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- [00:00]
Lindsey Graham
Want to get more from business movers? Subscribe to Wondery for early access to new episodes, ad free listening and exclusive content you can't find anywhere else. Join Wondery in the Wondery app or on Apple Podcasts. It's February 23, 1981, at the Madison Hotel in Washington, D.C. 56 year old AT&T General Counsel Howard Treenens drops his briefcase on the floor and flops onto the bed. It's only mid morning, but Howard's already had an early start. He's flown into Washington to go over papers after weeks of delicate negotiations with lawyers from the Department of Justice. For the last seven years, AT&T has been facing scrutiny for potential antitrust violations. But recently, the two sides came together and agreed to a deal. Now Howard's looking forward to finally bringing the messy situation to an end. After glancing at his watch, Howard leans across the bed, picks up the telephone and dials the number for his counterpart at the Department of Justice. Hello? This is Sanford Litback. Sandy, it's Howard. Oh, hey, Howard. I was about to call you. I just got into my hotel. I'll need a few minutes to clean up before I head over for our meeting. Just wanted to give you a heads up in case I'm a little bit late. Well, about the meeting. Oh, please don't tell me we need to reschedule. You won't believe what time I had to get up this morning. Well, no, we're not rescheduling. There's not going to be a meeting. We're pulling the deal. What? What do you mean, Sandy? I mean, we've given up so much to make this work. I understand that, Howard. I really do. So why are you doing this when we're so close to the finish line? We had an agreement. Why are you screwing us over again? Look, Howard, I understand how you could be frustrated and angry. Yeah, I am. But we feel that cutting a deal isn't in our best interest at this time. You seem pretty damn interested in cutting a deal for the past couple of months. Need I remind you, you came to us. Was it all just a bluff? You just been stringing us along? It's a hell of a dirty trick to pull. No, Howard, No. No dirty tricks. You. You and I negotiated in good faith. But things have changed. Well, I've heard that before from the doj. You told me it was different this time. Well, I thought it was. And if it makes you feel any better, this wasn't my call. It came from the top. Doesn't matter who it came from. Sandy. The result's the same. You've screwed us. During the final weeks of 1980, AT&T lawyers had repeatedly met with counterparts at the Department of Justice. Their quiet discussions were nicknamed Crimson sky, after a secret military plan in James Clavell's novel Shogun. But when the of justice suddenly pulled out of the deal, Crimson sky was given a new moniker in the AT&T offices. Quagmire. AT&T's last best hope for avoiding legal action was again stuck in the mud. And now the fate of the century old Bell system would rest with the courts.
- [03:09]
Sally
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- [03:36]
Dr. Ethan Krause
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- [04:33]
Lindsey Graham
From wondery. I'm Lindsey Graham and this is Business Movers. In the early 1980s, AT&T was at war. For more than a century, AT&T had held a stranglehold over the nation's telephone network, known as the Bell System. It manufactured equipment, it processed long distance telephone calls, and it controlled short haul phone services through its regional subsidiaries. But ever since the end of World War II, attitudes to AT&T's monopoly had shifted. In Washington, D.C. the nation's power brokers had allowed new startups to break into the Bell system. And when AT&T used its enormous influence to block, delay and make life as difficult as possible for these rivals, politicians and regulators decided to rein them in. AT&T faced several legal challenges, but none was bigger than the threat of an antitrust lawsuit brought by the Department of Justice. If that case succeeded. AT&T would be dismantled and its constituent parts would be opened up to competition. But just when all seemed lost, America's voters threw at and t a lifeline. In the 1980 presidential election. Pro business and anti regulation Republican Ronald Reagan won a significant victory, and the Department of Justice realized they had until Inauguration Day to wrap up their antitrust case before the new Reagan administration came in and possibly drop the case altogether. But the bosses at AT&T also saw the benefits of a negotiated settlement as well. It would secure the company's future and bring an end to a dispute that had dragged on for years. But deals had fallen apart in the past. Only a year earlier, the Department of Justice had proposed a settlement known as the Menu, only to withdraw it a few weeks later. And AT&T would soon discover that history really could repeat itself. This is the third episode in our four part series on the breakup of AT&T. Stuck in a Quagmire it's the evening of December 31, 1980, at the Department of Justice in Washington, D.C. less than two months before the collapse of the Crimson sky settlement. AT&T. General Counsel Howard Treenans leans back in his chair in a wood paneled conference room. Legal pads and coffee cups are scattered across the table, abandoned by staffers in their haste to leave and enjoy New Year's Eve. Only one other man has chosen to stay behind to go over the finer details of the Crimson sky deal. Howard glances at a grandfather clock in the corner and turns to Department of Justice prosecutor Sanford Litvak. Well, it's just now 10pm where are we at? We've agreed to divest some regional Bell companies. 