The Times, Newsweek, and The Post
By Ed Smith
Newsweek bought the exclusive magazine rights to H.R. Haldeman's book, “The Ends of Power,” in 1978 and wound up in the middle of a firestorm between The New York Times and The Washington Post.
The Haldeman work, published by Times Books, was a hot property, one of the post-Watergate "inside" books purporting to disclose what happened behind the scenes. Haldeman was President Nixon's chief of staff. He had been imprisoned for helping orchestrate the Watergate cover up and had become thoroughly disillusioned. His book asserted that President Nixon himself had initiated the Watergate break-in, had participated in the cover-up from "day one", and may himself have erased 18½ minutes from a critical White House tape which almost certainly recorded Nixon ordering the cover up.
Penalty Clause: In negotiating rights to the book, Ed Kosner, Newsweek’s editor, wanted The Times to pay a penalty if there was any leak before Newsweek’s February 20, 1978 publication date. Ed had been stung two years earlier, when Newsweek bought exclusive magazine excerpts for Bob Woodward and Carl Bernstein’s “The Final Days." Simon & Schuster, the publisher, had violated its secrecy obligation by distributing copies of their book before Newsweek began publication. Richard Snyder, the boss of S&S, had brushed off Ed's infuriated protests with "Sue me, baby!”
Ed didn’t want to be screwed again. What kind of penalty should we demand? I could find no precedents. From my general experience as the magazine’s counsel, I expected a hard fight. So I drafted the most onerous penalty clause I could think of to provide room to negotiate something less.
Big Opening Bid: If there was any leak at all (by The Times newspaper or anyone else), Times Books would forfeit a whopping $50,000 – one half of the $100,000 purchase price for the rights. There would be a further reduction in our payment if newsstand sales of the issue were less than 75% of our two Woodward and Bernstein book serial issues. (Despite Simon and Schuster’s breach in releasing copies of their second book, the print run had sold out.) I even proposed an additional reduction if such sales were less than 65% of the Woodward-Bernstein benchmarks. These seemed outrageous demands. But there was no harm in asking.
To my (well hidden) surprise, Times Books found our penalty clause “not unreasonable” and accepted it. Indeed, the lawyer who negotiated with us also represented The Times’ own periodicals and often lectured to other magazine lawyers about their legal problems. In lectures
after the Newsweek deal, he would recommend our unique penalty clause – without attribution, of course -- as the way “to protect a [magazine] publisher or at least save it money in the event of leaks.”
No Insult: The Times attorney did want to insert one exception: he insisted that no penalty should apply if the leaker was The Washington Post. Why? I asked. "Well,” he said, “Kay Graham is the head of The Post and Newsweek." I angrily responded: "Are you impugning the lady's integrity?" He immediately back-pedaled--"Oh, no, no, of course not." He dropped his demand.
Times Books’ apparent lack of concern about a penalty clause stemmed from its own self-described (and well publicized) "elaborate security precautions." It had the type set on three linotype machines kept under constant watch by security guards. The book was given no name at the printing plant, only a number, and two trusted employees proofread it. The advertising firm retained to promote the book was not given a copy. All copies used in salesmen’s calls were numbered, hand-carried to prospective clients, examined by them on the spot, and returned to a locked safe.
Security Breach: That all worked until late on Wednesday, February 15, 1978, just five days before the publication date of our first “exclusive” excerpts. We heard unofficially that The Post had broken through Times Books' “impregnable” secrecy. It had obtained a copy of the Haldeman book and would publish a front-page article the next morning.
The Times understandably went ballistic. I got a furious call from Kathy Darrow of The Times legal department (whom incidentally I had had hired when I was at The Times). She screamed that Newsweek had breached its contract and was responsible for The Post’s story. I told her that that was ridiculous.
Yes or No: It was inconceivable to me that Newsweek had anything to do with The Post story. But for direct assurance I called Harry Rosenfeld, the Post's Assistant Managing Editor, whom I knew from Watergate. He didn’t want to talk to me. "Just one question, Harry,” I said. “Was Newsweek the source?" “Off the record?" he replied. "Sure,” I said. "No," he said and slammed down the phone.
Rosenfeld, who had edited the Post’s story, then realized the importance of divorcing Newsweek from The Post and issued a statement: “I can tell you that we did not get information about the Haldeman book from Newsweek.”
Inside Story: All that The Post itself ever revealed was that its story was based on "information supplied by writer Nancy Collins" of its Style section. In fact, Collins later confessed to Ed Kosner that she’d slipped into the printing plant, grabbed an unbound signature of pages, Xeroxed them, then returned the signature to the printers without getting caught.
The Post’s story was nationally syndicated on front pages everywhere. Ed Kosner called an emergency conference. Newsweek could not begin publication of our excerpts, beautifully crafted by writer Peter Goldman, for four more days. Ed wanted to publicize them to other media immediately, before all their news value was lost.
Times Books confirmed that it was letting its own newspaper and all other subscribing newspapers publish as soon as they were able. But the company told Newsweek it should not release any information until 7 a.m. the next day. I asked my contact, "You mean you want us to wait until The Times is out with the story?" "Yes."
Get It Out: Since The Post story was out and The Times had lifted the newspaper embargo, I saw no legal reason to hold back Newsweek and I gave Ed Kosner the green light to go ahead with ours news releases that day. Which he did.
The big loser was the Times. It had been scooped on its own story by a major competitor. It lost considerable revenue from its newspaper syndication of the no longer "exclusive" excerpts. More humiliating, The Times owed a $50,000 penalty on its Newsweek contract even though Times Books had initially wanted to exclude The Post from the penalty clause.
The Fallout: What follows now is conjecture. My surmise is that Times publisher Punch Sulzberger called Kay Graham and complained that The Post had gone too far in publishing its stolen story and that Newsweek had violated its contract by putting out Peter's installments before the new 7 a.m. embargo date. Newsweek stood actually to profit from what its sister publication had done.
Kay demanded that I explain why Newsweek had not waited until 7 a.m. as requested. I was dispatched to Washington and met with The Post's outside counsel, Edward Bennett Williams. I spent at least an hour going over the contract, and then went to brief Kay. In a long subsequent discussion with Ed Williams on the speaker phone, Williams assured Kay that Newsweek was justified in going ahead when it did. At one point Kay, in frustration over the mess her company had caused The Times, asked rhetorically, "How did we ever get this penalty clause, anyway?" You couldn't always win with Kay.
The upshot, I understand, was that Kay agreed to settle what was for her an uncomfortable situation. The Post corporation wound up actually making some kind of payment to The Times.
Even without the penalty, Newsweek came out a winner. Despite The Post’s leak and the resulting fallout, our two Haldeman issues with Peter Goldman’s excerpts -- like the two Woodward-Bernstein issues --virtually sold out.
Ed Smith was Newsweek’s counsel from 1971 to 1979
Copyright © 2014 by Edward L. Smith. All rights reserved.