Interview Date: Tuesday July 22, 1997
Interview Location: University Park, PA
Interviewer: E. Stratford Smith
Collection: Penn State Collection
Note: Audio Only
SMITH: It is July 22, 1997. I am E. Stratford Smith, cable television pioneer, and professor of cable telecommunications, at the College of Communications at The Pennsylvania State University. We are about to commence and oral history interview with Robert E. Tudek, a prominent cable television pioneer and operator. This oral history interview is one of a series of interviews with pioneers and current leaders in the cable TV industry. Mr. Tudek qualifies under both accounts. The interviews are being conducted under the auspices of the National Cable Television Center and Museum now headquartered in Denver, Colorado. This interview is being conducted at my offices in the James Building on the campus of The Pennsylvania State University at University Park, Pennsylvania. I have known Mr. Tudek for so many years, that I intend to call him Bob in this interview. Bob are you ready to proceed?
TUDEK: Yes, I am.
SMITH: Would you give me then, for the record, your full name and address, tell us when and where you were born.
TUDEK: Robert Edward Tudek. I live officially in Florida; have been a resident of Bonita Springs, Florida now for nine years. However I spend the summers here in State College. I've been living here in State College since 1965. I was born May 1st, 1926, in Glassport, Pennsylvania, a steel community with a glass factory, eighteen miles south of Pittsburgh. I'm a graduate of Glassport High...
SMITH: Hold up on that, Bob. Let me get to that later. I would like to develop some background with respect to your family. Who were your parents?
TUDEK: My parents were John Tudek of Glassport, an immigrant from Poland who with his brothers, came over right after World War I. They were all glass blowers. They came from a family of glassblowers in Poland. The tradition is that...our family was in the glass blowing business for at least 400 years and migrated to Poland from Slovakia. My Dad blew what is known as head shop in the glassblowing factory in Glassport, Pennsylvania. However, the factory was mechanized, automated as were most of the glassblowing factories in our nation during the Depression, so he lost his job. He went on into the steel business, the rolling mill business, in the cup weld steel factory in Glassport, after having spent a couple of years at the Pittsburgh Steel Foundry in Glassport. From the last twenty-five years of his life, he spent as a rolling mill employee in the steel industry. My dad passed away at the age of 78, quite some time ago.
My mother, who passed away also, at about that same age, immigrated from Poland right after World War l after having lost her husband in the 1918 flu epidemic. She was married to a German, born and raised in Warsaw. My Dad had been raised in the Galicia, area of Poland, governed by Austria. My mother in Warsaw, governed by Germany. Poland had been partitioned for a hundred years prior to World War l. My mother came over after being widowed, and she sent for her son Henry, who came on over here to join her. My mother remarried my Dad who had also lost his wife. His first wife died of tuberculosis. He had a son, Stan and a daughter, Rose. My mother had her son Henry, so I was the first child of the second union.
SMITH: Do you have any siblings?
TUDEK: Oh yes, I have a brother, Roland, a brother Ray who's deceased, and sisters Irene and Helen. Of course, my half-sister Rose passed away of cancer just the last six months ago. My half brother Stan died of a stroke after having retired, having been a Master Sergeant in the Air Force for 27 years, passed away under a wing of an old World War II airplane at the Air Force Academy in Colorado, of a stroke.
SMITH: You were about to tell us something of your childhood and I interrupted. Would you go ahead now and tell us about your early education and your boyhood activities.
TUDEK: Yes, I went to a parochial school, Holy Cross, a Roman Catholic Church of Polish heritage, and a Roman Catholic Church of Irish heritage. I attended Holy Cross where they taught us the main subjects in languages, Polish and English. We had history, we had penmanship, and we had language, reading and so forth, religion. I still say my prayers in Polish. We were taught Polish and English. I went to public junior high and went to Glassport High, which is now a part of a consolidated district called South Allegheny.
I was fortunate and played football for four years. Played on two Western Pennsylvania International Athletic League Class A champions 1943 and 1944. I also coached an independent basketball team, high school stars and college team pro stars. This is while I was in high school that I was actually, in addition to the coach, the business manager and everything else. We raised quite a bit of money, we played before capacity crowds. We bought with the proceeds every year a beautiful awards sweater, for all 100 members of the band.
SMITH: You were telling us about when you were coach, but you didn't tell us very much about when you were playing football yourself.
TUDEK: I played halfback with three other friends. We played together for four years, in the backfield. I was the right halfback. Ted Gessup, whose brother was coaching the one year, was the left halfback. Dan Natali was the quarterback. (By the way his son, Dan Natali, Jr. was the big star tight-end here at Penn State many years later.) But the fullback was Lou Kusserow, who subsequently became an All American at Columbia, was a big star up there, and still holds many records at Columbia. Later was the most valuable player in the Canadian league for several years, and then became the producer of NBC Sports for 25 years. In the '50s, '60s, early '70s, for all the big sporting events, the World Series, the Orange Bowl, the Rose Bowl, the All-Star Games, all the American Football League games are always produced by Lou Kusserow. He is now retired, living out in Palm Springs, California.
Our class two years ago had its 50th high school class reunion. We graduated in 1945. I was the vice president of our senior class. They said I didn't play basketball except for junior high. I also managed and coached, was business manager of the softball team, all the players were much older than myself, then later a baseball team.
SMITH: Did you do this coaching while you were still in school?
TUDEK: I was still in high school. As a matter of fact, with the softball team I think I was twelve or thirteen years of age. All of the members of the team were seventeen and eighteen. I was the catcher along with the coach, the business manager and raised all the money. We had real beautiful uniforms too. I did all of this, and basketball. Our number 1 fan of the Glassport, Gladiators fans was a Greek immigrant, shoemaker, Phil Economas. We honored him after I graduated from the University of Pittsburgh; subsequently we had a big banquet where we brought in everybody. Former stars of Glassport High including Lou Kusserow and we had a big banquet honoring Phil Economas, our number one fan whom never missed a football game. I teamed up with Phil for the Glassport Boosters Club, the basketball team, where we raised all the money and had these teams.
As I said, I even had some pro basketball players, ex-professionals who played for me, particularly in the one game where we played the University of Duquesne in polio benefit game every year. That came about because the chairwoman of the polio fund in my hometown of Glassport was Mrs. Sandy White. Sandy was the congressman, very prominent congressman and ex-judge or subsequent judge and had been a Pennsylvania representative and had been a very prominent attorney. She was the chairwoman of the fundraising event and her husband Sandy had been an all time in the Hall of Fame at Duquesne University, on the board. So Duquesne, even though they were like one of the best teams in the country, they played us in the benefit game. We were beating them by four points with a couple of minute's left to play. Had Lou Kusserow playing, he was home from Columbia. I had Don Asmunga, who has been a pro playing that game and Ernie Sherman, a very prominent ex-athlete in Glassport, who played for Salem University in West Virginia. We played every year. We had some great teams there in Glassport Boosters and we played to full capacity crowds. But I was also the public address announcer. I went out on the floor before the game and announced the next game, and gave the players names and so forth and so on. We had a lot of fun.
SMITH: Did you play in those games?
TUDEK: On occasion I did play for the Boosters whenever they needed somebody. I'll never forget, I went into a game because we lost some players to injury. The last one left and this was in Courtview, Pennsylvania. They had a number of stars playing, including Ray Matthews, who was a star football player for Clemson and a big star for the Pittsburgh Steelers and subsequently maybe even to this day, until very recently he was coaching for the Steelers. Back in those days he was playing along with a bunch of other ex-college athletes. This particular basketball court was actually on a stage, in an auditorium. This was really where they had their plays. Whenever I went into the game, everybody hooted. Things were pretty bad when the coach had to go in and play the game. So I went on dribbling right down the floor and just kept on dribbling right on down to the corner, turned around and plunked it right in. Shut everybody up. I'll never forget that. We had those basketball Glassport boosters and we had baseball and we had the softball games. While I was going to school, however, as a sophomore, I worked in the glass factory from 6 p.m. until 3 in the morning.
In Glassport, everyone started their first job in the glass factory because you could go in at the age of 16. You could not go into the factories until the War. You had to be 18. During the War you could be 17 years of age to work in the steel mill. So as a junior, during the summer, I actually worked in the Pittsburgh Steel Foundry four to 12 and the last 3 months of the year. In high school we had no track team or baseball team so during the spring I worked in the Pittsburgh Steel Foundry four to 12. I was actually a molder of anchors that you use on ships during the war. My actual position as a junior in high school was a green fan molder.
SMITH: What year was this?
TUDEK: That would have been 1943. In '42 I worked in the glass factory, and in 1944 I worked again as a senior, right after football season, in Copperweld Steel as a labor gang. Then I was drafted into the service. That came about because I was 19 and so I was drafted. I got an exemption from the service, to finish the last semester of our senior year. The procedure at that time was that we would go into the service after the first semester, and go into the service, which we did, and then we got our diplomas. At graduation I was in Camp Landing, Florida, southwest of Jacksonville in a town called Stark. We were on a twenty-mile hike, finishing up our bivouac, the day that my high school class graduated.
I was in the Infantry. Had finished up seventeen weeks of basic training along with five or six others from my high school class were with me there. After service there in Camp Landing I was lucky enough to be delayed for a month or two before I went overseas by virtue of being a clerk typist at a camp in Maryland, and then I went overseas, from Camp Stoneman, California. The night before I was supposed to leave, at two or three o'clock in the morning, I hear somebody hollering " Hey Toots." That was my nickname. Everyone called me that including the nuns at Holy Cross. My best friend by the way was Honeycutt, who became a really great football player and FBI agent and actually played awhile for the Steelers. Anyway, I recognized Dan Natali calling for me at 2:30 in the morning. He had heard I was in the area there. We spent the rest of the night talking. I was to leave the first thing in the morning from Pittsburgh, California. He was going to be leaving subsequently. Before he left, some little boy came running up with Extras, just as we dropped the atom bomb at Hiroshima. So we did leave, however VJ Day occurred while we were at Pearl Harbor, on our way to the Philippines. Because of VJ Day, we actually got a week at Pearl Harbor. Then we continued on to the Philippines by way of the Marshalls, the Caroline's. We had one day off at a place called Bogmorg Island, a recreational facility they had there for servicemen. I went on to Clark Field in the Philippines and spent some time there in Manila with the Headquarters Company with the Second Army and went on from Manila by way of an LST through the tail end of three typhoons. If you go back in history, you'll see there was a great deal of damage done to the Japanese shore by three typhoons in 1945.
We went to Kobe, Japan where I was stationed in the Chamber of Commerce Building. My very first day there I made a big mistake. I entered into a raffle, and I was the last one to enter into it; there was no charge. The winners were going to take an all day tour in a C47 over Japan by plane. My name was the last one submitted and the first one picked. I was only one of two non-commissioned officers, I was a PFC at the time. They rest of the winners were colonels and captains and majors and a couple of lieutenants and one other NCO I think he was a buck sergeant. So we spent a day traveling by plane all over Ohonshu and we stopped at Hiroshima. We landed and had four hours there. I was stupid. We weren't told about radiation and all that sort of stuff. We actually spent four hours walking through the ruins of Hiroshima not long after that bomb was dropped. Fortunately I borrowed a camera and took a roll of film, took pictures and when I tried to get them developed, they never showed up. I did spend time walking the streets and kicked the trash looking for souvenirs and things of that sort at Hiroshima. It was horrible. Whenever we came over in a plane it looked like a big rust spot. Everything was down except for the hospital, I think the Chamber of Commerce building and one other building. All the windows were out of the hospital and at that time they had white sheets hanging down from every window. All the people on the streets, almost all had scars and they had bandages over their faces, and they just looked straight ahead. They didn't talk, they didn't say anything, and they just looked straight ahead and walked by.
I was smart enough to reenlist in the Army for one year under the Apple reenlistment program. For every year you enlisted, you got a 30-day emergency furlough. I knew I was going to be in the service for a year anyway, so I re-enlisted for a year, got my 300 dollars, my 100 dollars and made it home for Christmas in 1945. I went by troop ship to Seattle. I was smart enough to get a coach from Seattle to Indianapolis. By the time we got there, we were all black with soot. I was lucky, my seat was broken so I could put it down and actually make a bed. So all day, people would come by and ask me if they could use my seat, and we let them do that.
SMITH: You didn't charge for it?
TUDEK: No, we didn't charge for it. I made it home the night before Christmas.
SMITH: Back to Glassport?
TUDEK: Back to Glassport. I showed up, I was assigned to Philadelphia, at League Island Park, right across the street from the municipal stadium. They had a capacity of over a hundred thousand. I think it was 102 thousand. This was right near the big Navy hospital. We were actually stationed in League Island Park, where we not only had barracks but we had a prison. This was the Provost Marshall Division of the Second Army. They had a streetcar that went around the stadium. I was a PFC and there were 300 or so in this company, all re-enlistees. The policy at that time was that if you were an officer and you wanted to reenlist, you became a first sergeant. There are regular Army commissions and there are field commissions. If you were in the regular Army, you had that commission. When you have what is known as a field commission, and most of the commissions during the War were field commissions, only those who graduated from West Point and other facilities were actually regular Army officers. If you wanted to stay in the Army, you became a first sergeant. This was also true if you were a first sergeant, you could retain those ranks. So most of these 300 members of this command...I would say that 250 were first sergeants, and I would say that 50 of them were former officers, including colonels and majors and captains who are now first sergeants. They had only one tech sergeant, Dan Walheim, the brother of the famous actor Lewis Walheim in 'All Quiet on the Western Front.' Dan, by the way was at that time president of the studio union. He had been in four or five wars and was the most famous enlisted man in our whole Army. He was a tech sergeant; there was one other tech sergeant if I recall, one other buck sergeant with three stripes, one corporal and me, a PFC.
SMITH: Let's get back to you.
TUDEK: Yes. It's important to know that because I was the only PFC, I was given the job as clerk. They put up all of us who had an MSO typing capability, when you go in the Army you take tests. I passed the test to be regarded as a typist, among other things. I was given a job as the clerk in the investigation section of this company, by the first lieutenant, because he himself had been a PFC before he got his commission. He took pity on me. So this was real important. Here I am, nineteen. I become the investigator in this section of 16 or 18. The head of it had been a former captain or major. A lot of these guys who had been officers now reapplied for a regular Army commission, and while I was there, I'd say eight or nine of them did receive regular Army commissions, including this chief of mine who subsequently became a regular Army major. As the clerk, I reorganized the whole department. The files were in terrible condition. There were 475 outstanding cases, but they were all so mixed up and there were piles of correspondence that had not been answered. Things were a mess. And most of these people involved were not very good at reading or writing. They could read and they could write but they could not express themselves in writing. By the way, the correspondence was always addressed to a general. Pretty scary. So I went in there, and I re-filed everything and I answered all the correspondence and then I started to assign cases to these gentlemen. Then I found out they weren't very good at report writing, so I ended up doing their reports for them. They would give them to me orally and I would type up their reports. The head of the department was interested in being an investigator himself. He was out all the time investigating as a detective. So I was really running the department. Here were these guys who had been former officers and they had an average of between 15 and 27 years of service, and I was only 19 years of age and for all practical purposes, I was running this department. And I got tired of doing the clerical work, so I decided I was going to go out with them. I selected Waldheim to start with, and then a guy named Notary Norwood from Polaskie, Tennessee, and we became co-investigators. We had half the state, 20 including the city of Philadelphia. We had a great many adventures that I don't think I'll go into here, but there were many very interesting ones.
Whenever I was discharged, I did meet Dan Natali who did not reenlist when he was over in Japan. I decided then of course to go to school, the University of Pittsburgh. I enrolled in the field of criminology as a result of my work in the service. I was going to be a criminologist. I changed my mind about half way through and decided I was going to be a sports announcer. I forgot to mention to you that as a youngster I used to entertain all my friends by imitating all the sports announcers. To this day, I can still imitate some of them. In high school, at the high school assemblies and pep rallies I would actually go up on the stage and announce a football game and I would make the stars like Kusserow a lineman and I would make all the linemen the star backfield. In a coming game I would have the linemen end up being the stars in winning the ball game. I decided I was going to be a sports announcer and I ended up with a speech major and a psychology minor. I did graduate cum laude, not only from University of Pittsburgh, but also in high school. I was a member of the Pitt Players, although my only role was in Julius Caesar where I was a soldier and I think I had one line. "Beware the Ides of March."
While I was going to school I worked 11 to 7 as a county clerk. Started out in National Tube Works in McKeesport, which is next door to Glassport. I replaced a guy who was just graduating from Duquesne University. He had had that job for four years. The job was to tally all the steel that was produced in the mill so they could report to the headquarters in Pittsburgh the following morning. In order to have that job, I had to add so fast...all the other guys in the office wanted that night work as soon as possible so that they could get to it and get it done in time. So they wanted me to get it done by two o'clock in the morning, which meant I could sleep from two until about six, where I had to get up and walk around the whole building and get the last tallies. So I would sleep on the desk from two to six, but I had to add so fast just like moving my hands up and down as fast as you can and I wasn't allowed to make any major errors, only 1/10th of 1 percent errors. The girl who used the adding machine took eight hours to do the job and she would give me a report on my errors. I don't think I did have a major error. There is a technique you had to learn to do that, because you had columns of ten. Nine nines and one eight, all you did were ninety minus 1 would be 89. That's what happened there. That was my freshman year at Pitt. Then I went over instead to the Irwin Works, across the river from US Steel and became a central maintenance clerk for the last three years, 11 to 7.
The summers however, I became a head lifeguard at a pool in South Park in Allegheny County. This pool was a rather large pool, had a wading pool every bit as big as a city block long, half of a city block wide. We got crowds there on a hot weekend sometimes eight thousand, twelve thousand people. So eighteen guards working for me. There was a lot of time we had, because these were all college students. Seven of these boys became physicians. One of them is Dean of the Dartmouth Medical School. One is a very prominent professor at University of Pittsburgh, internist, another is a very big chest surgeon at San Jose, California, another is an orthopedic surgeon in Johnstown. Three of them became lawyers, one of them is Pittsburgh's most prominent tort attorney, Edward Bellzarini. He has all the records for the large awards. Three of them became FBI agents, three of them became Roman Catholic priests.
SMITH: That sounds like quite a swimming pool.
TUDEK: The three priests didn't work out so well. All three of them became alcoholics. Two of them are in the hospital to this day. The third recovered, had a very prominent career. Ended up as the chaplain or the bishop of Pittsburgh. Had Pittsburgh's most prominent Catholic parish. He passed away of throat cancer not too long ago. He was a very talented swimmer, track star, golfer, tennis player and singer. In fact, he sang at my wife's and my wedding. His entire family was singers; we attended his twenty-fifth anniversary as a priest. He and his mother, his dad and his sisters and his brothers all sang. So I had quite a great time, I'm just bringing this up because this is where I met my wife.
SMITH: I was going to say, you mentioned your wife, we might just as well get into the details of how you met her and her background and so on.
TUDEK: I was the head lifeguard out at South Park Swimming Pool in Allegheny County where Pittsburgh is located. It's a political job. You have to be sponsored by someone politically and interviewed by the county personnel director, and you get the job. I was warned by the personnel director the third time around that he wanted no fooling around out by the pool, and if he ever came out there with anybody of importance, he wanted to make sure that everything was in great shape. So I had to do that all the time, because I didn't know when he was going to show up. Guards were supposed to swim a half mile every the morning before we started. Half of them were supposed to be sweeping up the pool sidewalks. We had to clean all the grease and grime off the gutters in the pool. So everybody had set procedures, before you opened up the pool. So I liked to become an organizer, and we had 18 guys, and when we had the huge crowds, we needed all 18. But there were many times during the week, during cold or raining and we had crowds of a couple hundred people, sometimes only a couple of dozen people. And we had 18 guys, and what were you going to do with them. So I arranged it so when things weren't busy we had three crews. You sat on a chair for an hour, and you had two hours off. That meant you could show up two hours late, two of the three days and you could leave two hours early on two of the three days. Of course on Saturdays and Sundays we were crowded and everybody had to work the whole period of time. We worked for eight dollars a day, and I got an extra dollar for being head guard. Of course, I made quite a bit of money playing pinochle which I learned over in the Philippines. I didn't have any problem with money as a result.