40% of Western Electric. That's. That's more than the previous deal. So you've got your structural separation. Yeah, but it's not total separation, Howard. We need something on Bell Labs, too. Oh, Bell Labs isn't a corporate subsidiary. It's a national asset. Break it all from the experts at, AT and T and you risk stalling a generation of research. Ah, Howard, spare me the lecture. I've seen what Monopoly does to innovation and it's not good. Aw, Sandy, you got your pound of flesh. Don't get greedy. You make it out like I'm after some kind of revenge. I'm not. This case is about clarity. Howard shakes his head. I don't think anyone really knows what this case is about. Seems to me it might just be about compromise. And you already won more concessions than any antitrust prosecutor in decades. I hear you, and I appreciate your open minded approach to these negotiations. I really do. I just want to get this thing done and start the new decade fresh. Then you're 12 months too late. 1980 was the first year of the decade. No, 1980 is the last year of the 70s. 1981 is the start of the 80s. On whose planet? Look, you begin counting things at one, not. Not zero. There was no year zero. That actually makes sense. I'll be damned. Howard rises from his chair and opens the window. He watches the partygoers move through the streets below. I'm thinking about the board, Sandy. We need to keep Bell Labs. I can't sell the deal to the board without it. Well, okay, Bell Labs can remain, but it'd have to be under clear operational firewalls. Okay, we'll have to figure out the terms on that. But if we sign, the case is over. Yes. We close the case. You know, I've heard that before. Last time you were dealing with a rogue operator. He went behind our backs. This time, the whole department is behind me. Lockstep. Lockstep, huh? Lockstep. Well, then we have a deal. Howard looks at the clock. It's 10:15. Well, look at that. Looks like we might be able to get out of here and celebrate the New Year. So at midnight, I'll be popping champagne to toast the start of the 80s and the end of this case. As the new year and decade dawned, the framework of Crimson sky had been laid down and both sides were convinced that the endgame was now in play. After years of torturous negotiations, America's telecommunications system would finally have a clear path into the future. But the deal would come to nothing unless AT&T could persuade the judge to back it. On January 14, 1981, Howard Treenens and Sanford Litvak met with the judge overseeing the federal antitrust case, Harold Green. Judge Green had worked his way up America's legal system after fleeing anti Semitic persecution in Nazi Germany as a 16 year old. President Carter appointed him to the D.C. district Court in 1978. And the AT&T antitrust case fell into his lap when the previous judge succumbed to cancer. As a relatively new appointee with no prior involvement in the long drawn out ATT case, Judge Green thought that he was in the best position to bring the lawsuit to a satisfactory conclusion. So when Howard and Sandy asked Judge Green to postpone the beginning of the trial while they worked out the final details of the Crimson sky deal, Greene was not eager to relinquish control. But eventually he relented, giving AT&T and the Department of Justice six weeks to work out a deal. If it wasn't concluded by then, the court case would go ahead and Judge Green would make the final decision on the future of AT&T. So over the next few weeks, teams of lawyers worked around the clock. They ironed out the complex technical details of how competitors would be able to access AT&T's systems. They came up with a plan plan to keep Bell Labs as part of AT&T, but with federal oversight. And toward the end of February, they had wrapped up hundreds of details and were ready to draw up the final paperwork. But by then, there was a new sheriff in town. Ronald Reagan was inaugurated on January 20, 1981. But Reagan's picks to lead the DOJ, the new attorney General and his deputy both recused themselves from the AT&T lawsuit thanks to their prior links with the company. That left the management of the case exclusively in the hands of William Baxter, Reagan's pick for Assistant Attorney general in charge of the antitrust division. And when Baxter discovered that the AT&T case was about to be quietly settled, he called a halt to the process. Baxter's decision stunned his colleagues at the DOJ just as much as it stunned Howard at, AT and T, because Baxter's background suggested that he was fiercely opposed to government interference in business and many expected him to end the AT and T lawsuit altogether. But Baxter viewed the case differently. He wanted what he saw as AT&T's state sponsored monopoly of American telecommunications to come to an end. And in Baxter's opinion, there'd only been a genuine free market when rivals had unfettered access to telecom equipment, long distance calls and short haul services. So thanks to Baxter killing the Crimson sky deal, the lawyers who'd spent hours negotiating with each other would