for the dreaded sword of Damocles to come crashing down in the long-festering Pellicano affair, Sumner Redstone may have engaged in a brilliant piece of contingency planning by acquiring the services of Stacey Snyder, the chief of Universal Pictures.


The federal case against Pellicano, “the P.I. to the stars,” began after FBI agents raided his office in November of 2002 and found military-grade C-4 plastic explosives, which led to Pellicano being sentenced to 30 months in prison. The FBI also discovered evidence that Pellicano's agency had wiretapped, blackmailed, and intimidated dozens of movie stars, Hollywood executives, and their mistresses. So far, the case has resulted in the indictment of thirteen people.


The fear, as federal prosecutors relentlessly work their way up the Hollywood food-chain, is that the beneficiaries of Pellicano's illegally obtained information, including some of Hollywood's more powerful players, could be indicted. In turn, any indictment would open the floodgates to hundreds of millions of dollars in civil lawsuits. The loathing proceeds from the realization that in a community where information about the intimate affairs of celebrities is tantamount to an opportunity for extortion, one of the many direct or indirect beneficiaries of Pellicano's information was the newly-minted Paramount chairman Brad Grey.


Before joining Paramount, Grey had been a principal in the Brillstein-Grey talent management agency, where, in 1998, he was hit with a lawsuit by his star client Garry Shandling. Grey's law firm used Pellicano's services to obtain a settlement.  In those bygone days, far from considering Pellicano disreputable, Grey reportedly attempted to develop an HBO pilot about a Hollywood detective based on Pellicano called "Hollywood Dick". To be sure, Grey's spokeswomen at Paramount, Janet Hill, has denied that Grey engaged in any alleged illegal activity with Pellicano. But with prosecutors still analyzing tape recordings and encrypted computer files seized in the raid of Pellicano's office and with Grey's former associates testifying before a grand jury, including such wild-cards as the ex- “Most Powerful Man in Hollywood” Michael Ovitz, the grand jury might come to a different assessment than Ms. Hill. In any case, Sumner Redstone, who worked in the Justice Department after Harvard law school, is certainly aware that federal prosecutors—fairly or unfairly—can get a grand jury to indict not only the proverbial ham sandwich but also a high-profile studio executive.


Hence the need for a contingency plan. On February 27, with the prosecutors negotiating deals with key witnesses, Redstone approved an offer by Paramount to Stacey Snider, who as chairman of Universal Pictures oversaw that studio division in addition to Focus Features and Universal Studios Home Video. Her new job: a multimillion position as co-chairman of Paramount's newly-acquired DreamWorks division. Since this division already had the extraordinarily competent leadership of David Geffen—not to mention Steven Spielberg—and is slated to produce a mere 4 to 6 movies a year, it had no imminent need for an additional chairman, especially one whose contract at the time bound her to Universal until December 2006. So the real value in retaining her lay in her future ability to seamlessly replace Grey. Of course, Redstone could choose a stand-by-his-man strategy and await the outcome of the trial, if he was certain it would not interfere with other matters on his corporate agenda, such as seeking liquor licenses for his National Amusement theater chain (thus adding Vodka to the popcorn economy). But with a well-respected and proven studio chief in the wings, why take that chance? As one Paramount executive said, “The backup plan is already in place. If Brad gets indicted, Stacey moves in. It make the option of letting Brad go more feasible.”


The irony here is that Brad Grey engineered the $1.6 billion acquisition of DreamWorks SKG partly to compensate for the managerial meltdown that occurred under his regime change in 2006. Finding that Paramount had failed to create enough promising new movies to fill its 2006-7 pipeline, he had Paramount take over DreamWorks's slate. Now DreamWorks is being used to harbor another future project—his replacement.



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