This day the personnel manager came out with some prominent architect who was going to do something. He was showing him around and it turns out that my people had disregarded my instructions. If that occurred, everyone was to grab a broom and half the guys were to be in the pool swimming their half a mile. Instead, they did nothing. One of the guys jumped over the fence with his friends rather than coming in the right way, just to save him some time. The personnel manager of the county saw all this and he reamed me out. So I got angry with these guys and I absolutely laid down the law. There were no more shifts. They were all going to work an hour on and an hour off if there was only one person in the pool. They were all going to swim their half-mile and they were all going to clean the pool until quitting, and there were no exceptions. I wasn't even going to talk to them. This was all going on...we had a cold spell right after that and the guys, three of them, refused to go in and do their half-mile, and I gave them a three-day suspension. I refused to talk to the rest of them and I was really angry with them 'because they let me down. One of the guards bragged to the rest that he was going to knock me out of this mood by introducing me to his neighbor, my wife Elsie Manius. So this one day I'm walking by and he introduced me very quickly to his neighbor, this beautiful blonde girl. I just waved and that was it. My wife was impressed with me and she had her brother come down to the pool and invite me to their family reunion, which was held in a picnic grove behind the pool.
She was living in the Hazelwood section of Pittsburgh. She had actually been brought up in the Greenfield area of Pittsburgh, which is out near Squirrel Hill. Her dad was the night outdoor crane foreman for the Jones and Lockland factory, which was right down the road. He had all the outdoor cranes, and he worked 11 to 7 all those years.
I was invited to their family reunion in June, 1950, and subsequently I was invited to her grandfather's home to watch the opening football game; the College All-Stars played the professionals in a charity game. It was the last time this game was ever played. I watched this game on her granddad's black and white television set. Her granddad was a mechanical and electrical genius, had many patents in various things. He was superintendent of research for US Steel. He had built that TV set with a kit; I guess it was called a Heath Kit. So I watched the ballgame. Things went on from there, and my wife and I then became engaged that Christmas, and she graduated from high school in January of the following year, several weeks after becoming engaged. I graduated within a day or two of her from the University of Pittsburgh. I did my work in three and a half years. We graduated within a day or two of each other. I went to work at the Pennsylvania Blue Shield Plan March 23rd, three months after I graduated. Then we married that June, June 30th, 1951.
I worked for the Pennsylvania Blue Shield Plan until 1960. In the meantime, my wife and I had three children, Bob Jr. born in 1952, Tom who was born a year and a half later, and was subsequently killed in an accident seven days or so before he graduated from high school. My daughter Peggy, who was born 18 months after Tom, now lives up in Martha's Vineyard in Massachusetts, married to Doug Best who is our senior vice president of corporate development. Peggy has two children, two daughters, 13 and 14, Cory and Katie. My son Bob lives in Vermont, married to Janie. They have a little daughter, Aylee. Bob's a graduate of Penn State in archeology. My daughter went to Penn State for two years and graduated from Western State in Colorado, where she met Doug Best who as I said is our senior vice president of corporate development. He is also a graduate of Western State in Colorado.
I worked for those first nine and a half years with the Pennsylvania Blue Shield Plan as a professional license representative. Every year I addressed 92 hospital medical staffs in 29 counties of western Pennsylvania, including the city of Pittsburgh. I also addressed a couple of dozen medical societies and a couple of dozen specialty societies and I think at the end of nine and a half years I knew about 5,000 physicians personally. Over the last three or four years, I actually handled union or management relations for the Pennsylvania Blue Shield Plan nationwide.
It sounds like a very big job--and it was a tremendous responsibility, but you'd never know it because I still had the same title of Professional Relations Representative. I think I started with 3,000 a year and 1960, nine and a half years later I think I was up to 6,300 dollars a year. When I look back on it, it's hard for me to believe that I stayed, but I did. I was always told that I was going to be given this job as vice president of union and management relations nationwide, but I resigned before that happened. The guy who subsequently took my place Robert Rinehimer did in fact become the president of Pennsylvania Blue Shield Plan.
I became the district director for the Muscular Dystrophy Plans. My first assignment was field representative/director for the state of West Virginia, which was the most economically depressed state in the country. This is in 1960. President Kennedy made his name in campaigning in West Virginia, being sympathetic to the plight of the people of West Virginia, it played a big role in his campaign. Muscular Dystrophy had never formally campaigned in the state of West Virginia. They had one chapter, it was disorganized, in Morgantown. So I really had a great time in many ways. I enjoyed my work with muscular dystrophy. I was the only field representative of 95 to make his goal that year. I was then promoted to handle the campaign, and also handled patient services. We handled everything. We organized and managed the chapters, we were responsible for the audits and everything else and all the campaigns. I handled that following year, the campaign for the city of Pittsburgh. I actually made several innovations in campaign techniques, and enabled the campaign to break all the records by 27%. Subsequently Marion Novak, who is a legend in the cable television industry having run the western part of the country for TCI, broke that record. He just retired about four or five years ago. Going back in the history of TCI, when TCI a million 200 thousand subscribers, Marion Novak was in charge of 700,000 of them. Marion worked with me in muscular dystrophy and he stayed for so many years, and then I hired him in the cable business in Centre Video.
SMITH: Let's trace your move from your position in muscular dystrophy to cable.
TUDEK: I'll do that. I worked in Blue Shield from 1951 to 1960. Then from Blue Shield I went to Muscular Dystrophy for two years. I went from muscular dystrophy to being the general manager of the Master Builder's Association in Pittsburgh and the Construction Advancement program until 1965. Master Builder's Association is a non-profit association of builders in the construction industry, not homebuilders, that's industrial and institutional builders, large contractors. And we got a construction advancement program. Every contractor in 29 counties had to contribute five cents an hour for union employees for all projects and that money was used to advance the construction industry. I was in charge of this fund, I was the first employee. I was the editor of three publications, general manager of the Master Builder's Association and my first job was to build up the membership in six months, and I doubled it, as I had bragged in my interview.
I was a trustee of eight or ten welfare and pension funds in the construction industry. I was an officer and a member of the investment community of every one of these welfare and pension funds. We had probably two, three hundred million dollars worth of assets. We had our own claim processing company, non-profit organization. Again, I was the head of that. We processed thousands of claims a day. This represented all the construction employees in half of Pennsylvania.
At that time, I said to myself, I was really getting nowhere in life as far as leaving footprints in the sand. I got to thinking about that, about wanting to leave some footprints in the sand. I started answering ads, in various newspapers, the Wall Street Journal, New York Times, the other papers, looking for things where I could make some major contribution into something. I saw this ad in the Wall Street Journal that said 'treasurer, dynamic new Industry, cable television, headquarters located in university community, reply Box 420.' I think I was one of almost 500 applications, I think that's what Jim Palmer told me. This turned out to be Centre Video and Jim Palmer, a pioneer in cable and at that time owned 38% of Centre Video and a companion company, C-COR--which is still alive today, and building amplifiers for the industry. Jim Palmer gave me an interview at the Greater Pittsburgh Airport, actually in a motel nearby. He was interested in me because I had absolutely no experience in cable or anything like it. He didn't want to have to retain me so to speak. So I got a second interview here at State College, Pennsylvania, which was my first time that I ever visited State College. Even though I had 29 1/2 counties in Blue Shield, I only had half of Centre County. I had addressed the Philipsburg Hospital staff each year, but I'd never come over the mountain into State College, Pennsylvania. I had the interview, and got the job, not as treasurer, but as vice president and general manager of Centre Video. Again, I started on March 23rd or so, within a day or two of that in 1965. When I arrived here, Centre Video had 9,000 subscribers. We were a pioneer company, even though they had been in operation since either '51 or '53, the predecessor companies. Centre Video was actually started by three professors at Penn State, Haller, Raymond and Brown. They started a company in manufacturing. One of the three became head of research for, I think, General Electric. One of the three passed away in a drowning accident, and the other had a very prominent position, subsequently. They are the founders of HRB-Singer, Inc., a local State College industrial plant. They've had quite a history. But in those days, they started a company to build pre-amplifiers. This was part of Haller, Raymond and Brown. Haller, Raymond and Brown then sold to Singer.
At that time, Jim Palmer who was an engineer working for Haller, Raymond and Brown, was given the assignment to work part-time for the State College cable TV system, which I think just wired part of the community. I was told that after three days he resigned from HRB-Singer to take on the job full time, with this particular little cable system here in State College, which subsequently bought the cable system in Bellefonte. I think this was something like 1953. This company employed my partner, who I will talk about quite a bit, Everett I. Mundy, in 1956. They did business in the name of Centre Video. Everett subsequently became the chief engineer of Centre Video, and by this time the company had been spun off of HRB and owned the cable system and the manufacturing company. The board decided to spin off the cable television division, which became known Centre Video. Members of C-COR got three shares of Centre Video for every stock of C-COR that they had. By then, they also had the cable TV system in Kane, Pennsylvania and Towanda, Pennsylvania. They're both up along the Pennsylvania/New York border.
Centre Video had the State College system and the surrounding townships, and they had Bellefonte and the surrounding communities.
SMITH: Did they have these systems before you came?
TUDEK: All these systems were in existence when I arrived. They had two systems here locally. One in State College, one in Bellefonte, each had their own master antenna. State College system had the borough of State College, and the borough of Milesburg and the borough of Boalsburg, the borough of Centre Hall. Then they had all the townships surrounding State College; Fergusson Township, Patton Township, Harris Township, and so forth and so on. In Bellefonte they had the borough of Bellefonte, and the borough of Milesburg and the borough of Centre Hall. Then they had the townships surrounding Bellefonte, I think there were three townships around there. So between the two systems, they had approximately 7,000 subscribers, because they had approximately 1,000 subscribers in Kane, and approximately 1,000 subscribers in Towanda. Overall they had 9,000 subscribers in March of 1965.
They had been in operation now, in State College and Bellefonte from somewhere from around 1951, when the initial construction was done and Palmer came onboard in 1953 and Everett Mundy, my partner, in '56 and I arrived in 1965. I was hired as the administrator. I was actually replacing Floyd Fisher, who had been the part-time vice president and general manager of Centre Video. He was the full time Director of Continuing Education at Penn State. He played a big role in that field nationwide. I think he subsequently was president of the National Continuing Education ... He was told that he had to make up his mind as to whether he was going to work full time for Centre Video or stay with the University and he chose to stay with the University. As did William Christoffers, who was the part time treasurer for C-COR and Centre Video and the full time assistant comptroller for Penn State. Bill was given the same story, he had to make up his mind and he chose to stay with the University. He subsequently became the comptroller of Penn State. Fisher and Christoffers each owned 5% or so of the company, by virtue of warrants. Because of the role that they had played in the company, that 5% especially in the case of Floyd Fisher became real important in his retirement. It was worth a considerable amount of money. In Christoffers case, it wasn't that important, because Christoffer's in-laws were very successful in their investments, including their investment in Centre Video, in the Kane Cable TV System. Christoffers played a role in getting that franchise in Kane, and Fisher played a role in getting the franchise in Towanda.
Christoffers' wife inherited quite a bit of money whenever her Dad passed away, including the stock that her Dad had in Centre Video, by virtue of Kane. Christoffers and Fisher, along with two other Penn State people were members of the Centre Video/C-COR Board of Directors. Marsh White, a Ph.D., who was a professor of physics at Penn State, and allegedly got the first Ph.D. degree ever, awarded at Penn State. He was on the board along with Phil Walker, a Ph.D. who was the head of the fuel science department at Penn State. The other members of the board along with Jim Palmer and his wife, Jim Palmer had 38% of C-COR / Centre Video. The other member of the board was Jack Wilkenson, the brother of the prominent lawyer who had been Penn State's lawyer for many years for the firm of Love and Wilkenson. The lawyer became the head of the racing commission, and Wilkenson became a judge in the Commonwealth Court of Pennsylvania, and then for a brief period of time a Supreme Court judge in Pennsylvania. Delbert McQuade took his place as a lawyer at Penn State. Delbert McQuade was Centre Video's corporate lawyer. He took the place of Wilkenson in that firm. Jack Wilkenson who was on the board was in the furniture business in Bellefonte and I was told did quite a bit of business with Penn State when it came to furnishing furniture to Penn State.
The other members of the board, were Matty Mateer, the legendary head of the restaurant and hotel here in town, State College Hotel, and Gordon Kissinger, of Kissinger and Vine Real Estate. Matty Mateer was chairman of C-COR, along with Wilkenson, Jim Palmer's wife, Jim Palmer, Fisher and Christoffers and a guy by the name of Knapp, who was actually secretary of Centre Video and C-COR when I arrived. He had had a very prominent job with HRB-Singer, but he subsequently resigned. And another member of the board when I arrived was Benson, who was the founder of Chemcut here locally. He left town and he resigned along with Knapp, when Knapp was reassigned by HRB to a company in Virginia, he resigned as Benson resigned.
SMITH: What is Chemcut?
TUDEK: Chemcut is a very prominent here in State College. This was the organization that I joined in 1965, as vice president and general manager. Jim Palmer was president, the shareholders spun off from one company to another. I attended the first board meeting several weeks after I came on board, and I had the guts enough to suggest to the board that they give me permission to get the franchise in my hometown of Glassport, Pennsylvania. Jim Palmer immediately objected. He said, "How could you possibly build a successful cable TV system in Glassport, which is in the Pittsburgh television market?" No systems at that time were successful in this kind of area, because there were already five television stations in Pittsburgh. And here in State College, he pointed out "As you know, gentlemen, you can only get one signal" and that was Altoona, channel 10 although people who lived on some high hills could get Channel 6 in Johnstown.
SMITH: This was in 1965?
TUDEK: That's right. We had a five-channel tube system here in Bellefonte and State College. But twelve channel systems were now being built. By then I think Barco had already had a twelve-channel system built in Meadville, Pennsylvania and there were several others. Palmer said there were five stations and people could get five and I said "Well, that's not true." He said, "What do you mean?" I said, "Because of topography, they can't get one or more of the networks. In some valleys, they can't get CBS and in others they can't get the ABC depending on the way the valley happened to run. Quite a few people could not get the ABC. The transmitter was located right over the top of the hill in Glassport, Pennsylvania, 18 miles south of Pittsburgh. It went right over my hometown of Glassport. The people in the town could not get the ABC. Unless the valley was facing that transmitter, they couldn't get it. A good example of that was north of Pittsburgh where you had on the right side of the Ohio River, going up, the people could get the CBS and the NBC transmitters, which were located a mile or so north of the city of Pittsburgh. All because they faced this valley going right on up the river. But then you had a valley that went east and west in Aliquippa where they couldn't get those two networks. And it turns out that people in both of those valleys had trouble getting the ABC. In addition, I made the remarks that, and I shouldn't have done that, perhaps because I may have offended some of the board members, but they were not because they supported me wholeheartedly. I pointed out that in Pittsburgh, people would be willing to pay for entertainment. They have the Pirates, they have the hockey team, they have this and they have that, they have the symphony, they have the opera.
Actually, here in State College, some of you around the table have been in the cable system for fifteen years and you still have you still have your towers up. And people in State College may visit some ballgames once in their whole lifetimes. That was my observation at the time, because again, none of the directors had taken down their towers. They had towers right alongside the house. Bill Walker still had his tower up and Marsh White and the rest of them. I thought that was pretty humorous, here they were directors and owners of the cable company and they still had their towers up. We had campaigns where we would take down your tower free of charge. They passed it up. They didn't even want the company to take it down for free. I was trying to point out to them, we could sell 30% of the residents before we even showed them a picture. Which would be comparable to what you have here at State College after all these years because you had only at the most 60 or 70 or 80 homes per mile. Overall in the system there were more like 40 or 50 homes per mile. At that time they only had a low percentage of 50% after all those years.
In Pittsburgh, we were busy building in areas that had a density of homes of 120 to 200 homes per mile. If we got 30% penetration, before we showed a picture, we were doing better, it wasn't going to cost us anymore to build. We were going to be doing better there than we did in State College after all these years. And the board was enthusiastic about it, 'because they wanted Jim Palmer to spin off the cable company, to work hard on cable, rather than manufacturing. Jim had his heart set on the manufacturing part of the business.
SMITH: You felt those fringe communities around Pittsburgh made attractive CATV opportunities.
TUDEK: A real big part of my career in cable television was that which occurred as a result of that board meeting. Palmer went along. He at first disagreed, and maybe I convinced him with my logic. I had not been hired to get any franchises. There had not been any mention of that during my interview. I don't think that Jim contemplated that I should possibly do anything like that. I could be wrong; if he did, he kept it to himself. So I went down to my hometown and learned so much in that first franchise battle that helped me subsequently during my whole career. It was really a politically charged situation. They had 12 councilmen, and they had vicious internal battles. They had four factions. I was known in town, and my dad was well known and my family, but not withstanding that, we had these factions, and we had the Democrats vs. the Republicans, although it was mostly a Democratic community. Right from the beginning we got KDKA competing against us. Westinghouse owns KDKA radio and TV in Pittsburgh and of course, Westinghouse had a large system in Valdosta, Georgia. There was also some other local guy from next door, who competed. He was in the master antenna business. He had a development of several hundred homes in operation. He sold TV sets. He had another business in our community. So I had an uphill battle and I got the first reading, I think the vote was something like 9-3...
SMITH: In your favor?
TUDEK: In our favor. The second reading was something like 7-5 in my favor. And then the third reading was against me. You have to have three readings to get the ordinance into law in Pennsylvania. So it was against me. Now I had to get that third reading and it was very difficult, but we managed to get the third reading. I think that vote was something like 10-2. Now I negotiated the antenna site, based on my reputation. In the industry you have to have an antenna site and they're very difficult to get in metropolitan and suburban areas. I got five acres from the community, next to the city dump on the highest part of the area for $100 a year for 20 years and the first two years free. Ever since, all our people have had to try to match me in getting antenna sites and we've had 500 up over the years and I don't think anyone's ever been able to match that one. That particular franchise battle led to my getting 33 in a row.
SMITH: Thirty-three franchises? Over what period of time?
TUDEK: Thirty-three franchises in that area. Over the first year, year and a half after I started. In the end in four and a half years, I'd gotten 69 franchises out of 75 contests. The first 33 franchises, I competed against Westinghouse for my first 18, and they just gave up. I competed against Cox who had Channel 11, the NBC in Pittsburgh. Channel 11 tried to put together a package or two. But I also competed against Governor Shapp after his governorship of Pennsylvania, and the founder of Jerrold Electronics, which is General Instruments today. Jerrold made most of its business not in manufacturing, but in ownership of... and they sold systems. As you know, Shapp took a part of the system that he financed and provided the electronics for it. He did the construction for it. He would end up taking, in some cases they owned the systems 100% and built them themselves, at other times they had a minority interest in the system. They were actually one of the large operators. They sold 100,000 subscribers to Sammons when they finally exited that part of the business. I beat Shapp seven in a row. He tried to do it by having one meeting. He invited the seven councils to that one meeting. I met with them separately. But in the end they did bind together, and I ended up getting all of the franchises. I competed against General Electric, I competed against Art Rooney, and his sons who were the owners of the Pittsburgh Steelers. Now they were the toughest competitors. They had actually been in the business. They only had a small system in Butler County, nearby and they bought some franchises in eastern Pennsylvania.
Art Rooney, of course, was probably the most loved man in sports at that time and he was until the day he died. He and his son approached us and wanted to form a joint venture and get the city of Pittsburgh. Without any question, we could have done that without any difficulty at all. Jim turned it down. He felt that we had it surrounded and I assured him that Pittsburgh was not going to grant a franchise, if they didn't grant it to us, for many years to come. He felt whenever that time came, we would be strong enough to get it on our own. So we turned Art Rooney down. But he competed against me in Clairton, which was a town across the road from my hometown in Glassport and he competed against me in all the communities in the Ambridge/Aliquippa area, which is a beautiful system today called Keller Cable. I would imagine has 30 or 40,000 subscribers or more.
SMITH: Can I interrupt you a second and ask you what do you see as the advantage you had over competitors such as Westinghouse and General Electric in the franchising process?
TUDEK: I'd like to talk on that subject, because in addition to beating them, I really walloped Time. Time exited the business, then they got back into the business. When they got back into the business, I think they spent three or four hundred million getting back into the business, and they bought a system in western Pennsylvania called ShowTime. They teamed up with a local promoter in a community called Turtle Creek. It was the first system built in all of Western Pennsylvania. Turtle Creek is located in a bowl. You simply can't get any reception at all unless you live on top of a hill in that town. He only built four city blocks and he had 400 subscribers. He had that four city blocks sitting in they're for something like ten years when I arrived in 1965.