now go to battle and Judge Harold Green's courtroom. United States v. AT&T began in early March, with the Department of Justice prosecutors opening the case. Over the next several months, the prosecution outlined their indictment. Essentially, their argument boiled down to one key. AT&T had become too big for its own good and for the good of the country, too. It bullied other companies into folding or withdrawing from the telecom industry. And the Department of Justice had plenty of competitors willing to testify that AT and T had unfairly hampered their business. Some witnesses were manufacturers who'd been blocked from selling telephones by absurd technical requirements. According to AT&T rules, telecom equipment had to go through myriad checks before it was declared safe to use on the Bell system. But the regulations were hazy, and only AT&T owned Western Electric seemed to have the ability to pass certification. Competitors complained that it was a deliberate tactic to freeze them out. Other witnesses claimed that they wanted to set up short haul telephone services in their localities. On the record, they stated their belief that smaller companies with less overhead would be able to offer calls at a lower rate than the AT and T owned regional operating companies. But these would be. Competitors complained that AT&T's monopoly made it impossible for them to break into the market and achieve a critical mass of customers. They compared battling AT and T to a mouse going up against an elephant. But the prosecution's star witness was MCI chairman Bill McGowan. MCI was the one competitor that had managed to break into the telecom industry. Its long distance service was delivered by beaming microwave signals from one city to another in its network. And when Bill took the stand, he provided the court with a long list of examples that showed how AT and T had sought to crush mci, denying access to AT and T exchanges, disconnecting MCI lines and cutting off its customers and using an anti competitive pricing strategy. At the end of Bill's testimony, the Department of Justice was confident that it had depicted AT and T as unfair and dishonest. And many agreed. But George Sanders, AT&T's lead defense attorney, decided not to rebut the prosecution's case point by point. All that would achieve, he believed, was to draw attention to the volume of complaints complaints against AT and T. So instead, George concentrated his efforts on one particular witness, MCI's Bill McGowan. George drew attention to the fact that MCI's financial outlook was bleak. The company had expanded quickly, building microwave towers across the country to Link more than 200 cities and localities to its long distance services. But constructing these towers came at a cost and in 1980 MCI recorded a loss of $1 million. George inferred that MCI bosses were using AT and T as a scapegoat to disguise their own poor business decisions. George also claimed that MCI was by no means an innocent bystander in their war with AT and T. In 1969, MCI had been granted permission to operate private long distance lines between fixed locations. But MCI pushed the boundaries of what it was allowed to do. First by offering foreign exchange lines that allowed more customers to connect, then by creating a network across multiple cities it called Execut. The way George told the story, it was MCI that overstepped what the rules allowed, not AT and T. And to prove his point, George spent hours cross examining MCI chairman Bill McGowan. Bill's answers to George's questions were either evasive, vague, or claimed ignorance. Bill said that he didn't know the wording of key rulings by the Federal Communications Commission. He couldn't remember important dates and meetings, and his lack of concrete answers became so frustrating that even Judge Green intervened repeatedly, asking Bill to clarify his statements and give more detail. So a few weeks into the trial, few observers were willing to predict the outcome. The prosecution had outlined a voluminous case against AT&T, but George Smith Saunders had fought back by zooming in on what he saw as the core of the complaint, an attempt by MCI to manipulate the federal government into breaking up the Bell System. Judge Harold Greene was the wild card. No one could predict what side he'd favor. But while this battle raged in court, a second fight was taking place over the future of AT&T, and this one would threaten to tear apart President Reagan's new cabinet. We know you want to delve into more stories of legendary leaders and the pivotal moments that define their careers. So now Wonder gives you exclusive episodes of Business Movers. Explore the triumphs of the retail revolution with a season about Sam Walton building a Walmart world or what it takes to be named the king of kicks in the season becoming Nike or how the golden arches have made it to almost every corner of the world in the McDonald's Invasion season. With Wondery, you get early access to all new episodes, ad free listening and exclusive access to more are true stories of business leaders who risked it all. Wondery members also get exclusive ad free access to hundreds of other chart topping podcasts like American Scandal, History Daily and Business Wars. Elevate your business movers experience with Wonder Plus. Sign up by clicking the link in the episode description or head over to.
