Morgan Stanley CEO John Mack grapples with plummeting profits and a rogue trader, a summer associate messes with the wrong guy at the company picnic, and Rachael Ray buys in the Hamptons, in our daily roundup of finance, law, media, and real-estate news.
In the excitement surrounding the unveiling of Kristen, the Jersey-grown hooker who (accidentally) brought Eliot Spitzer down, we almost missed the fact that last night, the city lost another famous prostitute. Andreia Schwartz, the "millionaire" madam who was arrested last year for running a brothel on West 58th Street where call girls got paid between $700 and $1,500 an hour (how quaint!), was quietly deported back to her native Brazil after twenty months in prison and, the Post tells us, serving as a source for the federal authorities who were probing Spitzer. Schwartz's biggest client was Time Warner CFO Wayne Pace, who she said paid her about $200,000 and helped her buy the apartment out of which she ran her business. He denied it and got off with only a terrible reputation, but now we're wondering … who were clients one through eight?
Kinky Link to Brazil's Bombshell[NYP]
Earlier: Eliot Spitzer's 'Kristen' Somehow Much More Adorable Than Anticipated
• At least 75 Time Warner layoffs are expected to be announced today. The layoffs are among CEO Jeff Bewkes's first public tasks since taking the helm of the company from Dick Parsons last month. Earlier today, Time Warner announced a 41 percent decline in fourth-quarter earnings. [MSNBC & AdAge]
• Maybe some of those Time Warner folks can hang their hats over at Condé Nast. The Observer evaluates Portfolio's recent spending spree, during which it recruited top talent from The New Yorker, the Post, and the Times. [NYO]
• (Product)Red, the love child of Bono, iPod, and the Gap, has raised more than $22 million for fighting HIV and AIDS in Africa. But considering the big advertising bucks spent during the Super Bowl and elsewhere, some are arguing that it's not enough. [NYT]
This is just embarrassing. With five tabloid gossip columns in this city and countless gossip Websites, and it was L.A. Weekly's Nikki Finke that spotted arch-rivals Ted Turner and Rupert Murdoch out on a lunch date together? Okay, granted, it was at Turner's restaurant, Ted's Montana Grill, so probably nobody was really looking, but still. This is what the Finkster has to report:
Sources said to me that the lunch was requested by Turner (est worth $2.3 bil) in an effort to "bury the hatchet" with Murdoch (est worth $8.8 bil). It came just days after a GQ interview was published with the CNN founder blaming the Fox News Channel founder for helping get America into the Iraq mess and labeling it "Rupert's war" — and FNC in response using air time to belittle and demean Turner as "off his rocker." Now, Murdoch can use the Wall Street Journal and new Fox Business Channel to belittle and demean Turner as well. "Ted reached out in the hope to make nice to Rupert now that he's the biggest media mogul in the world," a Murdoch insider told me. Did it work? "Rupert doesn't change anything. He still goes after anyone he wants."
As we all know, Murdoch's News Corp recently surpassed Time Warner as the globe's largest media conglomerate. We're guessing it was a testy lunch — for a brief run through of all the icky background between the two, see Finke's piece. In the meantime, we are totally going to start lurking around the Olive Garden in Times Square. We just know that's where Donald Trump and Rosie O'Donnell have been hanging out.
Ted and Rupert Break Bread Together [Deadline Hollywood Daily]
• Rumor has it that Richard Parson's will announce his departure at Time Warner as early as this week. Jeff Bewkes, longtime No. 2, is set to take over as CEO. Does this mean a Parsons run for mayor? [Times of London]
• Radar cooked up a clever quiz: Fox News anchor or porn star? You decide. Wait, no, Murdoch decides. [Radar]
• Jim Cramer matched Rupert Murdoch's legendary subtlety: "We have a competitor now in Fox and it is really important to destroy and mutilate them." [Broadcasting & Cable]
• Alan Greenspan's old flame Barbara Walters complained the G-man never gave good advice, insisting back in the seventies that she avoid an apartment on Fifth Avenue because it was a "bad investment." [NYP]
• Henry Kravis got a little egg on his face thanks to the collapse of the $8 billion Harman buyout. Steve Schwarzman gets bragging rights or an excuse to back out of his own impossibly huge deals. [Deal Journal/WSJ]
• With computers taking over, the NYSE plans to cut the trading floor down by half from its historic high. The famous Main Room and "the Garage," opened in 1903 and 1922 respectively, will remain open. [NYT]
• Blackstone founders Stephen Schwarzman and Pete Peterson shot up 30 places to No. 4 in Vanity Fair's annual ranking of "The New Establishment." Henry Kravis, who made the list for the first time, will have to console himself with No. 51. [VF, DealBook/NYT]
• Maybe CEOs aren't all automatons after all: Scholars found that the death of a child or wife typically results in a 15 to 20 percent hit on profits — though the death of a mother-in-law often means good news for business. Let's just hope they're not confusing cause and effect, here. [WSJ]
• Beat this, Spence girls: The daughter of Qwest CEO Edward Mueller gets free use of the corporate jet to help ferry her from Denver to California for high school. [DealBook/NYT]
Time Warner hosted another in its series "off-the- record" conversations with big-shot newsmakers yesterday, and this time the guest was Barack Obama, who really ought to know that if he wants something to remain off the record, you shouldn't say it onstage in front of about 200 movers and shakers, many of whom are journalists. But, of course, he does know that, which is why no one at these events ever says anything interesting or controversial enough to merit being off the record. And our spy tells us that was the case at yesterday's event. The spy reports that Obama criticized John McCain's management skills and said Iraq, health care, and energy would be his top three priorities. The spy says Barbara Walters asked a question about terrorism and Jeffrey Toobin asked one about the Supreme Court. (Remember, guys: off the record!) Obama said he's only on chapter five of Harry Potter, according to our spy, who also said he offered his interviewer, Time Warner chief Dick Parsons, a Republican, his vice-presidency, if Parsons would take the pay cut. Is the spy telling the truth? We think so, but it's all off the record, so you'll never know.