Now this gentleman promoted fights and civic light opera shows. His business was providing financing for people who got licenses for bars. He had all these political contacts. Then I came in and get all these franchises and he's saying to himself "How dumb can I be. I've been sitting here all these years with this system." So he tried to get franchises and he did that by forming a company with Time-Life. He ended up with twenty percent of it. Right next door to the system that Time-Life bought with him was the community of Penn Hills with a population of about 70,000. That's the largest community outside of Pittsburgh in all of Western Pennsylvania. I think it's even larger today than both Johnstown and Altoona. So Time-Life had seven, and I'm not exaggerating, they had seven attorneys come down for the meetings. I was by myself. I had no attorney. Our people were busy, I had nobody in the company with me. We got a unanimous vote, which was the first unanimous vote this particular council had had in something like twelve years. But Time-Life was only one of the about eight or nine competitors. Art Rooney was a competitor, along with the outfit that had New Kensington and sold to Comcast, which was really one of the cornerstones of Comcast Company, and I'll be happy to tell you that any time you ask them.
Then in addition we had Dynamic Cablevision was in there and General Electric I think was in there and the Altoona group was in there. At the time, shortly before that, they actually had the largest system in the country in Altoona. There were a number of competitors, and we ended up getting that franchise in a unanimous vote. My argument was that we were the only company that met all eighteen specifications. In the case of Time-Life they missed on four. One of them inadvertently, they didn't agree to give the schools free service. This is something everybody did in the industry at that time. I guess these boys didn't know that. So it happened that the school had built a $200,000 dollar studio. It was a new high school, and they had a new studio with all the equipment and everything else, and here's Time-Life saying they weren't going to give them free service to the school. In addition, I argued that Time-Life had not submitted a certified audit in accordance with its specifications. Lawyers jumped up and screamed and what they had submitted was a little brochure that they give the shareholders. A little short version, you opened it up, maybe two or three pages, gives the highlights, notes. Specifications called for the balance sheet, program logs, notes. I argued that I wasn't an auditor, an accountant, I know that the councilmen weren't. If you would just look at it, this was not a certified audit with all the notes. The councilman volunteered, "You're right, you're right, that's not an audit."
These guys were jumping up. It was a ball. The truth be known because after the meeting, the guy I'm talking about, the guy who had the system in Turtle Creek, he was coming out of the meeting with me and he said "Tudek, are you a lawyer?" and I said no. He said "Here we had seven 75,000 dollar a year lawyers and not a damn one of them was a certified auditor.
SMITH: That individual that you're referring to is not Edgar Smith?
TUDEK: No. This guy was the local guy who owned Turtle Creek and owned 20% of this company called ShowTime, who was the applicant for this franchise and Time-Life owning 80% sent down these seven attorneys to represent Time-Life and ShowTime. The tragedy, with all his contacts, and everything else, he could have gotten every one of these franchises long before we ever arrived, except he didn't know the value of what he had, having had this first system in Turtle Creek. I think there was a great deal of irony there. Anyway, later on, this system in Penn Hills included another six or seven communities attached to it. Today it is rather a very large system that probably has a potential of maybe two hundred thousand. There is certainly a hundred and fifty thousand potential in that system. Communities that were added were very substantial, including a town by the name of Wilkinsburg, which was next door. It was all to be served by one master antenna. And he was the developer of a new apartment complex in the community. And the community really needed developers and people interested in making investments in the community. He had every right in the world to expect the city council to support him, because there weren't very many people making investments as he was in that community.
So I go in there and end up getting the Wilkinsburg franchise and adding it to the Penn Hills franchise. There's a story behind every one of these things and that one by the way, I got through a Penn State trustee who happened to be a councilman on the Wilkinsburg city council. Actually, as you remember, Penn State played a big role in Centre Video, the company that I worked for. They had four directors on the board. Jack Wilkenson entertained the trustees; he entertained the trustees at his home, and I got him to work with this one trustee of the Penn State board who was on the city council. I went on from there and ended up getting a unanimous vote and took the franchise away from the competitor.
SMITH: I'd like to interrupt you on this Penn State matter. I think at your last interview, you also tended to indicate that Penn State, as a university, played a part in Centre Video. You didn't mean to give that impression.
TUDEK: No, no, Penn State as a university had nothing to do with it. It just so happened that there were people who were on the Penn State faculty who happened to be directors of the company. The University itself, the officers of the University had nothing to do with it. But it just so happened that this one trustee was a councilman. The irony was, in the end, he was the one person who voted against us. He had changed his mind because he had a presentation—he was a technical man by the way, he was an engineer—and one of the competitors had him over to visit his system. Even though he was not an engineer, he so impressed this trustee with his engineering technical ability that he tried his best to have the franchise given to this competitor.
SMITH: Then how can you credit him?
TUDEK: In the beginning, he helped me get aquatinted. You might say I had an introduction to the thing with the other members of the city council.
SMITH: I see.
TUDEK: I was there to sell them. Once I made my presentation to them, I was able to convince them, but I was not able to convince him. In the beginning, the fact that he knew the company...all he did was introduce me.
SMITH: That was ironic.
TUDEK: Yes. In the end he was the one guy who voted against us, the vote I think was 11-1. He had the one vote against us. You asked the question about what advantages we had. The advantage that we had was that we knew the business. We had a feel for the business. It is true that at that time, the industry was developed in the small communities by small companies who made all the technical advances, all the other advances in the industry. They had been in it for some time, they knew the business. These larger companies, frankly did not know the business. They had the tendency to send lawyers and engineers to represent them. They were not able to communicate. If an engineer would explain to a city council his idea of how a cable system works, the city council--frankly it was gobbledygook . The same thing was true for the lawyers. I believe that what enabled me to do this was that I could explain to them what I was talking about, how a cable system worked. Since they understood me, they had a tendency to believe me. They couldn't understand these guys, the way they were talking. It was gobbledygook. When I got through, they understood what a cable system was, how it worked, and so they believed me.
We went from there. A tremendous staff, a management team, supported me. They had been in the business, my partner since 1956, this was 1965 and all the other key guys had been in the company since 1959 or '60, had four or five years before I got on board. They were young, they were very hard working, and they were very impressive. Today some of them work for me at Tele-Media and others have gone on to do some very big things in cable. They happen to be a really talented group of people. The technique that we used was to convince the city council to visit our headquarters and see the system. They got to meet our people and visit our manufacturing plant, C-COR and then go back and visit the competitor, by all means. Make up your mind. Visit a system and knock on doors. Talk to the people, see if they're satisfied. What kind of a company are we. So we would bring them up on weekends, football weekends. During football season I think we had 75, of those about 65 of those councils agreed to come up for the weekend.
SMITH: You'd take them to football games?
TUDEK: What happened is we would bring them up by bus, or they would drive up, and they would come up on Friday. We would have a nice dinner. We would show them pictures in my home or somebody else's home, mostly my home and entertain them there. Then we would have breakfast on Saturday morning and we would take them out and we had an agenda. If the wives came along, my wife would take care of them. She had a bus and she would take them on a tour of the area. She showed them the trout down there in Bellefonte, in Spring Creek, fishing. We had a tour for the gals. We took the councilmen to C-COR. We had an agenda, we went right from the beginning, gave them all the business about amplifiers and master antennas, what a modern master antenna shack would look like, the equipment would look like. We had slides, we had a presentation. Jim Palmer had a half-hour as an example, Everett Mundy had a half-hour, I had a half-hour, and we had that broken up. Then we would take them on top of the mountain and show them the master antenna up there, 100' tower on top of the mountain.
At that time we had a 5-channel tube system. So I had to say to them, this is really great because now you can understand how cable developed and so forth and so on and it's so much easier to explain to you. But down in the factory, you saw the rack with the master antenna equipment, the broadband stuff and everything we're going to do in your town. We had to show them slides of the master antenna that we had built in the other communities. We had already had the 12-channel system in Mingo Junction and Bryan, Ohio and Folansbee, West Virginia. So we showed them a picture of those towers, slides. I still had to get over the fact that all we had up there was a 5-channel tube system.
Then we would come down and take them to the ballgame. Then we had a dinner. The following morning, on Sunday, after breakfast, we had lunch at the State College Hotel, the same menu, chicken noodle soup and what have you, with peas, I remember, mashed potatoes, strawberry sundae. I want to tell you, the truth of the matter is that in most cases, the council was fighting over who was going to make the motion to give us the franchise. They almost had some fistfights about who was going to make the motion, who was going to second the motion. Many times they never went and visited the competitors. But in some cases, I'd say about half the cases, they did go and make one or two trips. We won 33 in a row.
Then I lost the first one to Jeannette, Pennsylvania. And again, I'm struggling with the name, because the guy, maybe you could help me, owned Greensburg with his brother who had New Kensington. And he's a resident here now part-time at Penn State. He did all the football games for Penn State. He owned the radio station in New Kensington, his brother owned the radio station in Greensburg. He sold to Shapp, by the way and then Shapp sold Greensburg to other people. But this guy ended up getting the franchise in Jeannette, which is next door to Greensburg, by promising them a FM radio station, which he gave them. So he whipped me there by giving them the FM radio station, which I think is still there to this day, in addition to the cable TV system which he sold to Shapp, subsequently and there have been many owners. Five or six companies have owned matter of fact, that Greensburg system since then. It may be owned by TCI today.
We went on from there. I never did loose a franchise to a large company. The competition in those days was really local. We had impressed people with the fact that we were the local guys. This is why so many of the franchises nationwide were done by local people. In the end others came in and the local people no longer were involved in a great many of them but they were the ones who got the franchise originally.
SMITH: Did you have to, in any of these situations, share a percentage of the franchise with local people in order to get their support?
TUDEK: Not at all. As a matter of fact, our franchises, many of them had no franchise fee, or one or two percent franchise fee. There were only a couple that had owner's terms and that was later on in our own company. I don't think I got a franchise in those first 69 that had what you'd call an owner's term like where the city had the right to buy the system as an example. In fact, in most cases, they did not have the right to regulate the rates. I'd say that in half the cases, they did not have the rights to regulate the rates. The franchises were all for 20-25 years, so forth and so on.
SMITH: Were they exclusive?
TUDEK: They were all non-exclusive. Jim Palmer took the position, and I agreed with him... that the Pennsylvania State Cable System, had hired a very prominent former official of the state government, attorney general or something like that to do research on that subject. And his research was that the Pennsylvania franchises had to be non-exclusive. Based upon that legal opinion, we took the position that the franchises were non-exclusive and so stated. It helped us get the franchises, but we had a provision in there that if they granted the franchise to someone else, it had to be on equal terms. We protected ourselves from that standpoint. But we always said, from the beginning, in my presentation, that we were asking for a non-exclusive franchise. There were also franchises that I got at Bryan and Mingo Junction, Ohio to add to the Folansbee franchise, which Jim Palmer had gotten before I arrived. We also built that one in Clarion that I saved. But the rest of them, as I recall were right around the city of Pittsburgh. When we built those first 12-channel systems and Pittsburgh had three networks, of course, ABC, NBC and CBS. Then they had the two educational stations, one was part time. And they actually had an independent station, which went off the air, subsequently. So we did have an independent. In some parts of Pittsburgh, under the rules we were able to bring in Channel 6, Johnstown and Channel 10, Altoona. Johnstown was NBC and Altoona was CBS. Then we also could bring in some part of the Pittsburgh market, the stations from Steubenville and Wheeling, channels 7 and 9. And again, they were network stations, so one of them as I recall was a cherry picker. It carried several networks. Actually, in some of the areas, some of the other operators carried some of the Youngstown stations. I think Comcast did in New Kensington, subsequently. I don't recall carrying a Youngstown channel. I could be wrong, oh, I am wrong, because in Midland we did in the Keller Cable Complex in Beaver County. So in Beaver County we did cover Youngstown. But again, they were duplicates. There was no independent station in all of the Pittsburgh market. That was the difficulty that we had. We had no microwave bringing anything into the Pittsburgh market. We had nothing but duplicates of networks. Around Youngstown we had none. Cleveland was too far away, of course. That was it. We gave them twelve channels, but they had three CBS's, three NBC's, two ABC's, a time and weather channel and so forth and so on.
SMITH: These were all directly off the air reception?
TUDEK: That's right. Every one of them was directly off the air reception. We had no microwaves in that area and no microwave coming into that area in that period of time. But we built the best parts of those communities. We had a difficult time raising the money.
SMITH: I was going to ask you to address the problem of financing the construction of, were those 69 franchises over a period of four and a half years?
TUDEK: Right. And most of those franchises I really got in about three years. I'd say 65 of those franchises I got in the first two and a half or three years of the thing. I had nothing to do with the financing in the beginning excepting that I did the cash-flow projections. I did 100% of all the cash-flow projections. Jim had tried to get money from all the banks. There weren't that many banks that were lending in those days. If I recall correctly, you had one on the west coast, and there were one or two perhaps in Chicago. There may have been one in Dallas, I'm not sure about that at that time. There was just one I think in Philadelphia and there was one in Pittsburgh, Pittsburgh National Bank. There were none in Cleveland at the time. You had two banks in New York, maybe three, I think there were two, and perhaps one bank in Boston that were actually making cable loans. Now there were other banks that lent money to cable people, but they weren't a cable loan. They had other collateral. Sure you can always get a bank to lend you money no matter what you want to do if you give them the appropriate collateral, but they weren't taking the assets of the cable system or stock of the cable system as collateral. They took the man's real estate as collateral, or his farm as collateral, or his stock or his bonds. A good example of that, Mellon in Pittsburgh took Canonsburg in a cable loan, the home of Perry Como and also Bobby Darin. But they never considered it a cable loan because it wasn't, they took the guy's real estate as collateral. They never even knew they were in cable.
The actual banks that took assets, the cable assets or stock of the company as collateral were very few indeed in 1965. There were finance companies that made some cable loans. Actually Economy Finance in Indianapolis, which there became FirstMark, they did quite a bit. And then there was a finance company in Baltimore. Later on there was a finance company in Chicago, Becker, staffed by people who had left FirstMark to go to Becker. And then of course you had Bedna Business Crediting of Hartford who did quite a bit.
SMITH: In those early days?
TUDEK: That's right. In the Business Credit Inc. I'm not sure they showed up until the seventies, but FirstMark and Ford and Heller Oakes--actually Becker didn't start until the seventies. I remember that because Tele-Media gave him his first consulting job. I met with him in the Pittsburgh Airport in 1972. So actually Heller, Oakes and Becker did not start until 1972. So in 1965, we Economy Finance and one other finance company, maybe two somewhere. Jim went to all the banks and he went to all the finance companies with my cash flows. He had some people from Saudi Arabia, he had the Venture Capital Funds, quite a few of them all over the place that he went to, where ever he found there was a venture capital outfit in Wall Street, what have you.
So I did the cash-flow projections from A to N in the alphabet, at that time we probably had 50 or so, 60 in hand. We made a combination of 30 of them in several systems. We were going to build the valleys of those 30 communities. We wouldn't have any problem getting or meeting our projections because we weren't going to build on the top of the hill. We knew, everybody knew, that if you were on the side of the hill you couldn't get this network. So that really made Pittsburgh a classic market as far as I was concerned. We told the bank we were going to build the safe areas of each of these 30 communities and then later on we would have phase 2 and then we would have phase 3 and then we would have it all built. Now in some communities, we had to build it all because we had a bond. As a matter of fact, in some communities we had to build five miles in six months. We had four or five of those where we had to build five miles in so much time. We had $10,000 dollar bonds and $25,000 dollar bonds.
SMITH: Did you ever default on any of those?
TUDEK: No, never once did we default on a bond. There is quite a story involved in this. And remember this is not our company. This former company, the one I honed my teeth on. I had this projection in. I had finished it up and I was taking it over to Jim and I wanted to go over it with him. He had someone in there, meeting with him in his office and waiting to meet him, seated at the desk. We got to talking. Turns out that he represented an accounting firm in Philadelphia who concentrated on cable TV accounting.
SMITH: William E. Howell?
TUDEK: That's it, I think. This firm was Shapp's accounting firm. I don't know if it was Howell or not. The guy who headed this accounting firm, when Shapp became governor, had a big job in the administration. It's a shame I can't remember his name, because he played such a big role in my life and in Jim Palmer's life. He should be looked up and until the day he dies, Jim and I should be sending him a case of champagne. This guy looked at the cash flow. He said "What are you doing?" and I told him. He said, "Do you mind if I look at your projections?" I went into Jim and I said "This gentleman out here would like to look at our projections, do you mind?" and he said go ahead. What he was doing, he wanted to talk Jim into using their firm as our auditors. He looked at these projections and he said, "This is exciting. Would you mind if I showed these to a bank that I think would be very interested in this?" He said, "I'll tell you what. So there won't be any conflict, you can even cut off the name of your company at the top of it. I'll just show these to a bank blind. He fully intended to supplant Toush. I don't know why because today accounting firms make more money consulting than they do with accounting. He thought it was a breach of ethics. He cut off the talks and went back to Philadelphia to the Fidelity Bank and they were very interested. We had a call from a gentleman by the name of McCarthy. I think his first name was Bill. This gentleman had been the banker for Shapp's company Jerrold, including their cable systems, so he was probably the most familiar with cable of any banker in the country, by virtue of the fact that he had been the banker for Shapp. Shapp had quite a few cable systems. It so happens that this particular bank merged into Fidelity. He was on Shapp's Board of Directors all this time and now he was doing this financing for Fidelity out of a branch bank which is where he was originally located. He had a black gentleman by the name of Jones. What a role he played subsequently, not only in this company as well as our company. This guy had been McCarthy's analyst for some time. As far as I was concerned, I had every reason to believe subsequently that he was the most competent analyst in the business. He had done quite a few deals with McCarthy. They may have not had the most money in the cable but I believe by far they had the most number of deals in cable TV at that time. They got very excited about this thing and asked to come on up, McCarthy and this black gentleman Jones. This led to a loan of 5.3 or 5.5 million dollars for stage 1, and then another million for stage 2. We had showed that we were going to meet 30% of the potential before we even showed a picture. We would end up with, after cancellations, we would still end up with 30% of the potential in any one of these systems, a minimum.
SMITH: Are you back to Glassport or are you talking about the group as a whole?
TUDEK: We're talking about Glassport and the other 29. I forgot to tell you how we impressed McCarthy and Jones. Earlier in Glassport, Jim approved a budget of 25,000 dollars to build three miles of system, a master antenna at 12,500 dollars, which Everett built with poles rather than a tower, which everybody expected, naturally. It was a steel town, Pittsburgh Steel Foundry, Copperweld Steel, a whole area is a steel valley that's what it's called-- Steel Valley Cablevision. He had to build with 12,500 a big antenna site with utility poles and a platform. I guess that system had in the end, I don't know how many communities before we were finished. To this day it probably has 30,000 subs today. So this master antenna that Everett built for twelve thousand five hundred dollars served all of these communities. Matter of fact Duquesne was a third class city, at one time had a population of 35,000 people. Clairton was a third class city and had a population of 35,000 people. It served Drabosburg, Duquesne, Liberty Boro, Lincoln Boro, Glassport, Elizabeth, West Elizabeth, and Clairton.
But we, in the beginning built three-mile systems. I promoted one of our installer/technicians, Russell Bambarger as manager, to go down there and do that. We built the three miles and the master antenna and we got over thirty percent. After cancellations we ended up with thirty-five or forty percent. This was how we were going to convince the banks. We did convince these guys, McCarthy and his associate. And we got the loan and we ended up having to meet those schedules so we wouldn't loose those bonds. One town, Wall, a location of a religious television station today, everybody sees up on the satellite, we had to build that whole community within 90 days or loose the bond. It was a relatively small community. We had to build five miles of Duquesne or loose the bond. We had to build five miles in Midland, Pennsylvania or loose the bond. Midland was right next door to Youngstown, right on the border there in Beaver County. In order to meet our projections, we had to get 4,000 subscribers within three months after construction started. And six thousand within another couple months. We had every single projection, monthly, quarterly, semi annual and annual, and we met every single construction deadline in every community we told we would have on by such and such a date we did it. This was no mean job. Really, everybody in that company from Jim on down, did a hell of a job meeting all of these projections. Then we continued to get the franchises that took me up to '69.