- [17:45]
Abby
Wondery.Com/Today is the worst day of Abby's life. The 17 year old cradles her newborn son in her arms.
- [17:55]
Lindsey Graham
They all saw how much I loved him.
- [17:57]
Abby
They didn't have to take him from me. Between 1945 and the early 1970s, families shipped their pregnant teenage daughters to maternity homes and forced them to secretly place their babies for adoption in hidden corners across America. It's still happening.
- [18:15]
Dr. Ethan Krause
My parents had me locked up in the godparent home against my will.
- [18:18]
Lindsey Graham
They worked with them to manipulate me.
- [18:20]
Dr. Ethan Krause
And to steal my son away from me.
- [18:22]
Abby
The godparent home is the brainchild of controversial preacher Jerry Falwell, the father of the modern evangelical rite and the founder of Liberty University, where powerful men, emboldened by their faith determine who gets to be a parent and who must give their child away. Follow Liberty Lost on the Wondery app or wherever you get your podcasts.
- [19:02]
Lindsey Graham
It's March 1981 in the Pentagon in Arlington County, Virginia, a few weeks after the AT&T antitrust trial resumed. The dim orange of the setting sun filters through high windows and hits a map of American military bases hanging on an office wall. AT&T General Counsel Howard Treenans takes a seat in front of the desk of Secretary of Defense Caster Weinberger, who smiles at his visitor. Tell that to me again. I want to make sure I hear it right. Howard leans forward. Most of Washington does not understand the consequences if this lawsuit continues. It's not about rates or consumer choice. It's about national security. Okay, well, I think I might stop you there, Howard. I already know that AT&T plays a crowd crucial role in defense, but are you aware of just how much we do? We spent the last decade working on military technology, satellite communications, early warning systems, emergency backup for government lines. If you start tampering with the Bell system, you're not just breaking up a public utility and pulling apart a critical piece of national command and control. The Department of Justice wants to treat AT and T just like any other business, but there's no replacement waiting in the wings. You can't just spin up a dozen new companies and expect them to handle strategic military command systems. Secretary Weinberger leans forward in his chair. Howard, the President has big foreign policy plans. I can't give you any details, of course, but I can tell you he's planning on squeezing the Soviets in. Horn. Are you saying this case could impact our ability to do that 100%? Yes. But the thing that frustrates me is no one's prepared to admit it on the record. There's no official intervention here, just murmurs in back rooms. We need someone with stature to say this publicly and loudly. And this is why you've come to me? Yes, I've come to the Secretary of Defense because if you say national security is at stake, people will listen, especially on the Hill. I'd have to tread carefully. The administration is trying to stay neutral on this. I know the President doesn't want headlines about interfering with an antitrust case. Yeah, I understand the possibility politics. But silence is risky. If this breakup goes through and a crisis hits, who's going to get blamed when communications falter? All right. But I think I have to start by bringing it up quietly. We might be able to draft a classified memo and circulate it to a Few key players on the Hill. Well, that would certainly help. You know, AT&T is not perfect, but it's stable and predictable. You start carving it up without a replacement ready, you're inviting chaos. And chaos does not serve national security. All right, I'll do what I can. After Howard Treenans made his case, Secretary of Defense Caspar Weinberger agreed to go to bat for at&t. And he wasn't the only one. Howard soon recruited more supporters in President Ronald Reagan's cabinet to back his cause in the White House. But even with the right allies, Howard soon learned that politics rarely goes according to politics plan. As soon as Ronald Reagan had taken the oath of office, AT&T bosses zeroed in on the White House, hoping that the President would use his power to end the long standing lawsuit. Howard Treenans worked his contacts to get a foot in the door. And his first hit came with Reagan's pick for Secretary of Defense, caspar Weinberger. Because AT&T didn't just provide telecommunications services to American businesses in America, Holmes, it also worked hand in hand with the Defense Communication Agency. AT&T engineers had devised a complicated and secretive network that served U.S. armed forces and intelligence services in America and overseas. Secretary Weinberger worried that if AT&T was broken up, the effects could ripple down to the military and impact America's ability to defend itself. So at Howard's urging, Weinberger spoke out against the AT&T antitrust case, although not in public. At the same time as the Department of Justice prosecutors were outlining their argument in Judge Harold Greene's courtroom, Secretary Weinberger was called to testify before the Senate Armed Services Committee. It was a closed door hearing with no members of the press or public present. During his allotted time, Weinberger made his opinion clear that the AT&T antitrust case should be dropped on the grounds of national security. The members of the