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That morning [Friday, January 7, 2000], first thing, an e-mail went out at 75 Rock, summoning every senior officer from Time Warner's corporate headquarters to a "must attend" meeting at 10 a.m. in Steve Ross's old conference room on the 28th floor. "I knew it was something big," recalled one person who received the e-mail. He had no idea how big it was. "To be honest, I thought it would be that Ted Turner was selling his shares and stepping down from the board."
To appreciate the reactions of some of Time Warner's top people, you have to know something about [CEO Gerald] Levin's strategy and stealth. With the exception of [president Dick] Parsons, [general counsel Chris] Bogart, [Time Warner Digital Media chief Rich] Bressler, and Rob Marcus, who worked for Bressler, no one at Time Warner, no one at all, knew anything about the ongoing talks with AOL. The first time a select group of Time Warner employees heard about the imminent merger was that Friday morning at 10 a.m.
"We've agreed to a merger with America Online," Chris Bogart announced to the two dozen Time Warner executives gathered around the massive mahogany conference table. "That's the good news. The bad news is that you're all sequestered here until Monday. We've got three days to put this deal together, and until we do, you can't tell a soul what's going on, not even your families."
They weren't prepared for Bogart's announcement. On the one hand, the news was awesome. This would be the biggest deal in history, it was all being done in a weekend, and the people sequestered in that room were part of it. On the other hand, "We were shocked, shocked," one attendee told me, still shaken by the memory of that January meeting. "Never, ever would I have guessed. I barely knew AOL. I mean, if the deal had been with Disney or with any other media company, I might have understood. But AOL?"
People who did know AOL were no less shocked. Timothy Boggs, Time Warner's top lobbyist, had spent the past year fending off AOL's demands that regulators force Time Warner to open access to its cable systems. "I was stunned at the news," he said. "I knew the AOL people well; we were in battle with them. They were slippery and very aggressive. These were not people of quality, not in my mind. I was stunned."
Edward Adler, head of Time Warner public relations, and Joan Nicolais Summer, head of investor relations, sat together during the meeting. They were speechless. This giant deal, this monumental deal, has been unfolding for months and no one told us about it? Joe Ripp, the company's chief financial officer, was numb. Levin hadn't consulted him! A no-nonsense numbers man, Ripp had devoted his entire career to Time Inc. and then Time Warner. In 1975, soon after graduating from Manhattan College and joining the accounting firm Ernst & Whinney, Ripp began working on the Time Inc. account. Named assistant comptroller of Time Inc. in 1985, over the next 15 years he'd worked his way up to chief financial officer of Time Warner. The company was his life. And though he'd never been close to Levin personally, he had regarded himself as a core member of Time Warner's brain trust. To Ripp, the news of a deal with AOL proved that he wasn't part of Levin's inner circle after all. Like almost everyone else assembled in that room on January 7, Ripp had been one of Levin's pawns.
Then there was Peter Haje, one of the most accomplished and respected corporate lawyers in the country, whose legal career had been devoted to Time Warner. Back in the 1960s, fresh out of Harvard Law School, Haje had started working for Steve Ross, helping him assemble his empire, piece by piece. In 1990, Haje, then a partner at Paul, Weiss, Rifkin, Wharton & Garrison, joined Time Warner as general counsel. In his decade of service to the company, Haje had proved to be a brilliant legal adviser; he was also known for his absolute discretion and loyalty. On hearing about the AOL deal, Haje was enraged. Even more, he felt sickened by Levin's lack of respect for him. True, Haje had announced his retirement and on January 1, 2000, he'd been succeeded by Chris Bogart. But still, all through 1999, when the AOL deal was brewing, Haje had been the company's top lawyer. Why would Levin have frozen him out? If in the past Haje had ever had reservations about Levin, if he'd ever questioned Levin's abilities as CEO (and he had), Haje had always kept his thoughts to himself. No longer. Now Haje told friends that the AOL deal was a disaster in the making; he wished only the worst for Levin.
If it ever occurred to Levin that executives like Haje and Ripp would feel betrayed, he probably assumed that the damage would be short-lived. Levin had never been a consensus builder. As one of his executives phrased it, Levin was the company's "switchboard": he maintained control at Time Warner by controlling the flow of information, like a miller with control of the dam. Over the years, determined to get what he wanted on his terms, Levin had figured that the best way to get things done was to do them himself. He didn't need others getting in his way, wasting his time, sowing confusion by dropping in ideas about this and that. By the time Time Warner's division heads were told about the AOL deal, it was too late: The train had left the station, the ship had sailed, the gate was closed. Given more time, could [Time Inc. CEO] Don Logan, [HBO CEO] Jeff Bewkes, [Time Warner Cable CEO] Joe Collins, and other senior people at Time Warner have altered the deal with AOL? Could they have talked Levin out of it, or at least demanded better terms? Possibly. But at the same time, they could have wrecked the deal, and Levin couldn't afford to take that risk. After all, this merger of equals was the defining moment of his life.
If suppressing other people's views and voices had worked for Levin in the past, it was a major tactical error this time round. To make the AOL deal work, Levin needed the active cooperation of his top executives. But why should they promote the megavision of someone who had humiliated and betrayed them? Someone who had treated them with contempt they didn't deserve? Levin couldn't have known it then, but from the time the AOL merger was announced publicly on January 10, scores of Time Warner executives would do everything in their power to derail it.
Chris Bogart outlined the terms of the AOL deal in full detail the fateful meeting. The more he spoke, the more questions he raised in the minds of the Time Warner people gathered in that room. "Why exactly are we doing this? What's the point?" asked one of the VPs in the room. "How long have the discussions with AOL been going on?" asked another. "Will we lose our jobs?" "Who's going to be running the company?" "How long will it take for the deal to close?"
At last, someone asked the overwhelming question: "You're telling us this is a merger, but it doesn't sound like a merger to me. It sounds to me like AOL is buying us. How could that possibly be good for us?" The question hung in the air like a swarm of gnats. Then the moment of recognition: Levin has sold us out. For reasons they could not fathom, Time Warner had been betrayed—double-crossed by its own CEO.
Nina Munk is a contributing editor to Vanity Fair and a former senior writer for Fortune. This is excerpted from Fools Rush In: Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner, by Nina Munk. Copyright © 2004 by Nina Munk and published by HarperBusiness, an imprint of HarperCollins Publishers Inc. Reprinted with the permission of the publisher. You can buy Fools Rush In at Amazon.com.