During those days, Pennsylvania was by far the largest outfit in the country. Jim played a big role, we were having a ball, and although I think near the end other states were coming in pretty strong. I think California was by then pretty doggoned big and really going. And that was brought to my mind by the convention in San Francisco in 1969 0r '68, where my wife and I rented a car and we drove down along Route 1 to Los Angeles to visit one of her relatives. Every time we came to the top of a mountain down below me was this California town in a bowl, and it was nothing but an antenna farm. Every single home in that particular community had the same type of antenna. There was just an antenna farm. There were 20' or 30' sticks. I said to my wife "By golly honey we're going to get down there, we're going to get this franchise, we're going to build this, we're going to live here. We'd get down to the bottom and there would be this tube system. And an old one, you could see, hanging there, that had already been. Same thing would happen in the next town. I kept being disappointed. All those towns were built by then on Highway 1 going down. I could not find a community on that highway in those valleys that had not yet been built.
SMITH: And this again was back in...
TUDEK: Sixty-eight or nine, I think it was more like '69 when we had the NCTA Convention in San Francisco. We drove down and I couldn't find a town on that highway. Doesn't mean there weren't towns off the highway, I'm sure there were, but on that particular highway, in those valley towns, they were all classic communities that had these antenna farms. They were all built, and had been built for some time. I could tell by the construction that they weren't new systems, they had been hanging up there. Most of them were tube systems, if I recall correctly. Maybe I'm wrong about that part.
SMITH: It would have been at that time.
TUDEK: I think so. There were a few. By then Barco in Meadville had the 12-channel system built. As a matter of fact, he had a Pennsylvania State Association meeting in his community by then. He had a reputable show in 1968 where we all met there for a state meeting and we all saw his 12- channel system.
SMITH: You're talking about George Barco of course.
TUDEK: Right. George Barco who was an attorney and one of the founders and one of the first presidents of NCTA, director of NCTA. He was a director and quite a guy. He was a graduate of the Pitt Law School. I happen to be a graduate of the University of Pittsburgh. But Penn State honored Barco in the end and I think I was president when he got the Penn State medal, if I recall correctly. He came in not long before he passed away and was honored by Penn State. At any rate, Barco had a 12-channel system back then, and there weren't many of them. He had to be one of the first. I don't want to say he was the first, but he had to be one of the first in the country of that 12-channel system.
But these old tube systems were hanging out there in California. So California was already pretty far along. In those days though, being from Pennsylvania in the business, you were really playing an important role in the industry. I was taught right from the beginning that Bob Tarlton was the founder of cable television. This is how I told the story to everyone, his story where he had this TV appliance store and he sold pictures to the people in the community and tied on to the master antenna that served the sets in his store. He did that in order to sell television sets. And, by the way, I had every reason to believe that because when Pennsylvania had their meeting in Carlisle, which I think you'll believe the record will show had to be 1966 or '65. George Gardiner had everybody in his home for a cocktail party, his very wonderful home. I met him and his wife and it had to be in 1965 because I came on board March 23, 1965 and I think this was in May of 1965. I happened to spend the evening with John Walson. John was not drinking that evening, and he latched on to me. I was a young guy and I was all ears, and I don't know that I said ten words to John that night, but he had me for hours. I was smart enough to listen to everything he had to say. He gave me his whole story, which of course everybody knew about how John started out as a TV repairman, had six weeks of schooling I think somewhere around Chicago, and he got into the business working with the power company. Got on the poles. And now he was telling me about his big fight in Allentown, where he was being overbuilt or he was overbuilding, I don't know which, I can't recall. And how he was going to lick the Chinaman, his competitor, even though the competitor had a better system than he did, by his marketing skill. He knew how to market and his competitor didn't. He gave me everything he had including the fact that he had just given 40,000 subscribers of his to his daughter. I think he lost his son-in-law at that time.
SMITH: It was his sisters, his two sisters.
TUDEK: Yes, he gave 40,000 to his sisters, but one of them lost her husband, I think, at that time.
SMITH: That could have been.
TUDEK: He had given 40,000 subscribers. He was at that time I think, one of the largest operators in the country. I think he had 200,000 subs or something like that then, or some number close to that, 160... and he never did ever get over 200,000 over the years.
SMITH: We can check those numbers.
TUDEK: But he had a rather large number of subscribers. As a matter of fact, when I first got into the business, I thought from memory that Williamsport was the largest in the country with 10,000 subscribers in 1965 and the records I think will indicate that. Not long after that, a year or two that Altoona had the largest system in the country with 30,000 subscribers. That's my memory. And of course H&B American subsequently, a public company was the largest in the business, with TelePrompTer being number two. I think Al Stern subsequently sold to Time-Life. He became the chairman. He sold his company after he bombed out in Akron. He became the chairman of Time, of the cable system. Could it have been Warner that he sold his cable system to, because Altoona was in Warner.
SMITH: He sold it to Warner, you are correct there.
TUDEK: He became the chairman of Warner Cable.
SMITH: I think that was the beginning of Warner's acquisition of cable.
TUDEK: At any rate, H&B American were a public company and then TelePrompTer actually merged and became the survivor. But the story that I heard in those days, which I think is worth telling, is about the competition between Kahn, who was the head of TelePrompTer.
SMITH: Irving Kahn.
TUDEK: Who was a legendary figure in our industry and the head of TelePrompTer and Al Stern. They always competed about who was bigger, and at the time if my memory served me correctly, TelePrompTer was Number two and Stern's company was number three. The story in that Kahn had his chauffeured limo, and a car phone. This particular morning, he gets a call and he says, "Who is it?" to his chauffeur. He says "It's Al Stern." So I guess Stern finally got a car phone. And Kahn said "Tell him to call back, I'm on the other phone." So that was the story I heard about that. But I remember that Walson was one of the big operators. By then he already had three microwave companies. He was the one who was bringing in microwave from New York, into the systems in Northern Pennsylvania.
SMITH: I was John Walson's Washington D.C. attorney at the time, and represented him in getting those microwave systems.
TUDEK: There was three systems?
TUDEK: He was an amazing gentleman, but the point I want to make is that I spent every bit of four or five hours with him. Don't ask me why...he was talking non-stop. There was nothing about his company, his life that he didn't give me at that time. And never once did he say that he was the founder of cable television. Never once did he take that credit that night. So subsequently, years afterward, he's now talked about as being the co-founder or the founder of cable television. I just think that was interesting that at that stage in his life, when he was cold sober, and talked with me for four hours and told me everything there was about him from the time he was born. Yet, he was bragging so much about being a better operator than the guy who was overbuilding him in Allentown. He was bragging about everything; about how he had designed his first amplifiers, how he had designed his first microwave equipment. So he was bragging all night long, but not once did he brag about the fact that he was the founder of cable television. I don't know if that is important or not, but I thought it was interesting because John was quite a guy in many, many ways. I always was very happy. He actually taught me a lot and I learned an awful lot about the business and the industry in that talk, because he did really accomplish a lot, there is no question about it, come hell or high water, he did it one way or another. He was a tough man to tangle with.
SMITH: Yes. A lot of credit that he's entitled to in the industry, there's no question about that.
TUDEK: I had the privilege early in the game of spending four hours with the guy and after that I never did talk to him other than to say hello. I treasure those four hours that I had talking to John Walson. Going forward, to the financing, we got that financing and we met our projections, and we borrowed that additional million from the 5.3 or 5.6, took in up to six and a half million. We had the second stage of construction going. And I can recall that Jerry Corman, who became the division manager for Centre Video and subsequently joined our company, was in charge of field engineering for the 2,000 miles of construction that we were going to do around the city of Pittsburgh. Maybe, at that time it was 1,000 before I left. His job was to get us on the poles. Duquesne Light was the power company and Bell Telephone was the phone company. They refused to let anybody on the poles. At that time, AT&T was redoing the CATV pole attachment agreement. All the Bells were taking the position that until they got that specimen agreement from AT&T they weren't even going to let you on the poles. There was a big fight in Pittsburgh between the power company and the phone company about who had the right to that communications space. The phone company was taking the position that they had the right to that communications space by contract with Duquesne Light. In the beginning, each was supposed to have 50% of the poles. The truth of the matter is the power company had 80% of the poles. But nevertheless, they had hundreds, maybe a thousand different agreements. And in each case, Bell took the position that they had the right to that communication space so they had the right to lease it and sub-lease it to the cable companies. They would end up getting the pole rental fee and so forth and so on and everything else. They wouldn't give us an agreement, Duquesne Light wouldn't give us an agreement. We had these bonds and we had these construction schedules to meet. Jerry Corman was in charge of all the field engineering, and he had a budget of 200 dollars a mile. In those days the budget for building the system, if I recall correctly was 3,000 dollars a mile. We did our own construction. C-COR had a construction company and although I did not work for C-COR, I was in charge of construction for C-COR, so I was in total charge of construction. And we did it all. In the end, to make a long story short, maybe I should make a long story out of this because it's very interesting...
SMITH: The telephone company, power relationships...go ahead and make the story long.
TUDEK: Alright, because it is a tremendous story.
SMITH: We need it on the record.
TUDEK: It really is a tremendous story. I went into town and found out who were in charge of pole attachment agreements in Duquesne Light. Turned out to be a gentleman by the name of Peter Krise. He was a graduate attorney, who never passed the bar, never practiced law. But he had worked his way up. He was the guy that had worked on every one of those agreements over the years. He was within two or three years of retirement. He had been doing that for something like forty years. I went in and explained to him who I was and what I wanted to do, and what my problem was. The problem was that Bell Telephone said it was their communication space. They were waiting for the agreement from AT&T, before they would enter into an agreement with us. He got really angry. I wrote all those agreements. They don't have the right to all that communication space. They don't have the right to sub-lease that space, that's our...I said, "It's about lunchtime, let's go to lunch. They were located right across the street from the old Carlton Hotel, which was located right across the street from the William Penn Hotel. Carlton by the way is today no longer in existence. Went over there to lunch. I found out that he was a teetotaler. I was a teetotaler for most of my life. I told him that occasionally I had a drink of wine with lunch or dinner, and I had Harvey's Bristol Crème sherry and why. Because a friend of my friend Natali, we mentioned Dan Natali before, was a whiskey salesman through all of his life and I asked him if I wanted an occasional drink for social occasions what should I drink. He said "Harvey's Bristol Crème sherry." It's the finest liquor in the world as far as he's concerned. As a matter of fact, if you read "The Last of the Mohicans", which was written in 1820, Harvey's Bristol Crème sherry was mentioned there as a famous wine in 1820. Ok, so this guy Peter Krise said "OK, I'll have a Harvey's Bristol Crème sherry now." He liked it so much, that this plays a role in what's going forward, believe it or not. So anyway, we had Harvey's Bristol Crème sherry and I convinced him that if he has the right, let's enter into an agreement, 'cause he's going to end up getting two and a half dollars per pole, all these poles, a lot of money, the whole bit. He agreed with me. He entered into an agreement with me, and we ended up building everything. Jerry Corman did the engineering and we got on those poles for less than 100 dollars a mile. This is truly significant, because subsequently when Warner Brothers built Pittsburgh, I remember, if my memory serves me correctly, it cost them eight to twelve thousand dollars a mile to get on the Pittsburgh poles. They were no different than the poles we got on, none whatsoever, the same company and everything else. To this day, probably a lot of that stuff is still on J-hooks, temporary attachments that was supposed to be taken care of later, and maybe it never has been. But we got on the poles for 100 dollars a mile.
SMITH: That is cost to you?
TUDEK: Cost to the company, Steel Valley Cablevision, all our entities. We had about seventeen of them down there. A hundred dollars a mile to build all this stuff for the change out cost.
SMITH: Even that's remarkable.
TUDEK: That's what I'm telling you. It cost Warner subsequently something like eight to twelve thousand bucks a mile. Then it cost others three and four thousand dollars a mile. We got on those poles for a hundred dollars a mile. We did our budgets for far less than 3,000 dollars a mile. We did it for, if I recall it correctly, 2,000 or 2,200 dollars a mile and in that year C-COR had a fantastic profit as a result. I think they charged us for 3,000 bucks, and I think it only cost us 2,000, so they had a tremendous profit.
SMITH: I hope you saved that bottle of Bristol sherry.
TUDEK: The Bristol Crème Sherry goes on from there, because this guy, Peter J. Krise came to retirement and joined Centre Video after his retirement. And they subsequently built the rest of those franchises from 30 up to 69, and I don't think they ever paid over 100 or 200 dollars a mile for change out cost. And they ended up with more subscribers per density than any other of the 25 top systems in the country did for years. Last time I checked, they still had a higher density/penetration than any other system in the top 25. And it was those systems that kept TCI alive. If you don't believe me, you take the oral history of J.C. Sparkman, and you ask him that question. Because TCI made some horrible . . . after they merged with Centre Video, they made some horrible decisions. I think I mentioned that they merged with Kaufman, Broad, Athena and a couple others...Republic Pictures that turned out to be bombs. The cash flow in the State College system, when I left it was 500,000 a year; subsequently it became higher than that. The cash flow and the money they could borrow on those franchises because when they merged with Centre Video in 1971, Centre Video had 40,000 subscribers. All those franchises and only 100 dollars of debt per subscriber. TCI had 100,000 subscribers, but they had debt either of 300 or 400 dollars per subscriber. Although a lot of it was long term, low interest debt. They still had debt beyond the value of the company. And so Centre Video was really the larger company at the time when they merged into TCI, and had all those franchises and construction money they could borrow, because they were only in debt one hundred dollars a sub. And it was the cash flow generated out of those systems. Because Marion Novak who replaced me, first it was Ralph Stephan then Marion Novak, made all of their goals constantly. And with that cash flow generated in Western Pennsylvania, including these systems in Clarion and particularly in State College, that kept TCI alive.
During that period of time, this was after I left...Peter Krise worked for something like seven years for TCI in that area. He passed away of a heart attack, at the office if I recall correctly, and I attended his funeral viewing in a little community outside of Johnstown where he was born and raised. His wife told me at that viewing that those were the seven happiest years of his life, working for TCI. That he really enjoyed himself, because at Duquesne Light he had never been able to assert himself, nobody ever paid attention to what he did. He had such a routine job. And he had all the satisfaction and friendship and companionship and success and that, by the way, he always had a Harvey's Bristol Crème sherry at dinner. She said she also joined him. They always had a bottle of it. Really, Peter Krise . . . again you can talk to the people who followed me--Marion Novak and Ralph Stephan and Jerry Corman and Russell Bambarger. All the guys who played a big role in this in the Pittsburgh area will tell you the big role he played in the success of those systems. First, getting on in time, meet your construction schedule and doing it for a hundred dollars a mile. We were moving along at that time, and I honestly believe, and said then and I will say today, without fear of contradiction, that Centre Video had the finest cable television company in the business at that time. If you challenge this, we'd prove it to you at breakfast the next morning. You think about it—69 franchises out of 75 contests. By the way, they were all unanimous, except for that Wilkensburg guy, the trustee at Penn State with the one negative vote. One abstention in Midland, Pennsylvania, and one negative vote in Carnegie, Pennsylvania. Out of 69 franchises, they were all unanimous except for those. In my view, we were competing against the biggest and best in the business, including Shapp and Westinghouse and the rest of them. When it came to meeting our construction goals, we met every single one of them...monthly, quarterly, semi-annual and annual. We finally even scored when it came to raising the dough. Jim did not take me into confidences as to why he was going to merge or sell. I attended the board meetings and I know what he told them. Basically, he said that there was so much capital to be raised. It was difficult to raise capital. That he preferred the amplifier side of the business. That's where he wanted to make his mark; this is what interested him. He said to me, on several occasions that anyone can be successful in cable. He wanted to make a contribution in his field, he was a graduate electrical engineer. He wanted to make a contribution in that field, I think he saw the future and knew a lot of what was going to occur in the future by virtue of his background and he wanted to play a role in that field. That was his main interest. It's a shame because I don't think he knew that he had the best company in the business. He didn't know that. Everybody will tell you, every Monday morning at our management team, he reamed me out from one end of the room to the other. Nobody knew why and how I would take it. But of course, Jim and I are friends to this day. I'm so grateful that he hired me number one, and number two, subsequently we bought all of our equipment in our own company from C-COR and I negotiated the best deal that I could get from anybody with Jim Palmer every year. That negotiation never lasted more than five minutes and we would buy everything for a year. The following year I would have another negotiation.
And then he subsequently volunteered to lend Everett and I five million bucks about the time we bought Key West. As a matter of fact, that Key West thing...we did that whole county down there, in Monroe County with money that Jim loaned us, which we didn't have to serve for I don't know how many years. He just called me up one day and offered us the money. Nevertheless, whenever I was working for him, he was the hardest taskmaster and he reamed me out from one end of the room to the other, he may not remember it that way. My management team was always embarrassed about the beating I took from him.
SMITH: After getting 69 franchises.
TUDEK: I'll never forget the board meeting, it wasn't only him, but what really got me hot one time...I think the first year, several things had occurred. We had an annual shareholder's meeting at C-COR, at their headquarters. Prior to my showing up the year before, Centre Video had a profit on the bottom line of 90,000 dollars or 100,000 dollars, I forget what the number was. After my year on board, they had a loss of a couple hundred thousand dollars. Fisher, who I replaced as vice president and general manager, was part time. And I'm up there bragging about these 33 franchises that I got and this and that, all that sort of stuff. I really thought our management team and myself had done a tremendous job at that period of time. Fisher gets up and he says, "Tudek, before you arrived, on the bottom line, we had a hundred thousand dollars. You had this loss." I had to point out to him that we were a balance sheet, not a P&L business. Up on the balance sheet before you had 9,000 subscribers, by then at the end of the first year we probably had 18,000 or something.
I remember, because I want to talk about marketing in those days, before I go into my own company, I had introduced in the company, with the help of my staff and Mimi Barash, real marketing, and improved dramatically the subscriber count. But then I had all these franchises. Even ten or 20 percent of the potential...in those days off the cuff, you could get a value of 10 or 20 percent of the value of the company for having expanded the franchise. I figured how many millions of dollars I had improved the value of that company in that year. It got me angry that I had to defend myself after having done such a tremendous job without his understanding what it was all about. Here this company that had at that time a value of 2.7 million dollars when I arrived, had a value at the end of that first year that was in excess of ten million dollars. The next thing, we had a board meeting. I think at that board meeting I had gotten 43 out of 45 and I was projecting coming on the following year to getting another 15 or 16 out of 20, something like that. One of the guys on the board wanted to know what made me think I could get those franchises. I said I'd already gotten 33 in a row and 43 out of 45 so I think I really have the right to project getting 10 out of 15 or whatever I was projecting. I'll never forget that. Of course, again, whenever I made a suggestion on the board and Jim knocked me down, he told me I knew as much about what I was talking about as that scrap paper in the waste paper basket. I had some suggestion reference to marketing at C-COR. At the board meeting C-COR met at the same time as Centre Video. Keep in mind they were two separate companies with common ownership. They were at the same time at the State College Hotel. Matty Mateer was chairman of C-COR and Jim Palmer was chairman of Centre Video. As I explained, Centre Video was spun off from C-COR. C-COR was the manufacturing company and Centre Video is the cable company. They met that same evening, I think we had the Centre Video meeting first and then we had the C-COR meeting following that.
SMITH: Can you tell me what year this is?
TUDEK: 1965 to when I left October 1, 1970. We had usually monthly board meetings and I attended all these board meetings. We also had an executive committee meeting before the board and I attended those meetings with Jim Palmer, and a guy named William "Bud" Leopold, attorney in Altoona was the secretary of Centre Video. A more knowledgeable attorney I have never met. I dealt with hundreds of lawyers in my career and Bud probably taught me more than any other lawyer that I've ever been associated with, besides being one great gentleman. Bud was the secretary and on the executive committee. At one of these board meetings at C-COR...I did not work for C-COR, but I did run their whole construction and field engineering without portfolio, without additional salary. So I thought I had the right to make a contribution. And one day I dared to make one about marketing, which of course was always the weakness at C-COR. Jim told the board that what I knew about selling or marketing compared to that waste paper in that waste paper basket. So I always give that as an example of the fact that I'm not a salesman. As proof of the fact that here he had me on board and he had all these difficulties in marketing, and never once in our whole career together did he ever asked me for counsel or advice about selling or marketing. When it came to my getting franchises, he always had fifty criticisms of the franchise that I got. Getting off of that, when I arrived Mimi Barash was a neighbor of Jim Palmer's, he lived across the street and they were friends and Mimi was a shareholder at Centre Video/C-COR from the beginning. She has this advertising agency, and as you know, Mimi subsequently became not only a trustee at Penn State, but also the Chairman of the Board of Trustees. Back in those days she was a young gal and her husband had a billboard company called Morgan Signs, and I guess Mimi has that company to this day. She was a contractor for Jim Palmer and handled public relations and marketing.