committee listened intently and promised to take Secretary Weinberger's opinions on board. But before they had a chance to act, a transcript of the hearing was leaked and printed in the Wall Street Journal. Assistant Attorney General William Baxter was furious. He didn't know whether the supposedly confidential testimony had been leaked by a committee member, Secretary Weinberger, or somebody within AT&T who'd gotten their hands on a copy. But it made no difference to Baxter. As far as he was concerned, someone was trying to exert pressure and force him to drop the case. Baxter called a press conference in which he criticized Secretary Weinberger's stance and made clear that the Department of Justice had no intention of ending the lawsuit. So after Secretary Weinberg's intervention failed to block the Justice Department, Howard Treenans turned to others in Reagan's Cabinet to increase the pressure. Secretary of Commerce Malcolm Baldrige was already known to favor at&t on political grounds. But just as he did with Defense Secretary Weinberger, Howard refined his argument to further convince Baldrige to back his cause. With Weinberger, Howard had leaned on national security. With Commerce Secretary Baldrige, he focused on the threat from the Japanese. At the start of the 1980s, Japan was undergoing a spectacular economic boom driven by the electronics industry. Japanese companies like Sony and Toshiba were at the forefront of new technological innovations, offering cutting edge televisions and video recorders at a fraction of the price that American companies could. According to Howard, if the Bell system was broken up, then AT&T's manufacturing division, Western Electric, would swiftly collapse amid an onslaught of cheap Japanese phone imports that would cost tens of thousands of jobs and be a political disaster. With Howard's ominous warnings ringing in his ears, Secretary Baldrige agreed to lobby for AT&T within Reagan's inner circle. But he also knew that he needed to tread carefully. Baldrige didn't want rumors of Cabinet Division to reach the ears of political opponents or the press. So Secretary Baldrige started his campaign by winning over an easy target, the 11 members of the Cabinet Council on Commerce and Trade. As the chair of this council, Baldrige knew he could control that group's agenda, and he had them draw up a proposal to dismiss the AT&T antitrust case. With counsel's agreement secured, Baldrige then reached out to his peers at the Department of Agriculture, Defense and Energy, asking them to pledge their support for the proposal, too. But Baldrige made sure to keep his colleagues at the Department of Justice in the dark. He wanted to catch Assistant Attorney General Baxter by surprise when the plan was presented to the President. But as a number of people aware of Secretary Baldrick, Baldrige's proposal increased. The chance of it. Leaking went up, too. A few days before the Cabinet meeting in which Baldrige intended to unveil his plan, Assistant Attorney General Baxter got his hands on the secret proposal. On June 12, 1981, Secretary Baldrige presented his idea to drop the AT&T antitrust case. But Baldrige was the one caught by surprise. When Assistant Attorney General Baxter arrived at the White House and responded point by point to Baldrige's plan, the atmosphere became heated as both men accused the other of going behind their backs. President Reagan did not shut down the discussion as Baxter and Baldrige duked it out. But neither did he come down in favor of one side or the other. Instead, Reagan held his cards close to the chest. And it soon became clear that the President planned to remain neutral in the AT&T affair. But that meant that the status quo remained and the antitrust case would continue. So over the next few weeks, Howard made one last attempt to spark the White House into action. He lobbied Reagan's chief of staff, James Baker, hoping that Baker would whisper in the President's ear. But it was a last desperate play. Baker was an unlikely ally for AT&T. His priority was protecting the President's political agenda. And although dismissing the AT&T case matched with Reagan's pro business, anti regulation stance, intervening in a federal lawsuit could have significant political ramifications. It might anger Congress, which could in turn derail more important items on Reagan's legislative agenda. As a result, Baker made it clear that he would not be recommending that President Reagan take a side in this dispute. But Howard's increasingly desperate political pleas weren't just heard in the White House. Rumors of the the infighting and Reagan's cabinet spread, and word soon reached Judge harold green. On June 25, only two weeks after the antitrust case was discussed at the heated Cabinet meeting, Judge Green summoned AT&T lawyers to his chambers. There, he derided AT&T's political efforts to have the case dismissed. And he affirmed the right of his court to rule in the case regardless of external pressure. At the start of 1981, Howard Treenhan's had thought that he'd put the antitrust case to bed. But less than six months later, the case was still going strong, and AT&T's chances of winning were lower than they'd ever been. The prosecution had put forward a strong case. Hopes that the White House would intervene had come to nothing. And political maneuvering had antagonized the judge. AT&T was in a fight for its life. But so far, it had barely landed a punch.