See pictures and quotes of Barack Obama, Mariska Hargitay, Norman Pearlstine, Gayle King and others from the party. [NYM]
Something odd must have been coursing through the AOL Time Warner watercoolers around the time of the disastrous merger that created the company. As Seth Stevenson reports in this week'sNew York, former Time Warner CEO Gerald Levin — who disappeared shortly after the merger — has reinvented himself as the director of Moonview Sanctuary, a "holistic healing institute" complete with drum circles and equine therapy. Meantime, a New Yorker "Talk of the Town" item this week notes that former AOL chief Steve Case — you know, the one who conned Levin into the merger — owns Miraval, an Arizona spa that peddles scalp rejuvenators and "seven kinds of Oriental bodywork." The New Yorker quotes Case describing his ultimate goal: the creation of "the Nike of Wellness." (Not the AOL of wellness, we can't help noticing.) And the company's post-merger COO, Bob Pittman? He bought DailyCandy. Doesn't that leave his chakras out of alignment or something?
The Believer [NYM]
Spa Man [NYer]
So those two hair-obsessed guys arrested in Boston for planting the Aqua Teen Hunger Force non-bombs that terrified New England? A bit of creative Googling reveals that both men — Sean Stevens, 28, and Peter Berdovsky, 27, who goes by "Zebbler" — are affiliated with a "live performing video force" called — and this is the sort of fun part — Glitch. Well, yes. We suspect that Turner Broadcasting, parent of Aqua Teen's home, the Cartoon Network, sees this as quite the glitch. Which perhaps explains the whole thing: It's all part of Time Warner, and Time Warner is trying to be more synergistic, and didn't Time Inc. CEO Ann Moore just say her company needs to fail more? This, folks, is failure done right.
Two Men Charged After Boston Security Scare [Reuters]
As if a few hundred layoffs weren't bad enough, there's more bad news this week for Time Inc.-ers: The company announced it's shuttering the Time Inc. Bookstop, a fixture on the second floor of the Time & Life Building, in March. A company-wide memo noted that "many nearby and online shops" provide "alternatives for purchasing cards, books, music, and DVDs," which is true enough. But the Bookstop offered special prices on company merchandise and holds a special place in the hearts of those who recall that 1989 merger of Time Inc. and Warner Bros., when the store began selling CDs from all the Warner-affiliated record labels at absurdly low prices — as low as $6. No cash was required; by flashing their I.D. cards, company workers could stock up on old Neil Young or Talking Heads discs or pick up the latest from Madonna or Prince, and have the bill deducted directly from their next paycheck. But those days are gone, and Warner Bros. Records isn't even part of Time Warner anymore. Still, for anyone who ever worked there — including, disclosure, this reporter — it's a demise as saddening as Tower's. —David Browne
Time Warner has shown us the future — and it is remarkably like the present, but with retro interior design. We arrived at the Time Warner Center last night for the opening of the media company's "Home to the Future" exhibit expecting robot caterers, smell-o-vision televisions, and Dick Parsons's clone. Instead we got demonstrations of Time Warner's revolutionary new concepts, DVR and VOD, and news that apparently Samsung has figured out a way to make a television screen flat. Also, it seems there's something called the Internet, which allows you, as a sign explained, to get all the music you want, just at the touch of a button. All this breathtaking new technology was set in an exhibit designed by Edwin Schlossberg, best known as Mr. Caroline Kennedy, who used lots of orange-on-orange and blue-on-blue hexagons, plus furniture made out of puffy white-leather circles. It was Camelot! The demi-celebs in the room were as confused as we were. "Whatever this is, I'm underwhelmed," said man-about-town Boykin Curry. "I thought maybe the food was the vision of the future, that Time Warner was going to start home delivery of tiny pieces of steak through your television." At around 8:30, guests began filing upstairs for a concert by Tony Bennett. (Again: The future will be like Camelot!) We left for a much more interesting use of flat-screen televisions, Robert Wilson's video portraits at the Phillips de Pury gallery downtown. They were awesome. —Jada Yuan