The two of us really put in a real marketing program. That was her field, and she earned a fee that way, and besides it needed to be done. So we really went at it, like never before. And we made dramatic increases in subscriber count right here in State College and Bellefonte and elsewhere, in Kane and Towanda. If I recall correctly, we took the penetration from about 50 or 60% to 85% within several years. I want to comment that this was nothing unusual about the system here in State College, because in those days the pioneers knew very little or cared very little about marketing. It all came about because they couldn't borrow any money, so they had to raise the dough by selling people to get on the cable system. And they charged them a connection fee of 100 dollars or 200 or 400 dollars or 500 dollars. And once they built that first couple blocks of that town, they actually waited, you might say, for the people to come to them. Actually they were wishing that they didn't because then they didn't have the capital to build. Because what they charged the people was not quite enough money to build that mile, but they charged 150 dollars, so they had to come up with cash flow. They couldn't borrow the dough so they really weren't concerned about that. Once they had built the towers...they weren't marketing oriented for the most part, at least all the guys that I bumped into weren't. They really didn't sell aggressively. In those days, door-to-door marketing was virtually unknown. Whatever they did door-to-door was with Boy Scouts, where they would do it for charity reasons. Just like selling cookies, they would get a donation for the Boy Scouts. As a matter of fact, that was done up in Ashtabula, Ohio about that time, by Boy Scouts. There was some door to door like that. Some volunteer organizations go door to door. Nobody had a real door-to-door team in 1965. Telemarketing was unknown. Basically it was just newspaper advertising or radio advertising and perhaps direct mail.
Well, Mimi and ourselves developed telemarketing in addition to direct mail and then we actually started on door-to-door, hiring people. There was an outfit that beat us to the punch and sold Akron, again we're talking about Al Stern's company. They were building Akron about 1968. It was the first insurance company loan I believe, at least that's the way it was written up. He borrowed ten or twenty million from Aetna to build Akron. And that turned out to be such a bomb, that I think that's why he ended up merging that company into Warner. It's a long story, and it's his story. He had a door-to-door marketing team. The numbers are something like this; I'm not very far off. They gave the 90-day free trial and there was something like 41,000 potential and they sold 39,000. They actually connected 36,000 after the cancellations. They ended up with something like ten or eleven thousand subscribers. That's why in the end Al Stern, in my opinion was forced to merge.
They had some excess capacity there and they wanted us to hire these guys. We did and we put them to work in the Pittsburgh area. One of those gentlemen is still with us today; he's our number 2 man in marketing Bill Forhey. He's been selling door to door ever since then. I don't know of anyone else in the business who has been selling door to door continually since 1966 or '67. But Bob Shepard and myself, although Ralph Stephan was also marketing manager for awhile...along with Mimi Barash developed the door-to-door technique that we use to this day. We have since then, in our old company and our new company, have done door to door in at least 600 communities. We have full time people and we have a procedure and we like to think that there isn't anyone in the country that's done more and as well as we did then and what we do today.
SMITH: What's particularly special about the way you do it?
TUDEK: It has to do with the fact that...first of all, when it comes to door to door, so few organizations in our nation have ever been able to develop a door-to-door organization that lasts. You think about it. Encyclopedia Britannica, the people who sell pots and pans, Stanley, I don't know if they're still in business but for years they were. There are the Avon people and there may be about one more. And over the years, there have been more than dozens of companies in all fields that have tried to develop door to door and bombed out. It's the most difficult selling there is, to get someone to do that day in and day out, year after year. Everybody knows that. People who have that experience know how great that experience is if you're a great door-to-door salesman. You are a salesman. So it has to do with recruitment, has to do with motivation, has to do with support and a system. Unless you have all those things put together, it doesn't last. A lot of the cable companies, all had door to door, tried it and it lasted for a campaign or a city and that's it. Broke up. TCI, by the way, just canned their door to door, everything in marketing just about a year ago when they decided to decrease their expenses, and now they're starting it up again. But over the years, before that they didn't have their door to door. They actually hired contractors all those years. And almost everybody in the business today still hires contractors. As a matter of fact, this is where Marcus got his start. If you take his oral history, Marcus actually had a door-to-door company when he started. We hired him back in Centre Video to do that one system that we had to build within 90 days. He bombed out, by the way. But he's the one that had 3,000 subscribers that he did for Sammons in the Rio Grande Valley that he did in a 90-day free trial. He lost all 3,000 of those subs. He's the guy that helped Jack Kent Cooke save his company when Jack Kent Cooke came rolling into TelePrompTer, Manhattan to take over. He demoted Shaffer, the ex-governor of Pennsylvania who was chairman of TelePrompTer. Shaffer became vice chairman and Jack Kent Cooke came running in from the West Coast to take over as chairman because he was the largest shareholder in their subsidiary, TelePrompTer, Manhattan. They were in default of their loan. That was a real story on its own. This is all documented, the New York Times, the Wall Street Journal. It deserves telling again because people may not know how big a role this incident played in the history of our industry. By then, I think Kahn had been convicted. If you recall he had the franchise situation. The stock was not injured as a result of his conviction, the record will show. It actually went up ten dollars. Although I think subsequently when he went to prison, perhaps there may have been a negative effect. But he was now in prison and TelePrompTer hired Bob Todd of the Pittsburgh National Bank who was a pioneer at the bank in cable lending. He usually was chairman of the committees at the conventions on cable lending. TelePrompTer hired him as their controller and treasurer. At the first quarter, after he reported--when he went into his boss—-and I'm not sure whether Kahn was there or in prison at the time, to show him his work for the quarterly financials. But Bob Todd brought up the fact that of their 150 million-dollar capital expenditure program, they were depreciating something like 85 or 90 or 95% of it, on the basis that until they got 25% subscribers for one year or 18 months, everything was depreciated including the interest. Which are incidentally what all the companies did at that time. I researched it with Tousch. They took the position that everything was to be capitalized, until you got 25% penetration. There were some differences among the way the companies did it but TelePrompTer's was, if I recall correctly, until they got 25% penetration or 18 months went by, everything was depreciated. He didn't think it was right. So he went to his cohort.
Bob Todd was a graduate Harvard MBA. He went to his cohort who was the head of a stock brokerage firm on Wall Street, who was a fellow Harvard MBA graduate. He was advised, and again this was all in the New York Times, about a two-page article. He was advised by this gentleman to go to the SEC, which he did. He went to a lawyer. His lawyer advised him to go to the SEC. Which he did.
SMITH: Securities and Exchange Commission.
TUDEK: That's right. Which he did. And the SEC immediately suspended the sale of stock in TelePrompTer. That was the crisis. In the meantime, when he did that, TelePrompTer had a public relations firm, which they gave a retainer to, I think it was 100,000 a year, Hamlet Public Relations. And TelePrompTer, without consulting their public relations firms, sent a news release to the Wall Street Journal and New York Times and others, saying that the construction program that they had was going along fine, and that there wasn't any fraud. Because there were rumors that they had some fraud in their hundred million-dollar construction program and that's why they weren't doing so well. They weren't meeting their projections in the big cities.
Kahn had bragged to everybody that they were going to be charging far more for all of these things they were going to be providing, bells and whistles, in the big towns. They were behind schedule. They were way behind in budget. They were a hundred thousand subscribers behind in budget. When the public relations firm got hold of this press release, they got very excited and they called and said, "You should not have mentioned the fact that there was no fraud in the construction program. And so they had a new release go to the New York Times and the Wall Street Journal, and of course, having done that, the Wall Street Journal then emphasized the possible fraud in the construction program. Now there wasn't any fraud. There never was. But that created the problem and all of this brought in Jack Kent Cooke. The suspension of the stock, and the potential fraud and being behind budget; Jack Kent Cooke being the largest shareholder TelePrompTer, Manhattan came running in to take over as chairman of TelePrompTer. We enter into this story because by then...I'm going a little forward. I'm going go back to my former company, but now I've got to go forward to Tele-Media.
SMITH: Go ahead.
TUDEK: Where we had a gentleman on board named Joe Taylor who built these systems right around Youngstown and Columbiana and Leetonia and Washingtonville, three communities, one system, right outside of Youngstown. It was a leaseback with Ohio Bell. They really only had 3,200 potential, and they only had 384 subscribers. They were bankrupt for all practical purposes. They had not filed for bankruptcy, but they really were bankrupt. They owed everybody money, including the leaseback payments and everything else. Joe Taylor had built this system for his wife's relative, a coal miner. After having been a foreman of a construction company for Anderson, and then also helped build Ashtabula and Conneaut, Ohio. He left that construction company and did this for his wife's relative. Everybody looked at the system and nobody would buy it so...we'll go into it in more detail later, we ended up buying the system and Joe Taylor remained as our manager.
A year and a half later, he sued us to stop us from buying Conneaut and Ashtabula, because when he was working for this construction company, he got the franchise from Conneaut and was promised by the Aiello brothers, for whom he worked that he would get 5% of Conneaut. The lawyer who did the incorporation papers claimed that he got 5% for doing the incorporation papers. So the lawyer and Joe Taylor sued and tried to get an injunction to keep Everett and myself from Tele-Media from buying Conneaut and Ashtabula, Ohio. There was Joe Taylor, a general manager at our first system. We had a second system by then and we were about to buy our third, and he was suing us. So we had a problem and he had to leave. But we gave him a tremendous recommendation because we really liked Joe. He joined a TelePrompTer system in Portsmouth. They were in a rebuild. They were going from five channels to 12, or 12 to 20. Whenever Jack Kent Cooke shows up to take over TelePrompTer...this has to be 1973-74. All that was in the New York Times, along with that other story I told you: the Athena, the Gulf and Western story. That's in the New York Times. Jack Kent Cooke sent out a letter after six months, after having hired Joe Taylor as president of TelePrompTer, Manhattan.
When Jack Kent Cooke arrived, he wanted to get rid of some bombs. There were two problem areas that Kahn had in franchising. One was Johnstown and one was this town in New Jersey. That was going very badly. He wanted to know whom they had on board that could go in and do an analysis of this particular community, whether we should get out of it or do this or whatever we should do. And the guy that hired Joe Taylor suggested Joe Taylor to Jack Kent Cooke. Joe Taylor was hired to go to this community in New Jersey and he sent Jack Kent Cooke a wire with two words in it. Sell it. That so impressed Jack Kent Cooke, Jack sent him out to Gary, Indiana, or some other community. And Joe told him the same thing. Just sell it. That's all that had to be done. Jack Kent Cooke made Joe Taylor the president of TelePrompTer Manhattan. Now the record will show a letter authored by Jack Kent Cooke to all the shareholders of TelePrompTer, where he mentions what he's done, improved the company, deserved their attention and support and the resumption of the sale of stock. This was within six months after he came onboard. There was no stock sale in that period of time.
The first thing he mentions is hiring Joe Taylor as general manager. Subsequently Joe was promoted to president, but he came on board as general manager of TelePrompTer Manhattan. Joe Taylor tells me this story. That when he got up there, his orders from Jack Kent Cooke was to cut a million dollars of expenses in 24 hours. Joe was a small town boy then in a little community next to these three communities in Ohio. His dad was the police chief, and Joe was a policeman in this little town of a couple hundred souls. And here he is in New York City, TelePrompTer, Manhattan, and he's over to the system to visit and they are doing on their program origination channel, an exhibition of anal intercourse live. This is not an exaggeration. And he immediately stopped it in defiance of the law, because they had passed a law, the city, preventing the cable system having any control of program origination as part of the franchise and everything else. Joe had called by the way, before he actually stopped it. He wanted to know where the chief engineer was located. He said he was on vacation. So Joe got hold of him and said, "Do you know that they are demonstrating live on the program origination channel anal intercourse?" He said, "Get it off." And the chief engineer said "I'm on vacation" and Joe said, "You're fired." That was the first bit toward the million dollars. Rather than getting hell for what he did, Jack Kent Cooke supported Joe completely on that. For quite some time they stopped that stuff on that channel. Eventually, by the way, the people won out. To this day, they still show that sort of stuff up there in New York. But for some time, Jack Kent Cooke actually kept it off. He made them fight him before he permitted it again.
So then Joe actually got as a result of that...he eventually made president. He left TelePrompTer to become president of that construction company, which also had a cable company. And then he left to become the head of Cablevision for Alan Gary. After so long, after several years, he was actually demoted. In the end, he was handling a portion of their acquisitions and he's now retired. Again, you'll find, in the record, that letter to the shareholders from Jack Kent Cooke about hiring Joe Taylor as general manager and then subsequently president of TelePrompTer Manhattan. That was really something there about what saved them. I was getting back to the theme. Jack Kent Cooke, as part of this, hired Marcus to add subscribers. He had to put 100,000 subscribers before year-end or he wouldn't be able to borrow any more dough from that line of credit which was either a hundred million or a hundred fifty million for the construction program. Marcus put on the 100,000 subscribers before year-end with the 90-day free trial. But when I researched how TelePrompTer handled connections and disconnects, they only disconnected once a year. So heaven only knows how many of those 100,000 subscribers remained on. But with those 100,000 subscribers Jack Kent Cooke was able to take down additional dough to continue on with the construction program.
Marcus then went on and hired Miss California. You may remember at the convention where he had this door to door company and he had the girls, and it was these girls that he used that got Bill Daniels in trouble...was it in Colorado Springs where they had that underground system, that Bill actually went into bankruptcy? It was Marcus with his beautiful girls in Colorado Springs that bombed out doing door to door. Marcus got out of the door to door eventually and joined Michaels in that CEA company. Again, showing how difficult it is is what I'm trying to tell you. He never stayed in it. His fame rests on the 100,000 subscribers that he raised for Jack Kent Cooke. I guess nobody will ever know how many of them he ever saved. I do know that of the 3,000 subscribers he added in the Rio Grande Valley of Texas, every single one of them cancelled out. Took it from 27,000 to 30,000 when Sammons bought it from Shapp and when we went down there to buy it there were 27,000 subscribers. You asked about 'why' in marketing. Because it's really difficult to keep people motivated to do that. It takes a lot of courage to get out there every day and knock on doors in somebody's home.
SMITH: But you and Mimi apparently found the key, you say, and you haven't specifically told me how you did it.
TUDEK: The first part of the key is that we hired mature, successful salesmen.
SMITH: Not Miss California's.
TUDEK: Not Miss California's, nor youngsters, nor Boy Scouts, nor volunteers. We hired mature, professional salesmen who had been successful in their selling careers. They were career salesmen. They were usually guys in their 30s, late 20s, very presentable, and had a history of successful selling, not necessarily door to door. But they were successful salesmen who made a living and wanted to remain in the field of sales. That was the first thing. But that alone didn't do it. The most important thing was support. You had to organize the campaign. You had to have the thing so organized that the salesmen know whom to call on to make a lot of calls without wasting any time. He had to know what block to go to and so forth and so on. If you had him out there in the non-cabled areas, and this happened all the time. People would bring door to door salesmen in and the door to door salesman would go out there to the outskirts where you could sell real good and the cable company had no intention of going out there for years and years. That would happen all the time. You had to make sure that they knew exactly where they were going to sell, and you had to have it well organized and all the paper work done for them and the support. They had to spend their time and they had to be motivated. You had to have very close supervision. You couldn't have some supervisor take care of too many guys. It had to be close supervision, usually by a guy who sold himself, who was topnotch, and he didn't spend full time selling but he did sell. He was a danged good salesman. Then you had to support him with good administration. You were selling not in new areas, but in areas that had already been cabled and sold. So you had to make sure they knew who was a subscriber, who was not a subscriber and how to detect people who were illegal. So that was all part of it. They were actually doing an audit at the same time. So they had to go out there and know who was the legitimate subscriber. And if they weren't a legitimate subscriber they went in and told that guy to be a legitimate subscriber. So they're really doing an audit and a sales job at the same time. Unless you really had it well organized, it was a mess.
That was all part of it. We learned by trial and error. The job was to keep them onboard and motivated, the right compensation level. Bob Shepard who was with us in Centre Video, is now still with us all these years as our marketing manager, going way back to that period of time. That reminds me that I should mention, getting back to franchising...when we bought those guys up we met these men who played a role in cable for TCI and then they're back with Tele-Media. Jerry Corman is our senior vice president today. Back then he was in charge of field engineering for C-COR. Then he became a regional manager for TCI, in that system in Wilkensburg that I took away from Time-Life. Then there was Russ Bambarger who handled all the construction. He's the first guy that I promoted in Glassport to manage a system. He became head of construction for TCI. He's the guy who did the 2,000 miles of construction around the city of Pittsburgh. I'll never forget when we did our first inspection with Russ. He gave me field glasses and he had on white gloves. So I could actually see the splices. Everything was done in accord with the book. He's still doing construction for Tele-Media today. He's probably done 50-60,000 miles of construction. Then of course you have Ralph Stephan, who's now retired but took over my job when Centre Video merged into TCI as vice president and general manager. ...had a vice presidency, he was the general manager. He resigned to come with Tele-Media as an investor and an operator. Then his job was taken over by Marion Novak who goes back with me to muscular dystrophy days. I spoke about Novak's career where he ended up handling 700,000 of TCI's first million, two hundred thousand subscribers. Then in addition to that you had Tom Kenley who's now retired out of Tele-Media but was our vice president, chief engineer. The chief engineer had a number of jobs with C-COR and Centre Video. He was field engineer, marketing man and chief engineer. And then of course Frank Baxter, who also retired from Tele-Media and who left C-COR and Centre Video to become the chief engineer for General Electric and then had his own consulting firm subsequently.
SMITH: You mean for General Electric Cable?
TUDEK: That's right. General Electric Cable out of Schenectady. And then he formed his own consulting firm, then he came with us and left because of some open heart surgery that he had which was successful but it got too much for him. He just retired six months ago.
SMITH: I was just going to say you're getting into speaking about backgrounds of people that were with C-COR originally and then were working with you. Why did you leave Centre Video with that record?
TUDEK: We'll get to that . But I want to pay tribute to these guys who made this team that enabled me to get these franchises of 69 out of 75, OK? In addition there was John Hastings who's still with C-COR to this day and who will confirm—you call him if you don't believe me, that I met every single monthly, quarterly, semi-annual and annual construction deadline. I would really want you to call him. Put on a tape. Ask him. He was the guy that had to do it. He and Jerry Corman had to do these things. I would like for you to call him.
TUDEK: I like to brag about the fact, kiddingly, that Frank Baxter that I had an awful lot to do with his subsequent success. Because while he was with me, and right before I left, he came into my office and said he had been given a job by Jim Palmer to design the master antenna in Carnegie, Pennsylvania. Steel Valley Cablevision, which was a system that was going to be located within one or two air miles of three transmitters in Pittsburgh. We all knew about the direct pickup problem. He came in to talk to me about his design. He'd hardly sat down and I went and gave him eighteen specifications for an antenna site as fast as I could think. And he put them down. And one of them, I think I made a mistake, so I know that he copied it. He wrote an article on the subject that appeared in one of the magazines. I kid him about his being hired by General Electric. Frank had a very illustrious career and was a very, very great engineer. Then we had Jim Trosell, who also was one of our chief engineers, who left Centre Video to go into business on his own. We bought that company out and Jim came with us as chief engineer, and Jim is now retired and doing quite well. So you have Jim Trosell and Jerry Corman and Russell Bambarger. I mentioned Bob Shepherd who was our marketing manager who goes back to 1968 and then Ralph Stephan. Then I think there was one more gentleman, Walter Veth who left probably in 1967, maybe a little later to become the senior vice president for Greater Media. I consider Walter Veth one of the finest operating managers in cable in the business. Nothing would have pleased Everett and I if Walter had joined us when we formed our company. Greater Media is a cable television company in addition to being a very, very successful radio company headquartered in New Jersey. Matter of fact, Greater Media has a couple hundred thousand subscribers in two systems, one in Philadelphia and one in Massachusetts. I think the total is approximately 200,000 subscribers. They have a very low debt and they always have been one of the leaders and one of the top operators. Back when we got into the radio business, they owned as many radio stations as anybody did in the industry, or nearly so. Today they're still one of the big operators in radio. But they've been very successful and Walter Vett got those franchises that they got in Massachusetts for that company. I hope I'm not forgetting anybody, because whenever a councilman came up to visit us on those franchises, they were so impressed with these guys whom when I arrived were actually installers or technicians. Jerry Corman was the foreman of the system in State College. Trosell and Bambarger and all the rest of them were actually installer/technicians. We encouraged them to go on and get schooling and some of them actually went on to get degrees, like Trosell as an example. A few of the others that I haven't mentioned actually went on to get degrees. We promoted them and today they're senior vice presidents or owners of companies.