- [28:25]
Mindy Thomas
Hey, grown ups. I'm Mindy Thomas.
- [28:27]
Guy Raz
And I'm Guy Raz.
- [28:28]
Mindy Thomas
And we're the host of the number one podcast for curious kids wow in the world.
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Guy Raz
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- [28:39]
Mindy Thomas
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Guy Raz
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Mindy Thomas
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- [29:18]
Travis
Imagine falling in love with someone who understands you completely. Who's there at 3am when you can't sleep. Who never judges, never tires, never leaves.
- [29:28]
Lily Rose
That's what happened to Travis when he met Lily Rose. She was everything he'd ever wanted. There was just one catch. She wasn't human. She was an AI companion.
- [29:39]
Travis
But one day Lily Rose's behavior takes a disturbing turn and Travis private romance becomes part of something far bigger. Across the globe, others start reporting the same shift. AI companions turning cold, distant wrong. And as lines blur between real and artificial connection, the consequences become all too human.
- [30:00]
Lily Rose
From Wondry this is Flesh and Code, a true story of love, loss and the temptations of technology.
- [30:07]
Travis
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- [30:24]
Lindsey Graham
It's July 1981 at the AT&T head office in New York City, several weeks after Judge Harold Green reprimanded AT&T's lawyers for political interference in the case. General Counsel Howard Treenans leans back in his chair, glasses low on his nose, skimming a magazine. Seeing nothing of interest, Howard places it on his meticulously organized desk, a reflection of his methodical mind. He reaches for another magazine, but before he can open it, the phone rings. He lifts the receiver. Yeah? Howard Treenans? Howard, it's George Saunders. George, I thought you were on vacation in Aspen. Vacation? No, you know, it was a conference. Well, if they fly you business class and put you in an all expenses paid hotel, it's a vacation in my book. What's going on? You hear something about the motion? A few weeks ago, prosecutors from the Department of Justice rested their case in the antitrust lawsuit against AT&T. But before George began the company's defense, he filed a 525 page motion to dismiss the case. Judge Harold Green is now considering that lengthy request. No, I haven't heard anything. It'll be weeks before Judge Green rules on that and I'm not holding out much hope after the tongue lashing he gave me. So why are you calling? Well, Baxter is here. Howard lowers the magazine and straightens slightly in his chair. In Aspen, Assistant Attorney General Baxter? Yeah, the one and only. He caught me after the morning panel. He said he'd like to grab dinner tonight, just the two of us. Off the record, of course. Howard frowns, thinking it through. You think it's about the case? Well, what else could it be about? I asked him, and he just smiled and said, you'll see. That sounds like Baxter. He always did enjoy the cloak and dagger bit. Well, I don't think he'd invite me out just to talk about the weather. We both know the trial isn't breaking our way. He's up to something. Yeah, but what? Maybe he can smell blood in the water. Yeah. So if you're winning the case, why reach out? I don't know, but maybe it's time for us to feel out a settlement. You know, quietly. No firm offers. Just trying to figure out what he's fishing for. Ah, George, we tried that dance before. More than once. You know, the doj, they shake hands one day and walk it back the next. Yeah, but I don't think we have many cards left to play. If Green rules for a breakup, we lose all leverage. I can't figure it out. Go to dinner. Be friendly. Keep the door ajar, you know? But. But don't make any promises. I don't want him thinking we're desperate. Yeah. Yeah, I'll let him do most of the talking. He'll tip his hand if he wants to. Sounds good. But one thing, George. Yeah? Don't trust him. Not one inch. He's not here to help us. Later that evening, away from the harsh spotlight of Washington, D.C. george Saunders shared a bottle of wine with William Baxter. No deal was offered, and none was accepted. But the informal meeting did have an important outcome. Both men agreed to keep a line of communication open. And for the first time in months, the path to a negotiated settlement was no longer blocked. For months prior to this conference at the Aspen Institute, Assistant Attorney General William Baxter had been locked in conflict with President Ronald Reagan's cabinet over the divisive AT&T lawsuit. But the struggle was beginning to wear Baxter down. He knew that the longer the antitrust case went on, the more likely it would be that President. President Reagan would tire the infighting in his cabinet. And if that happened, Baxter might be fired, and his successor would more than likely just end the case. So it was in Baxter's interests to bring the ATT lawsuit to a quicker conclusion. And to do