When these councilmen came up, they were very much impressed with the manners and the demeanor and the knowledge and the experience of this management team that they were meeting, that Jim Palmer had on board. These were guys that were all on board before I arrived. I can't take credit for recruiting any one of them. A good example of that is Jerry Corman. He had a way about him of saying "Yes sir" that was so good that I wanted to get everybody out in the parking lot and have Jerry Corman teach them how to say "yes sir." I never got to that, but I assure you that Jerry Corman had an awful lot to do with the way the councilmen were impressed.
Everybody had their role. Whenever we brought them up, every one of these guys had their 15 minutes or the half-hour. A good example is we showed them what a vehicle looked like. How it was put together. That vehicle that they saw was washed and sparkling. Lots of these councilmen were machinists or worked in the mill. These were the kinds of things that really impressed them and we knew that. Jim Palmer kept his manufacturing plant really neat. There was no smoking permitted. There were no butts on the floor. And these guys walked into a manufacturing place and so many of them remarked, compared to the mills that they worked in and I worked in. And also, several of them, more than several would actually consult with our janitor. They figured you get to know a company by talking to their janitor. They confessed that it was the janitor that sold them. Janitors told them how really great the company was, and that's how we got his vote. So everyone plays a role. The fact that the factory was so neat and the employees were the way they were and this management team was so knowledgeable and friendly, had great personalities. Everett Mundy was really so very, very impressed...he had been in the business since 1956; he had been the designer of the amplifiers that Jim Palmer had sold to the aircraft carriers. He had helped put together the underground communication system and the underground Pentagon at Fort Ritchie. Then Jim Palmer and C-COR had many firsts in the business even then. Cable powering before I got onboard, later on the first broadband amplifier at Meego Junction, Ohio. So all of that was very impressive. The fact that we were pioneers and experts and experienced in the business. This is why I say what I did about the fact that we had the finest organization in the country.
SMITH: You used the phrase 'cable powering'. By that you meant providing electricity to the active components over the cable itself?
TUDEK: That's right. That was something that C-COR took credit for, along with another five or six things in the business that C-COR took credit for, and I think rightfully so. We had the first transistorized amplifiers hanging in the business. I'll never forget, next door, they couldn't get theirs operating, they begged Everett to help them do it and Everett had the job in his pocket in case he had trouble with me or Jim Palmer. Jerrold would have hired him to help make their systems work. They were delayed for many months because they just couldn't get the thing to work. Ours were showing pictures.
It was all of this that was really great but, on the other hand, I was dissatisfied. As you recall, I wanted to join a company where I could make a significant difference and I could leave some footprints in the sand. My salary was now increased. I was dissatisfied with my salary and dissatisfied with the fact that all I had gotten was 1 or 2%. I had gotten 69 franchises. I think I can tell you one story that illustrates why I was dissatisfied. Jim Palmer and I and my wife and daughter flew out in Jim's plane to Pittsburgh to look at the system around the airport. It's Coraopolis down below the hill in Moon Township. Moon Township is right around the Greater Pittsburgh Airport. The guy had something like a thousand subscribers. His name was Firanski and he was Polish and he was a TV dealer. He got the franchises in Neville Island and Coraopolis and Moon Township. He put together a thousand subscribers and borrowed the dough from Pittsburgh National Bank, who contacted us because we had our million-dollar line of credit there. They were in default. Some executive of a large company in Pittsburgh had guaranteed the loan and he had since left that company. He was hurting. He didn't want to come up with whatever that default number was. The bank was forcing them to sell the company. We went in and looked at it and we did the due diligence and we had some problems on what he wanted. He wanted to stay on as a consultant at 25,000 a year for three years. We were giving him the price he wanted, 300 dollars a subscriber if I recall correctly.
So we went home; that was Wednesday thinking we had a handshake agreement to buy this system. We called Leopold, the secretary and counsel to put together an agreement as fast as we possibly could so we could enter into it within a few days, maybe even by Friday. I got a phone call from Firanski early Saturday morning. Got me out of bed. He said "Bob?" I said "Yeah" He said "Well, I've got some bad news to tell you." I said, "What's that." He said "Well, after you left Elmer Metz came in to visit me." Elmer Metz was right hand man for Shapp. Really big man, although he went on a diet subsequently years later. He formed a consulting firm with Doug Jarvis. And Metz had a consulting firm for years afterwards until he passed away. But Metz was Shapp's right hand man. He said, "Metz came in with an agreement in hand and gave me the 25,000 a year as a consultant. So I signed it." He said "You know Tudek, with all the franchises you got for that guy, you're all heart. If you had any brains, you'd be a hell of a guy. (laughter) Because when he got that franchise, he had negotiated 51% of the company. He was the one who got the financing, guaranteed so many hundreds of thousands of dollars to get the loan. Firanski actually had 51% of the company. So even though he was in sad shape, he was going to make in addition to the 75,000, 25,000 a year. I think he was going to get another 75 or 100,000 dollars. He came out of it better than anybody did, including the guy that was the big shot treasurer of this manufacturing company that put up the guarantee to get the money. So he said to me "Tudek, you're all heart, if you had any brains, you'd be a hell of a guy."
And there were so many people coming to me and saying, "You're getting all these franchises. Everyone of them is worth 20% of the company, 50% of the company, 10% of the company at the minimum." And 69 of them and what do you get in warrants. I had gotten something to come on board that amounted to a half percent of the company or one percent of the company. And Jim had 38%, Fisher had 5% and Christophers had 5%. So I started...actually I thought to myself, I had done so well for cable, but it hadn't done much for me.
TUDEK: So I was going to get into some other field where I was going to make my mark. I started with the same thing all over again. I started answering ads, and I ended up getting an opportunity in Philadelphia for a home security company, hard wire and now they had an invention and the patent of doing wireless using an FM frequency that had been perfected in the moon shots. They had formed a separate company after they got this patent and they had a system of wireless using FM. It was done in such a way that with a code, you couldn't interfere with it, allegedly. It had been done for the government so they could send messages back and forth without anybody else intercepting them. They really liked me real well and they were going to give me 20% of the company. During my interviews, this is a true story, I had two interviews. One of them, they had me meet with the venture capital department of Scott Paper. I got them to invest 700,000 in this venture, during my interview at their company, in their boardroom. Then I went up and met with Morgan Stanley. I raised 500,000 during my interview. I did meet the guy that they had invested in who had the first telephone company; the telephone that did all the stuff that telephones do today, automatic alerting and things like that. They had to have something to alert the alarm. This guy was an entrepreneur and he had been involved. They had to meet me in this situation. I had the offers of the presidency of three or four cable companies. This was unsolicited. Kaufman and Broad had heard that I was looking, they were the company that was in trouble. They were the public home building company, which was subsequently bought by TCI. There was Athena. Athena offered me the presidency. Again, subsequently, TCI bought that company. There was a third company that offered me the presidency, I can't even recall at this stage who it was. But I was soured on cable. I was going to accept this job. I got a phone call...before I got this phone call, Everett came to me, several weeks or months before that. He said that by year-end, he was going to leave and form his own company in cable, would I like to join him. I said I'd consider it. I was out at the Holiday Inn near Pittsburgh, working on a franchise where I stayed all the time, right near the Allegheny County Airport. I got a call and it was raining like heck, thundering and lightning, from this guy in Philadelphia. His name was Black, who headed this venture in Philadelphia. His family, by the way, owned all the properties going back 150 years around the airport. He was a member of the, what's the ritziest club in Philadelphia? Like the Duquesne Club in Pittsburgh, there is a club in Philadelphia where you had a seven year waiting period for membership and you had to be a Republican, going back a hundred and fifty years or you're not going to be a member. This is where we always met in Philadelphia. And he happened to have a speech defect, he stuttered. He came from this prestigious family. He got started doing these hard wire systems of home security in the main line of Philadelphia. These very expensive homes. He'd charge quite a bit of money, and he could because these were hard wire systems and took quite a bit of work. Now he wanted to get into something other than the main line homes. He got me on the telephone and said "You've raised a million, two already. We want you real, real bad. But you have to make up your mind. " I just couldn't make up my mind. Several months had gone by. He said, "We've got to move. Otherwise we're going to loose this money." He had a partner who was an architect, who had actually designed construction windows. He said, "You've got to make up your mind." I said, "I'll tell you what, I'll drive home tonight. I can really think in the rain, I'll drive home and I'll let you know." By the time I got to the crest of the mountain, there was lightning like heck and everything else, booming around and what have you. I got to thinking about really, I didn't want to leave the cable business, and I don't want to leave Everett. And I'd say in a short period of time, I'd say 15 or 30 seconds, it occurred to me as to how, why, what we should do; how we should form Tele-Media. We didn't even have the name of the company at the time.
I drove home. Called Everett Monday, first thing in the morning and told him in a couple of minutes what we were going to do and how we were going to do it. I called this other guy in Philadelphia and I declined. That was one hell of a thing that Everett did, coming up with the idea.
SMITH: And Everett was in full agreement with what you told him?
TUDEK: Oh yeah, he had no problem with what we were going to do. We did exactly what had come to me on top of that mountain. We were going to go to some people in Pittsburgh, who I had worked with in Color Cable with Jim. They had wanted me to leave Centre Video and join them, which I refused to do and instead negotiated them out of...they wanted 65% of the company. They ended up with 10% of the company. I did that for Jim.
SMITH: Would you spell that name. You mentioned it several times?
TUDEK: Color Cable, a subsidiary of Centre Video. The three gentlemen who formed it were Evans Rose Jr., a lawyer, at that time with Rose, Schmidt and Dixon and Ward Wickwire and George P. O'Neill. They wanted me to join them and I refused, so they came to Jim and Jim ended up agreeing to try to raise the financing...they were going to raise the financing, we were going to provide everything else. They couldn't raise the financing, so in the end, they got 10% and we got the financing as part of that package that I'm talking about. We built Color Cable. I went to Evans Rose, and he then brought in George O'Neill and Ward Wickwire and John C. Oliver of the Oliver family, US Steel, and O'Neill's brother in law, and Grant McCargo. Four of those five were Yale graduates and they all went to the same prep school...Phillips Andover. None of them had to work, they were old money. Grant McCargo was old money too. He owned the Holiday Inn in Sewickley, and his uncle was a big man in development and oil. Grant ran his company for him. These were the five initial shareholders of Tele-Media, with Everett and myself, the seven of us. We went on from there.
SMITH: How did the ownership interest....
TUDEK: We were so naïve. We were in there dollar for dollar. Everett and I cashed in...he had more TCI stock by then than I had. I had that 1% of the company. The merger had gone through by then. I meant to tell you that Everett and I resigned on October 1, 1970, the day that Jim Palmer and Bob Magness had a handshake deal in Denver for the tax-free merger of Centre Video with TCI. And Jim Palmer...I called him out there because we were contractually obligated to resign on that date. We had formed this company six months before that with these gentlemen, we were contractually obligated to resign October 1st. To keep the merger alive, Magness insisted that Jim make a big effort to save me and Everett. Jim offered me what he said was five million of warrants. I told him it was too late. I didn't give him the details. At any rate, we left and Jim then had to stay. Jim had no intention of staying on after the merger, he was going to full time as president of C-Cor. But because I left, Jim stayed on as president much to the chagrin of TCI, especially J.C. Sparkman. And eventually, Jim was deposed as president of that division, Centre Video. So Jim lasted about a year as president after I left, and then Ralph Stedman took over and then after that Marion Novack.
SMITH: You were going to tell me the proportions of .....
TUDEK: We were so naïve that Everett and I put in 30,000 a piece. They put in 50,000. Then we put in another 5,000 a piece in there, but we were minority shareholders. We didn't get an extra buck or percent of the company by virtue of being the organizers. If my memory serves me correctly, he and I owned 38% of the company, by putting in that 50,000 dollars, and then we each put in an additional 5% a piece. I think that took us up to 45% of the company. These guys were really something. John C. Oliver had been all his life, the trustee of the Oliver estate. He had his offices in the top floor of the Oliver Building in Pittsburgh. Our accountants were there from day one, and Rose, Schmidt and Dixon were a law firm and they were located in the Oliver Building. Oliver was the trustee of the Oliver estate and again, either his father or his grandfather had quite a bit to do with the formation of US Steel and several of the other large industries in Pittsburgh. His estate was the largest shareholder in Xerox at the time.
George P. O'Neill, Potter O'Neill, he went back a couple hundred years and he dabbled in the stock market. They didn't believe in spending principle. They had been taught that for generations. Ward Wickwire formed Sales Associates. He got in trouble subsequently. The other guy had the Marshall Stamping Company in McKees Rocks. That was Ward Wickwire's brother in law. John C. Oliver—I mentioned about his being the trustee. And Marsh McCargo had the hotel and developments, and his uncle had all the oil companies.
McCargo wouldn't come to a board meeting without an attorney. He was that careful. They loved board meetings. They loved them for eight or twelve hours if necessary. They wanted to debate every little thing I wanted to do. They wanted to talk about it, and I was moving so fast. By the time you had a board meeting, I had gotten a couple of franchises, wanted to buy this company, wanted to do that, wanted to do this. When I came to our first franchise, the town wanted a 25,000 bond. He wanted assurance that we could get the financing. He wanted a letter from a reputable financial institution. So I said to the board, "Why don't we just guarantee $25,000 and I'll go to the bank and they'll give us a letter and assure us, and McCargo wanted no part of that. A guarantee from him was worse that putting up cash. It meant more that putting up cash. Far more important than putting up cash. He taught me something, by the way. He rued the day, because years later it cost him a lot of money. They gave me such a difficult time, I just said "Forget it" and the true story is that I ended up getting three letters in about a half hours time, typed in front of me, what we call today a soft letter about they're willing to do the financing subject to loan committee. It meant nothing. But people didn't know that, so I showed up at the meeting with these three letters. I didn't have to get the bond. These guys were very personable. Don't misunderstand me, and very likeable and they were gentlemen and they really knew how to conduct themselves. But they were really, as far as I was concerned, holding us back. I wanted no parts of that, and I knew I'd made a mistake; they should have had maybe five or ten percent of the company, and not a majority of the company. They were already trying to get Everett and I down. When they were trying to get that 25,000 bond, they finally agreed to do it provided we gave up 20% more of the company.
So the truth of the matter is...the first annual report, which would have been something like in February, we started the company in October of 1970. Let's say I met with them sometime early in 1971. We already had gotten the franchises in East Palestine, which we wanted to add to our first acquisition. Before we even bought Tombiana, Cetonia and Washingtonville, we got this franchise next door in East Palestine, in spite of the fact that Communications Properties, Inc., which was then Tower...Tower was the largest company by far in the state of Ohio. They had the community of East Palestine surrounded on three sides. They had Salem, which they had got the franchise and built Salem, which was on one side. They had Lisbon, which they had built which was the county seat on the other side of East Palestine, and they had Beaver Falls, Pennsylvania, right across the border, on the other side of East Palestine. So they had it surrounded on three sides. They had been working on it for years. And we beat them for that franchise. This was before we even bought our first company. We had entered into an agreement to do so, but we hadn't closed the deal yet.
There we were, with that first annual report, where I had already acted as the consultant for the three shareholders of Color Cable, O'Neill, Wickwire, and Evans Rose, Jr. for their 10% of Color Cable. When they did the merger with TCI, everybody agreed, except these three minority shareholders of Color Cable. They hired me as a consultant to represent them. And I met with Fisher. He came in to negotiate with me. My fee, by the way, was anything I could get over double what I got them. If they had 10,000 shares, I didn't get a penny unless I negotiated anything over 20,000 shares. It turned out that we got three or four times what they had been offered. So I got that as the fee. Eventually, that was worth quite a bit of money and kept us alive as we went forward. Kept it on our balance sheet and sold it at TCI went on. Maybe five years later, we sold it; we did quite well with that security. Even at that time, I had already done some other consulting work. I think I was reporting earnings of something like what amounted to a million dollars in value. And had gotten the franchise. And what I wanted to do was increase Everett's salary to 25,000, which was what my salary was. I wanted to pay my wife because she was working free of charge. I wanted to pay her 2,000 bucks a year.
John C. Oliver, he was the treasurer by the way, said "Where are you going to get the money to do it?" Not like, "Can we come in, do you need some money-the whole bit. We appreciate what was happening, put in some more dough or this or that. He wanted to know where the hell I was going to get the money to give my wife 2,000 and give Everett his raise. I got it, by the way. Ward Wickwire was the one guy who kind of supported me. This was the sort of thing I had to put up with. So really, before we did our third, Ashtabula and Conneaut, I had had enough and I told them that we were going to liquidate the company or buy them out, one or the other. And so we bought them out. They got 25% of what we owned in this company, along the way. Which incidentally, they ended up getting about five and a half million dollars for. I think their initial investment was 68,000 dollars, and they were all in the income tax bracket where they actually got tax benefit below...I think something like 90,000 dollars worth of tax benefit out of that. They only put in 68,000 dollars, so they had a negative investment, and they ended up getting five and a half million bucks. Along with getting their money back to start with. In other words, they got 120,000 dollars plus 25% of that company along the way.
SMITH: You indicated that you'd like to discuss some experiences that you had and interviews that you had at the time that Centre Video was being considered for merger with another company.
TUDEK: What brought it to mind was an article in Multichannel News about Bud Hostetter resigning from US West. It was quite a shock of course to everybody, particularly to the old timers in cable television.
SMITH: Mr. Hostetter was founder and chief executive officer of Continental Cablevision. Is that correct?
TUDEK: That's correct. And as you know, they were the forth largest cable company in our industry when they merged but Hostetter remained as chief executive officer, working out of Boston. He's the largest shareholder in US West and allegedly had the value of 1.2 billion dollars.
SMITH: He became the largest shareholder in US West as a result of the merger of Continental and US West. Is that correct?
TUDEK: That's correct. It brought to mind that when I was with Centre Video as vice president and general manager, about 1969, Jim Palmer explored the possibility of a merger with Centre Video and Continental. At that time Bud Hostetter's partner was Irv Grosbeck. They had been introduced to me as Harvard MBA graduates, who had gotten into the cable television industry in 1963. This was about 1969. I remember meeting with them all day. Particularly, I remember a luncheon that we had at the old Downtowner Hotel in the downtown area of State College, Pennsylvania. They were mostly interested, surprisingly to me, in the state of the art of the master antenna equipment. While they were absolutely amazed at the fact that I had secured, by then somewhere between 60 and 65 franchises out of 70 to 75 contests, they wanted to know how I did it, because it seemed like they didn't know the first thing about it. But again, I couldn't get them away from wanting to talk about the technical aspects of the equipment in the headend. So later on, they wrote back to Jim that they really wanted to remain private. The idea was there for Centre Video and Continental to merge and go public. They thought that they would prefer the private route. So that ended that one. But then Jim, either before that or after that talked about a merger with CBS.
Many people forget that CBS was in the cable television business. And they started out with a small system of a thousand subscribers southeast of Cleveland. We at Tele-Media thought that company was not very far away from where our main operations were located. We had an opportunity to buy it for a very wonderful price, but we didn't do it.
At any rate, CBS got into the business and had a fair number of subscribers at that time. Their chief executives and I and our management team spent about three days together, they're going over all of our operations in the Pittsburgh area; all the construction and all the franchises and what have you. As a matter of fact, we were finishing up. That had to be in 1970. This went rather well, because we had just included this lengthy due diligence on their part. We were in Carnegie, Pennsylvania, which is within a mile or two of the Greater Pittsburgh Airport. We were finishing up the construction of that system. If I recall correctly, we started construction in July of 1970. We had concluded our due diligence and we were about to say our good-byes. They were enthralled. My only reaction is that, without any question, CBS would have wanted to buy or to merge with Centre Video. Whenever the chief executive was informed by telephone, from the plane above the airport, that that day the FCC had made the decision that the networks had to divest and get out of the business. That happened that day. That killed that particular merger with CBS, and of course CBS was given a year or two or three to divest. They did that by forming the company called Viacom. At that time, Doug Petrie was the first president of Viacom. I then met Doug Dittrick a little bit later. He's now the chief operating officer or first vice president of ATC, which was a company put together, a hundred thousand subscribers, that were put together by Bill Daniels as a broker in a package by just Ma and Pa systems. ATC was now going public. As a matter of fact they went public either December 12 or December 13, 1969. They were the last company in the cable business to go public for some time because, that very next day, the market went caputie. And again, the record will show that. The market had a real big nosedive. For that reason, Jim Palmer could not go public. He was supposed to go public in January, right in the middle of January, and he was told that because of what had happened in the market, they would have to delay it.
Going backwards, before ATC put this package together and before they went public, must have been three or six months earlier, 1969, Doug Dittrick and Monty Rifkin who was president came on up. I spent an evening with the two of them at dinner here in State College. I heard their plans about putting together this group of subscribers and going public, and wanting to take Centre Video with them at that time. Doug Dittrick was given the job to accompany me to Pittsburgh to go over all of these franchises that I had secured and the construction that we had done. We drove to Pittsburgh. We spent three days together in a car.
On the way down to Pittsburgh, I told him I had to get there to the community of Edgewood, which was near Wilkinsburg and Penn Hills. I told earlier about getting the Penn Hills franchise, and taking it away from Time-Life. Also the story about Wilkinsburg and taking that away from... this was a franchise in that same system. I thin it was going to be the last franchise. Today I think this is a rather large system, and probably has the potential of 150-200,000. Probably has 70 or 80,000 subscribers in the system, or maybe more. But I told them that the bids were due at exactly 7:00 p.m. on that particular date. We left a little later than we wanted to, and I rushed down there. He was with me as I walked into the city council. It was very crowded. I walked in and the meeting was already underway, about five or ten after 7:00. I walked up to the front to hand the president of the city council my proposal, which he rejected right then and there. He said, "You're late." He said there's only one proposal submitted, so I guess you're out of luck and the other guy's going to get the franchise." Naturally, this was very embarrassing to me because here was Doug Dittrick, and I'd told him the story about my getting all the rest of these franchises. This was near the end; I'd already gotten at that stage of the game 60 out 65 franchises that I was to secure in this particular area. So I told Doug Dittrick that I would get that franchise, without ever even submitting a bid.
SMITH: How did you do that?
TUDEK: I'd really used their next-door neighbors in Wilkinsburg, who were really falling in love with Centre Video to prevail upon them to be in the same system. The guy that submitted this franchise proposal was from Maryland and he had one little operation somewhere. He was merely sending out applications by mail to everybody all over the country. He had read about the fact that this was a formal bid, and he submitted a proposal. He really wasn't a true operator. So these gentlemen prevailed on the councilmen who actually unanimously gave us the franchise.
SMITH: Was that the same day or later?
TUDEK: Much later. I'd say two, three, four, five months later. They did investigate the guy. They found out that what they had been told was right. He had one little franchise. He probably didn't have the financing to do the job. He would be building a separate little system, and he couldn't give them all the things that we were going to be able to give him. They just voted to give the franchise to Centre Video. At any rate, Jim decided not to go with Monty Firkin and ATC. At the same time, a little later he did Communications Properties Inc. I think I was struggling with that name of that company before. They're the company that bought Tower.
SMITH: Yes. Communications Properties Inc. Their principle stockholders were Fred Lieberman and Jack Crosby. Gene Schneider and Ben Conroy and others were in the company part of the time.
TUDEK: But they bought a company called Tower in Ohio. Claude Stevanus started that company. His family had a hardware business and he built the largest company in Ohio. His family had a hardware store in Coshocton and he still spent time there, especially on Saturdays, in the hardware store. He's the guy that we beat in our first Tele-Media, later on our first franchise battle in East Palestine, Ohio where he had the town surrounded for many years. Today, they are Times-Mirror, by the way. Jim decided not to go with Communications Properties Inc. and instead he hired Malarkey-Taylor to broker his merger with someone. Actually Malarkey-Taylor may have brought in Communications Properties Inc. I'm not certain, along with ATC, but that's not the way I remember it. I kind of thought those were Jim himself, and Malarkey-Taylor actually brought in Bob Magness of TCI. Jim and Bob Magness eventually did a deal. As I said earlier in my tape, they were in Denver and had come to an oral agreement and Everett and I were already committed contractually to resign on October 8, 1970.
But before we get back into the birth of Tele-Media, I do remember that I was struggling with the name of the gentleman Bob Poff, I told you about his joining TelePrompTer as controller and the argument about depreciation and how he went to the SEC and they of course fired him, and he went on back to the bank. The gentleman that he went to when he got his first assignment at the first quarter of doing the financial report for TelePrompTer was a gentleman by the name of Sullivan from the brokerage firm of Faulkner, Dawkins and Sullivan. The reason he went to Sullivan is because they were fellow Harvard MBA students, graduates. Matter of fact, along with those two, the third member of that triumvirate at Harvard MBA was a gentleman who worked later on worked for Jim Palmer and myself in C-Cor named Bud Jarvis. He also was a classmate of Poff and Sullivan at Harvard MBA. And Jarvis had earlier been the president of Sammons. People forget that Jarvis was their first president and resigned at the stage where they had about a 100,000 subscribers. And then he went into private business, a trucking company, and he left there and he joined C-Cor. Then after C-Cor, he and Elmer Metz formed a consulting company. Elmer Metz was the long time number two man to Governor Shapp at Jerrold. Faulker talked to Sullivan and this gentleman by the name Sullivan by the way, made a lot of news himself. He left his Wall Street brokerage firm to join some huge company as chief executive officer. He was one of the first guys to get a huge bonus for doing so. Since then it's kind of routine, but when this happened, I think the Wall Street Journal or the New York Times had a full page article or a two page article about the big deal that he got to join this company. How he left his firm and he got all this stock and a bonus. It was this gentleman, by the way who was going to take Centre Video public. Faulker, Dawkins and Sullivan. Jim Palmer had attended a conference, seminar a year or so earlier about how to go public, and he bumped into this gentleman, Sullivan at that conference. It was Faulkner, Dawkins and Sullivan that agreed to take Centre Video public. Centre Video had gone through all the machinations that in those days took about six months. It's still the same today because you have to have certified financials for three years and you've got to have this and you've got to have that. So they went through everything, and all that was left in January of 1970 was for them to actually take them public and name the price. Whenever I said the market went capluie, I think it was December 12th or 13th if my memory serves me correctly, somewhere around Pearl Harbor Day, that year, when the market went bad. The day before that was when ATC went public. Research will show that to be true. What else happened there of significance on that day, the FCC, either that day or the day after, announced that all applications for microwave...not only microwave, it had to do with, you had to have three miles of construction. One mile or three miles of construction in your franchise area by year-end in order to be grandfathered. Everybody just went wild putting in that one-mile or two miles or three miles between December 12th or 13th and December 31st in order to be grandfathered. I can't quite remember exactly what it was. But then in addition, this rule applied to microwave. Unless you had the microwave in operation...Centre Video was about to put in a CARS microwave system. This was above the airport at Lock Haven, Pennsylvania. We were bringing in the Wilkes-Barre Scranton station and the Lancaster station. I'm trying to think if we were bringing in something else instead, it might have been Johnstown. It had to do with the Lancaster and Wilkes-Barre Scranton stations in State College, by CARS Microwave. We hadn't even started on the tower or the construction. We actually constructed that tower and completed the job and built the first broadband CARS Microwave system in the country. That was written up by Frank Baxter who at that time was chief engineer for C-Cor and subsequently became the chief engineer for General Electric Cable Television. He got himself a nice bit of publicity with that publication of that article on the first broadband CARS microwave system.
SMITH: Who was the publisher of that article?
TUDEK: I don't know, but Frank Baxter is still alive and retired now from Tele-Media. We just heard from him recently. He's down in Florida. You could out and have him send you that article.
SMITH: I think it would be worthwhile to have it for the record.
TUDEK: As a matter of fact, also the article on how to build a master antenna system. Remember I told you about his coming in to see me and my giving him 18 points. And he ends up writing an article...
SMITH: If I may interrupt...whenever we're dealing with who did what first, it's always nice to have any published material that we can to back it up. Because everybody in the industry wants to be first in something
TUDEK: I agree with you. He did publish that article. Matter of fact, what was so amazing about that particular situation is that Everett Mundy, Centre Video's chief engineer, my subsequent partner and still my partner all these years, and Jim Palmer had an argument, which was nothing unusual. Everett Mundy decided that he was going to take a vacation for two weeks, rather than put together this CARS Microwave system in Lock Haven. Now of course he had gotten a lot of the preliminary work before the FCC came out with this particular mandate. But I went on through, and I'm not an engineer. I handled this thing and I was the project engineer so to speak. We hired at my suggestion a huge, heavy duty helicopter to take all the concrete and the tower from the Lock Haven Airport up on top of the mountain and construct that. Everything, all the master antenna equipment, the buildings, concrete. Of course, remember we this deadline. We had to have this in operation by year end. One of the emergency situations that occurred...the helicopter was hired for a two day or three day period at like 2,500 dollars a day or even more than that. They had everything they needed up on the mountain. Except at the last moment, they had a transformer that they needed, because the power up there had been knocked out; the transformer was dead. There I was, at the airport. The helicopter was about to take off with its last load before it went back to Philadelphia and they needed the transformer.
I found out that there was a power company sub-station within a mile or two of the airport. I asked one of the guys to hop in a jeep or some kind of a van with me, run me down there. I walked in a begged with the engineer on duty to buy a used transformer that they had right then and there. They sold it to me. We loaded it into the vehicle to run it back to the airport, loaded it into the helicopter. It took off up there and it had everything it needed to put that thing together. We would never have done the job were it not been for the engineer, I don't know him name. He actually went up there on top of the mountain and he stayed there for several days. Our guys had to come in by foot and take up sandwiches to him and talk to him. And he stayed in that thing for several days, lived there, slept there and put that thing together. I'll never forget whenever we turned it on, the night before December 31st at our master antenna building out there at Benner Pike here in State College...we turned it on and I don't think the pictures thereafter were ever as good as they were when he turned it on. I'll never forget that. I thought that they were the most beautiful pictures I'd ever seen on a television screen. Of course, they didn't remain that beautiful, but they certainly were when he turned it on.
SMITH: At least you thought they were.
TUDEK: I thought they were. But that was quite a situation and that was documented and there is an article to document that situation. Anyway, this all occurred, all of these things, not that long before...actually Everett came to me, as I said, he had this argument with Jim Palmer, and this was nothing new because they had a kind of a love/ hate relationship. I like to think to this day that Everett is a real friend of Jim. If Jim ever came to Everett and asked for help of any kind, Everett would give it to him and I think vice versa is true. I think that if Everett went to Jim, Jim would also help. But in spite of the fact that they had this relationship where they were really friends, and would give each other the shirt off their back, they actually had a lot of fights with each other. I guess Everett decided that he had had enough of it and he had come to me that Christmas, and said that he was going to leave and would I like to join him. I think that this ends up that phase of my tenure with Centre Video. Although I look back on it with a great deal of excitement and you might say pleasure, I really enjoyed that. And as I said, as great as I thought I did for the company and the industry, it didn't do for me. Everybody around me was really doing great except for myself, and I decided to leave the industry. I told that story...how Everett convinced me to go with him and go on from there. So I'm ready to continue back onto the story with Tel-Media if you want.
SMITH: Yes. I would like for you to go ahead from that point, Bob.
TUDEK: As I was explaining in the previous tape, we had the early shareholders from Yale. (Harvard?) The Yale graduates, and the Philips-Andover, I was struggling with the name of the school that they all went to. I told you about the experiences we had with them and how they were very pleasant to deal with, and were friendly and sociable. But when it came to business, they enjoyed this so much that they wanted the board meetings to last all day long. Things didn't work out. We decided, as I explained we did buy them out. Even though we were a limited partnership in our entities, I let them come into the meetings as if they were directors. We did have a corporation, and they were no longer in that corporation. Everett and I were the sole directors. John R. Prebis, Jr. was the third director in Tele-Media. He was a senior at Duke Law School when we purchased Ashtabula and Conneaut in 1972. He was a law clerk at Rose, Schmidt and Dixon in Pittsburgh and worked on that acquisition, and went back and got his degree and came and joined Rose, Schmidt and Dixon and worked on our accounts, and subsequently made partner in the firm I'd say on our account. Has remained to this day as our general counsel; does do an awful lot of work with us, but he's probably one of the most imminent and accomplished lawyers in the field of cable, having done somewhere nearing 300 transactions in cable...150 to 200 of those for Tele-Media and another 100 of those for others. He's still doing some cable, but he also does an awful lot of other commercial law work. He's now with the firm and has been for the last 15 years of Buchanan Ingersoll. Which is one of the largest law firms in the city of Pittsburgh, Pennsylvania. It's not the largest, perhaps the second largest firm.
At any rate, early in the game, our first acquisition, did I tell that story about how I had the 18...
SMITH: You started to talk about 18 criteria on the record and I'm not sure, my memory doesn't tell me how extensively you went into it. I suggest we do it now and if there is any duplication, we can edit it out.
TUDEK: Let's do that. When we first started our company, this may be duplication but I think if I get started this way, I'm better off. Everett Mundy, my partner had a plane at that stage, a Twin Engine Comanche. He leased it to Tele-Media Corporation. Tele-Media Corporation is T for Tudek, M for Mundy and C for co-workers. This was an idea of my wife Elsie, who also did our logo. But at any rate, we met at the local airport here in State College, and Everett was waiting for me in this plane. He was foraging in the plane and he said to me "What are we going to do?" I said "Let's fly up to Poughkeepsie, New York to see a friend of ours, who's very knowledgeable of that area, and we'll go from there." He said "OK, that sounds like a good idea, I'll let the tower know where we're going, and file a flight plan. He said, "By the way, some day I'd like to own a radio station." I said, "Well, I would too." As a matter of fact, I prepared to be a sports announcer. My idea was to get into radio, and I just never got into it. So we took off for Poughkeepsie and we met this gentleman whose name I regret to say I cannot think of right now. He was a gentleman who had secured an awful lot of franchises for Vicoa, for the company in Steubenville. The company in Steubenville subsequently merged into TCI. They are worth... they still have TCI stock on their balance sheet that has a value of something like 400 or 500 million dollars. He had secured for them some of their early franchises. He and a fellow by the name of Fisher, whose name I do remember, from Lewistown. Fisher lived in the community during the franchise battle and he was on the payroll for...it wasn't very much. He was a courtly, kind old gentleman. He lived in the community, he worked with the city council and the city clerk and the Y's and what have you, and ended up trying to get the franchise. He had a real good record. Jim Coffey was the name of this gentleman that Fisher worked for and Jim Coffey was the gentleman we went up to see. Jim Coffey had earlier been the general manager if the State College system under Jim Palmer. Jim Palmer had hired him. Jim Coffey had earlier been fired by Jim Palmer years before, as the manager of the State College Pennsylvania system. And at this stage of his life he was despondent because he had suffered a heart attack. Even though he had gotten all these valuable franchises for his employer, Vicoa, they fired him. He had a heart attack, he no longer could work full time, they thought and they fired him. He had a company called Cable Monkeys, doing installation for companies on a contract basis. So we went up to meet him and he was kind enough to take us around and show us everything. He showed us systems up there; that was Poughkeepsie that had been put together by the telephone company. They had the phone wire and the cable lashed together. The phone companies of course were ordered out of the business by the FCC. This system was now for sale. It had this problem of 1) getting the pole attachment fee with the phone company and 2) you had the problem of the cable being lashed together with the phone cable.
SMITH: You mean lashed in tandem on the same wire?
TUDEK: Yes. They lashed them together. Instead of building two separate systems they built one system and they had lashed the two together. They had done a very poor job of construction and it was a mess and everything else, and we kind of pooh-poohed it. Unfortunately, we didn't buy it because this was the first system bought by a company in Providence, Rhode Island called Colony. This was the first system of Colony, which was, as you know subsequently became a relatively large cable television company. It was very big in radio, and I think they had some television stations and of course they had the Providence Jerrold. The former long-time president of ATC left to head the Colony and they just sold their Cable TV systems to Continental, before Continental sold to US West.
At any rate, it would have been a great acquisition. We knew about that opportunity. That became one of the 18 opportunities that we came across in three weeks time. That night, a big fog set in, and we couldn't take off the following morning; it was that bad. So he said "Well, why don't you see the rest of this area." And he took us down into Middletown.
SMITH: He being Coffey?
TUDEK: Jim Coffey. He says, "Why don't you go down and let's show you Middletown." Middletown was a community, with the surrounding area, had a population of something like 50,000. It was the only franchise in that whole area that had not already been built in an operation for years. Because this was an area, a classic cable television area where the people lacked one or more of the networks. This is how we defined in those days, the classic cable TV system area---One that has no access to one or more of the networks. And the reason that Middletown, New York had never been built, was that was the location of a large antenna factory, rooftop antenna factory. It was the headquarters of the people, out of loyalty to that company, had refused to grant anybody a franchise. But Coffey told us that they had several months before changed their minds and they were having a franchise battle. As a matter of fact, the proposals had to be in by the following day. There was an interesting story about the previous time they had agreed to grant a franchise. This very same Fisher, who worked for Jim Coffey at Vicoa, and who had been so successful in getting these franchises including Newcastle, Pennsylvania; Lancaster, Ohio and many of the franchises that went into that Steubenville complex that was sold to TCI. This guy Fisher was working on a proposal in Middletown, New York and he had a meeting of all the city council, and he had given everyone of them a little black valise with a proposal from Vicoa inserted in this little black leather valise. This was a rather common thing, about the size of an ordinary proposal. After the meeting, all the councilmen were photographed walking down the steps out of the council building, with these little black valises under their arms. The newspaper, who, for whatever reason, was violently opposed to the granting of a franchise, made a big situation about these black valises under their arms. The amazing thing was, they were giving some present. All you had in those was a proposal. And that was it. But the newspaper ended up saying the city council was actually friends, you might say, and refused to act and vote. That was a year earlier.
Fisher had pulled this boo boo by giving his proposal in these little tiny black valises. I'm not even sure that is the right word. But you know what I'm talking about. They're little rectangles with a little zipper on the top.
SMITH: Like a small briefcase.
TUDEK: It can only hold something that's like a half-inch or an inch in thickness. They weren't expensive or anything like that. But this kept the franchise from being granted. So now they were starting all over again. Of course, Vicoa was going to be one of the applicants again, probably. Although not necessarily because remember now, Coffey was no longer working for Vicoa. He had been fired and he was in charge of their franchising. You want to keep in mind that Vicoa was a competitor to Jerrold. It was the number two company at this stage, and they manufactured a full complement of equipment in cable. They started out manufacturing cable and then they went into manufacturing all the amplifiers and all the head end equipment. They had two brothers, the Baum brothers along with their dad who built this company. But again, it was the franchises that they had secured and the operations of the franchises that eventually kept the company alive. And they went on even long after the company, Vicoa, became a leisure company that manufactured potato chips. They spun off the cable end of that. I think the final system just left here a year or two ago. It was a big system in Maryland that was overbuilt by Jones. Jones, I think finally bought the system, something like 70,000 subscribers in a county in Maryland. That was the last thing out of that company.
But at any rate, he told us all about the fact that this franchise proposal had to be in that particular day. I sent a wire that said "Tele-Media very interested in your franchise opportunity. Will submit details as soon as possible." We got back a wire that said. "Glad you're interested in our franchise opportunity. Please send details as soon as possible. Signed Middletown, Ohio." Western Union had sent the franchise proposal to the wrong town. So we now knew about the third opportunity. This was our second or third day on the job. We already had Poughkeepsie and that system which we should have bought. And there was Middletown, Ohio ad now was Littletown, New York. Incidentally, Middletown, Ohio eventually became a TCI system; I think it is to this day. So finally, the fog lifted and we took off back home. That was the third day on the job. And we said "What next." We got hold of a broker near Philadelphia. How can I forget his name? He was located near Philadelphia at that stage of the game. A gentleman who was the second employee of NCTA.