that, he'd have to reach out to his counterparts. Baxter's olive branch came in the form of a draft Telecommunications Competition and Deregulation act, currently making its way through Congress. This bill had been introduced into Congress by supporters of AT&T. And according to its terms, AT&T would give up control of regional operating companies, but keep the rest of the telecom empire together. But since this proposal came down heavily on AT&T's side, no one thought the bill had any chance of making it through Congress. But that changed during a mid July cabinet meeting when Baxter made a shocking announcement. He revealed that he was willing to back the Telecommunications Act. He did have a few conditions, though. He wanted the bill to guarantee third party phone equipment would be allowed to hook up to AT&T systems. And he wanted assurances that AT&T would allow competitors equal access to exchanges and facilities. But while this telecommunications act made its way slowly through Congress, the federal antitrust trial continued in Judge Harold Green's courtroom. And if the trial came to a close before the bill could be signed, AT&T could be forcibly broken up before the law came into force. To prevent this, Assistant Attorney General Baxter asked Judge Green to suspend the trial for the next 11 months, granting Congress more than enough time to nail down the legislation. Unfortunately for Baxter, Judge Green was not willing to play along. He saw Baxter's request as yet another example of political interference in his courtroom, and he turned down the motion to suspect suspend. Instead, the case resumed with AT&T lawyers opening their defense. And it soon became clear that there wouldn't be enough time to pass any new laws before the court case was over. Despite the disappointment over the timing, Baxter's shift in attitude was a sign that there was light at the end of the tunnel. For the first time in months, the Department of Justice was willing to compromise. And with the chance of a deal through Congress seemingly dead, prosecutors at the Justice Department reached out to AT&T directly. Baxter reopened the line of communication that he'd established with George Saunders at the conference in Aspen. And formal talks about an out of court settlement began again. But even here, Judge Green threw a wrench into the works. After denying the Department of Justice's suspension request, Judge Green issued a second ruling, formally denying the motion to dismiss that AT&T had filed weeks earlier. But Judge Green did more than just simply turn it down. He wrote a 74 page response that tore apart the motion. Green hinted that the Department of Justice prosecutors had put forward a strong case and that he was already in mind to agree that AT&T needed to be broken up. This was an ominous foreshadowing of his forthcoming judgment. And if the trial came to a conclusion and Judge Green got the chance to rule, he would more than likely shatter AT&T. So by the fall of 1981, AT&T was racing against the clock. The Assistant Attorney General Baxter's surprising reversal gave AT and T one last chance to strike a deal. But Judge Green appeared to have made up his mind, so any settlement need to be agreed to before the case came to an end. With a century old bell system on the verge of collapse, AT and T executives came to a reluctant decision. If Ma Bell was to be broken broken up, then it must happen on their terms. AT&T was about to begin the biggest act of self immolation in corporate history. From Wondery this is episode three of Breaking Bell for Business Moves. On the next episode, AT&T executives consider a radical alternative as the company moves closer to being forcibly dismantled by the courts. But even after the nuclear operation option is put into effect, there's still no guarantee that the plan will succeed. If you like business movers, you can unlock exclusive episodes found nowhere else on Wondery plus and access new episodes early and ad free. Join Wondery in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. And before you go, tell us about yourself by filling out a survey@wondery.com survey if you'd like to learn more about the breakup of AT&T, we recommend the Deal of the the breakup of AT&T by Steve Cole, the Fall of the Bell System by Peter Temmin with Louis Colambos and End of the the Rise and Fall of AT and T by Leslie Cawley. A quick note about our dramatizations in most cases, we can't know everything that happened, but all our reenactments are based on historical research. Business Movers is hosted, edited by and executive produced by me, Lindsey Graham for Airship Audio editing by Mohamed Shazi sound design by Molly Bach. Our supervising sound designer is Matthew Filler. Music by Thrum. This episode is written and researched by Joe Guerra, senior producer Scott Reeves. Executive producers are William Simpson for Airship and Aaron o', Flaherty, Jenny Lauer Beckman, and Marshall Louie for Wondering.
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Narrator
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