SMITH: For the record, the second employee of NCTA was a woman who was my assistant, and I was replaced as the executive secretary of NCTA by Edward P. Whitney, who did become a broker.
TUDEK: Whitney played a big role in our company later on, but this gentleman, Whitney was no longer with Blackburn at this stage and this gentleman was the only guy that Blackburn had. And you'll know who he was because he an early employee of NCTA on a lower level, we're not talking about on a higher level, a clerk really, perhaps. He was an operator, had left his company to join a gentleman in a venture up in New England, a dairy farmer, that got into the cable business and that didn't last too long. And he became, while he was an operator in Pennsylvania, the president of Pennsylvania PCATA. He ended up as the vice president of Time-Warner. Of course, he headed Cincinnati for years. Then was let go with Time-Warner's downsizing. He formed his own company. Couldn't get an acquisition together in three years even though I consider him to be the finest broker I've ever come across, and I mean that sincerely. Then he ended up putting together a whole package for a group in Philadelphia. In a short period time they sold out and made quite a bit of money. Thank God he had some equity, so he ended up doing all right. It was Frank Nowaczek. He was the broker from Blackburn. We called him and he took us into Pittsburgh and showed us an opportunity in Rankin, Pennsylvania, which subsequently, franchises were added to that, Mt. Hall and Whitaker and so forth. Actually it was really North Braddock rather than Rankin that I think he took us to. There was a Braddock and North Braddock. They had been in operation for a couple of years and they had a fight and then an argument. It was being run by some woman manager, and it was for sale. And then he showed us another opportunity in Ohio. Then he took us and showed us Columbiana, Letonia, Washingtonville, Ohio. That subsequently became our first acquisition. But at that stage of the game, we hadn't made up our mind. Actually, this was only our fourth, fifth and sixth day on the job.
Then we learned that there was a state cable meeting in Danville, Virginia. Everett and I took off with our plane again to go down to Danville. We got down there and they had a big meeting, and there was a big fight about the franchise in Danville that involved Booth. The newspaper went out. Booth had actually built a tower and built the system down to the city line and had a franchise. But the paper had convinced the council to cancel the franchise and give them the franchise.
SMITH: Can you identify Booth a little more specifically?
TUDEK: Booth is the operator that still is in business, headquartered out of Detroit, and had a family tradition in the newspaper business. The senior Booth, at that time was still alive. They had a cable TV system in Pulaski, Virginia. They were building the underground system in Blacksburg, Virginia, the home of VMI. They were building that underground at the time. Mr. Booth had an interest in that locale. His senior man who had been with him for 35 years and was handling the due diligence work, showed us the statue of one of the Booth ancestors who was on a horse, I think right at the VMI entrance. He was in the cavalry during the Civil War. But Mr. Booth was very big in the radio business, I believe at that stage, and also had a television station or two and of course, had the newspaper in Detroit, I think it was the Detroit News, if I recall correctly. Somehow or other, they were tied up with the Scripps Howard people, interrelated and I don't know the details. Within the last five or ten years there was a real big battle and the Detroit newspaper was sold. Subsequently the son took over, and a matter of fact is now divesting the company. I think the last system they had not yet divested is Victorville, California, which they're selling to the Tele-Media Corporation, a system of 32,500 subscribers.
SMITH: Can we go back to where you got the franchise from, you took it away from them.
TUDEK: No, what happened was this was the convention for the state association was in Danville, Virginia, which is at the very bottom of the state. The newspaper had taken the franchise away from Booth. They had built, by then, a rather large building to headquarter the cable system in Danville. They had a huge studio to do local program origination on the cable television system. And it was as big and as equipped as most medium sized television stations in the country. They were really going at it hog wild, spending all kinds of money. As a matter of fact, if I recall correctly, they had selected Vicoa rather than Jerrold to build the system for them on a turnkey basis. We all saw the system that Vicoa had built and we saw their beautiful studio. But while we were there, we met this gentleman who managed the Pulaski system for Booth and was in charge of building this system in Blacksburg where Virginia Military Institute is located. Mr. Booth was not particularly interested in selling that underground system, but he probably would have entertained an offer. But we were interested right from the beginning in Pulaski, because Pulaski was in a bowl. It was the classic system that could not get the ABC channel. That made it a classic. Booth already had a twelve-channel system built. Even though it was a classic system, they only had a thousand subscribers even though they had something like 3,500 or 3,800 potential. The reason for that was that this system was originally built by the telephone company in the state of Virginia. Chesapeake and Potomac had built this system, had turned it on and couldn't make it operate. They built it as. So they had to turn it off, even though they had connected a thousand subscribers, and start all over again. Then they had to get out of the business and they sold it to Booth. Of course, they did have some of the same problems where they had lashed their cable with the telephone cable.
Here, Everett and I were now going to buy this cable system, which would have been the very first Bell system leaseback sold in the country. It turned out we ended up buying the one in Columbiana, Ohio, which was the first Bell lease-back sold in the country and Pulaski would have been the second. When we negotiated this deal with Mr. Booth, it was a real pleasure to do so. He was a courtly, dignified gentleman, who dined often at his club in Detroit, his private club, which overlooked the bay and his yacht. And his people told us that he often had cable meetings on his yacht in Detroit.
At any rate, we met at his club and I'm really amazed. I got up on the board and I'm lecturing Mr. Booth about the cable television business. I'm just a young fellow, at that time he was probably in his 60s and had been around some time. But he listened patiently to me. And we agreed and entered into a deal—300 dollars a subscriber. And he agreed that he would reduce the price by 25,000 if he didn't get the franchise in Dublin, next door. Dublin had a potential of about 3,500 subscribers. But Everett wanted me to request a 75,000-dollar reduction in the price because of the co-channel problems that he had at the top of the mountain. This was why things weren't so hot even then sales wise, because the pictures weren't good on several of the stations. There was a bad co-channel problem. Co-channel occurs because you have a television station giving you, as an example, giving you channel 4 on the backside of the antenna maybe 50 miles away and a channel 4 on the front side of the antenna giving you 50 miles away. So you really had a problem with two channels 4s hitting both sides of the antenna.
At this stage of the game, it was a problem that was very difficult for the engineers to handle. That was back about that time President Johnson, who was in the cable television business in his hometown in Texas, had this same technical problem. He hired the engineer from Altoona, Pennsylvania, which at that time was the largest system in the business. That was early in the game, 30,000 subscribers. He helped President Johnson with his co-channel problem and the engineer told him there was nothing that could be done. Subsequently, this engineer tried to lick his problem by building the antenna shack in a cave on one side of the mountain to avoid getting the pictures from the other side. Of course, subsequently they actually had directional antennas; they tried to lick the problem, with highly directional antennas.
SMITH: Did that cave experiment work?
TUDEK: It helped somewhat because you were shielding the antenna from the backside. This same problem was attacked by Johnny Walsonovich, by building his antenna in an attic. That was the reason he had his master antenna system in the attic of his home in Allentown, trying to lick the co- channel problem.
SMITH: That's an amazing experiment.
TUDEK: At any rate, Booth had a co-channel problem on the top of the mountain and Everett wanted a reduction of 75,000 to take care of it. He was going to try take care of it with this idea of bringing the antenna down from the top of the mountain to shield it from one side, or a highly directional antenna. Well, unfortunately, they didn't come back to us, and they sold the system to Vicoa and gave a 37,500 reduction. So Vicoa ended up with Pulaski and ended up with Dublin. These are systems, by the way, recently acquired by Adelphia. I always liked the idea because 1) I'm Polish and Louis Pulaski was a revolutionary war hero from Poland, and they had an airport there and I liked the town. We had negotiated this very, very difficult pole attachment agreement with Chesapeake on the phone. They did not have their own attorneys, but rather had hired some communications attorney down in Washington D.C. to negotiate this agreement with us. This would have been the first or second agreement negotiated. How do you get along with the very company that you are entangled with and lash together for them and so forth? It was a big problem at the time. We were successful and had completed the negotiation of that pole attachment agreement whenever this thing occurred. Vicoa got the benefit of all that in that 37,500 reduction. Again, this was another opportunity that we missed. Now, we had besides Pulaski and Blackburn...we got fogged out again the second night in Danville. We couldn't leave and we spent all kinds of time there with a broker who was already a pioneer in the business and still in the cable television business in Virginia who was a broker then, with the broker who handled the Rio Grande acquisition by Sammons that I talked about earlier in my history here, where I was the consultant and earned 250,000 dollars on that deal. He was the broker. There has been a lot of testifying in trials with cable people as a consultant. He's been president of the Virginia Cable Television Association on two or three occasions. He might even be today. He has some cable systems along the coast in Virginia today that we thought about buying but decided not to. Over the years, we bought a number of systems that he had built and actually had interest in when we bought them. He had paper, and we paid him off. I forget his name. But we spent quite a bit of time with him. He gave us several opportunities.
Then this gentleman who worked for Booth, in addition to showing us Pulaski, and showing us Blackburn, took us for a tour of the state. We couldn't leave; it was all fog. By car, he showed us a number of opportunities of companies that were for sale in Virginia. He knew, he had been there, was a real pioneer. He knew everything in the state, he knew everybody in the state. He actually showed us half dozen opportunities in the state of Virginia, in addition to Pulaski and Blackburn. Along with a broker, who gave us a number of opportunities. So it was now our sixth day in the business, and we already had a dozen opportunities.
SMITH: Can you remember that man's name?
TUDEK: I should because he played such a big role in our company in that subsequently, in our history, I will tell you about getting the franchise in Geneva, Ohio which led to that whole complex that we built along the lake. He was the gentleman who was my competitor in Geneva, and had already got a council to pass a motion authorizing him to negotiate with utilities. He thought that was as good as a franchise. He took me up to the city council when I arrived and they had me really address them. Anyone can negotiate with a utility. I subsequently got the franchise and took it away from him. At that stage he only had one system and that was in Maryland. He's played a big role in the business and I'll try to remember his name. Two years ago we spent two days with him, in his system, down there in Virginia. He has headquarters in an old boarding school that he bought, a home. He runs his operation out of a very stately mansion and has a real fine operation down there in Virginia in a lot of these very nice communities that have a great deal of growth along the water.
Unfortunately, by the way, over the years he has been very successful, but he invested quite a bit of money in other ventures. At the time I met him, he had invested in the meat business, the grocery business and wasn't doing that well. He's have been far better off just putting his money into CD's. He, along with Nowaczek and Jim Coffey, in another twelve days or so, we had eighteen opportunities. This was in three weeks.
Remember, all Everett and I thought we were going to do was get one franchise and build it; or buy one company and move there and kind of relax and have it easy. That was how little we knew about business I guess you might say.
SMITH: How many of that 18 did you actually acquire?
TUDEK: Well, wait a minute. What we did was we set up 18 specifications since we had 18 opportunities. We ended up buying Columbiana, Letonia and Washingtonville, Ohio, even though it was the smallest of all 18. Some of these were large. Littletown, New York you know was 50,000 subscribers and Middletown, Ohio was probably bigger than the others. This system with 3,200 potential was only 384 subscribers. But it met most of the criteria. We had 18 specifications and it met more specifications than any one of the other eighteen opportunities. Why that was so, as I told you earlier, the systems were broke as a leaseback by Ohio Bell to this strip miner who was related to Joe Taylor. Joe Taylor's uncle was the strip miner. Joe Taylor entered into this agreement with Ohio Bell, and Ohio Bell had built this system. Things didn't go as well as they should have. He didn't get the subscribers and they couldn't meet their obligations. They were in default in every aspect of their operation. They were in default with their leaseback payments and they were in default all along the lines with the bank and everybody else. By the time Frank Nowaczek had taken us down there, the system had been visited by virtually everybody in the business. And of course, the reason they had no interest in it, was because of this pole attachment agreement that you had to enter into with Ohio Bell. And you had this problem of their having built the thing and all kinds of things that they wanted and so forth and so on. The idea of negotiating with Ohio Bell an acceptable pole attachment fee scared everyone away.
But more importantly, Joe Taylor had an application in next door at East Palestine, Ohio, which is a community that is famous for its glass factories, among other things. He also had an application in at Geneva, Ohio up along Lake Erie. Both deadlines were passed. So it wasn't possible for us to go and submit a proposal to these communities. We went, using his application, before we even bought the Columbiana system, we followed up on the franchise in East Palestine, which is right next-door and would be added to that system. We went down there. This was where Claude Stevanus had been working on trying to get this franchise for many years; something like six years. Tower had bought Salem, Ohio, which was not very far away, a nice size system. Nice sized community. Then he had Lisbon, which was right next door to East Palestine. Lisbon was the county seat. Then right across the Pennsylvania/Ohio border was Beaver Falls, Pennsylvania. So Tower, which was headed by Claude Stevanus, had East Palestine surrounded on three sides. As I said, he had been working on his franchise for something like six years. We went down there, Edward and I and we ended up getting that franchise. This is where we had to have a letter from a recognized financial institution that we had the capability of securing the financing. This is where I tried to get our board of directors to let me go to a bank and we would all guarantee 100,000 or whatever. There was an amount in there, like a hundred or two hundred thousand dollar loan that we had to be able to get. This is where the board balked. They wanted to get more of our company. They already owned 65% but they wanted even more of it, if they were going to do that. Perhaps I should tell you a little about our board of directors. Four of them were graduates of Yale, and had gone to the same prep-school—Phillips Exeter at Andover...
SMITH: I think you went into some detail on those four men.
TUDEK: Yes I did, but I didn't remember the name of one and I do remember his name now.
SMITH: Please go ahead.
TUDEK: Newton Chapin, who has owned the Marshall Stamping Company in McKees Rocks was the fifth member of board, and I couldn't remember his name. He was the brother in law of George O'Neill. I had said he was the brother in law of Ward Wickwire. I was wrong. I had mentioned that his name was George Potter O'Neill. That his family went back hundreds of years and owned Potter County, here in Pennsylvania, which is one of the counties north of Centre County in Pennsylvania. And that John C. Oliver, Jr. I had mentioned earlier was an heir and trustee of the Oliver Estate, who was one of the founders of US Steel and some of the other companies that were headquartered in Pittsburgh, Pennsylvania, including, I think the.. Company of America. Grant McCargo was involved with Graham Oil Company, who had a sister who was very prominent out in Hollywood. I don't remember her stage name. Grant also had a tragedy about that time, where he had a wonderful wife who was killed in a skiing accident out in Idaho. No one knew quite what happened. She was with her family skiing and she was killed.
At any rate, we had Ward Wickwire who was the founder of Salem Broses, a steel company. So again, they had balked. I had a meeting that night. There was a board meeting that morning that I had expected to last five minutes. I wanted them to all agree to do this. I would go down to the bank and the bank would give me a letter saying that they would be willing to lend us 100,000 dollars, or whatever the number was. They kept it up and kept it up. This was late in the afternoon, whenever we finally adjourned. And I had to show up at 7 or 8:00 at East Palestine, Ohio. That's a drive of probably, two hours from Pittsburgh. The banks closed at 5:00. I finally adjourned the meeting, and I ran down to the one bank and I told them that what I needed was a letter. I was in a hurry. Believe it or not, he had the girl type it up in no time at all. Within five minutes, he signed it. It was what was known as a very soft letter. All it meant was that they were willing to lend us the money, subject to approval by their executive committee and subject to the negotiation terms and so on. This was like 4:15, so I still had at 45 minutes before 5:00, and two hours to get to the meeting. In those days I had the reputation of making whatever meeting I had to go to, just making it, or perhaps being five minutes late. I'll never forget Trevis was waiting for me at an airport once to get signatures. Trevis again was our general counsel. And I showed up at the gate and he said, "You're early." I said, "What do you mean?" And he said "Well, you've got two minutes." And he had me sign these papers before I got on the plane.
I now went down to the second bank, and third bank and within 45 minutes, I had three soft letters from the three banks in Pittsburgh that I took with me down there to East Palestine to show them that not only did we have one bank, but we had three banks willing to lend us the money to build the system. It was going to take a lot more than that to build the system, but they apparently didn't know that. So we went down there that night with those three letters, and we ended up getting that franchise. We actually got that franchise before we closed the deal next door in our first acquisition. So we got our first franchise before we got our first acquisition. We made this acquisition, because in addition to having this proposal in at East Palestine, Joe Taylor...and I went into great detail about Joe Taylor and how he left us to go to TelePrompTer. And he ended us being the president of TelePrompTer Manhattan. My old story about Jack Kent Cooke and the role that Joe Taylor played with Jack Kent Cooke. Then Joe Taylor went on with Alan Gary, after having been president of several other cable television companies in the interim. He's now retired in Florida. But Joe Taylor told us that up there along the Lake in the communities of Conneaut and Ashtabula, Ohio, there were two systems; one with 6,000 subscribers in Ashtabula and one with 3,000 subscribers in Conneaut. But that none of the communities around those two had ever been built. You could put together a string of communities that would be over a hundred miles long. Whoever could buy Ashtabula and Conneaut had the capability of doing that. And if you got the franchise in Geneva, which was next door to Ashtabula, you would have to be able to do that. The reason for that was that the owners of Ashtabula and Conneaut, the three Aiello brothers, who were partners with two very, very prominent attorneys in Pittsburgh, were fighting with their other five shareholders. In addition to fighting with their other five shareholders, they were in default of their loans and they were in default of their leaseback payments to the telephone company in Ashtabula. It was an independent telephone company that built the system that was a leaseback so, they were leasing it to this company. They had a huge battle that was so intensive that the FCC chided both sides for all the stuff they were involved in. They kept both sides appealing to the FCC. At that time, remember, you had to get approval from the FCC before the telephone company could make an addition to their system. It was Section 214. Whenever the telephone company was trying to get approval to build the multiple dwelling units in Ashtabula, these applications were opposed by the operator. They had all other kinds of battles about the agreement entered into—the leaseback, the payments and so on. The other five shareholders, one of whom was a doctor, an M.D., a pediatrician from Altoona, Pennsylvania, Dr. Hugo DiJiacobi, who really played a very prominent role in the early days of cable television. He was one of the ten shareholders of the largest system in the business, in the early days of cable, 30,000 subscribers. They had each invested something like 20,000 or 200,000; I think it was more like 20,000. They built this system. There's quite a bit that could be talked about. Hugo DiJiacobi was an extremely popular physician. In my earliest job, I worked with doctors and I knew him personally and had to wait for hours to get to see him. At his home, patients waiting would be out on the porch and down the steps. This in spite of the fact that he was a very difficult gentleman in all of his other relationships. His brother-in-law who was a next-door neighbor refused to talk to him. He had no other friends, and he constantly fought with every shareholder he had. He was involved in Latrobe, Pennsylvania. That's another situation where his sued his other shareholders. He was involved in Dubois cable system in Dubois and he sued. He was involved in Conneaut and Ashtabula and he sued the shareholders. He was a part of a group of people who applied for the franchise in Youngstown, and they got the franchise, but they got very negative publicity for the whole industry, because his partners had been involved in some shady dealings. One partner was convicted for bribing the basketball team CCNY in our nation's first collegiate basketball scandal. He went to prison for three years. His name was Lamont. He came back to his hometown of Altoona, and he started a television company by the name of DuMont. Putting together in a sense, under the name of DuMont. He sold TV sets by the name of DuMont. What happened here was, a gentleman came up from the Harrisburg area and got the franchise in Altoona. He had no money to build it. He was looking for people to build the franchise. He was introduced to the Lamont brothers. The one who had been convicted had another brother. And they put together a group and had this sub-chapter S of ten guys. In addition to Dr Hugo Di Jiacobi, and the two Lamont brothers, they had a gentleman by the name of Ercualani, who has a rather prominent, I guess to this day, restaurant on the top of a mountain in Cresson, Pennsylvania, right next door to Nanty-Glo, or some town next door to Cresson, which is famous for giving you a big feed. Matter of fact, you went in there and they had a scale, and you weigh yourself beforehand and you weigh yourself when you leave. But it's a situation where you get dozens of courses, and it's really great food.
Ercualani was also in the car business. So he was in this. Then there was the lawyer from Altoona, Bennett who was the lawyer but he was also a shareholder, along with the two brothers. There was a gentleman who was associated with them. I don't think he was a shareholder, who was named "Hot Nose" Gaetano, who had served time for killing somebody in an argument with a pool cue. At any rate, whenever these guys got their franchise in Youngstown, it got all this negative publicity, and the franchise was cancelled. From that stage, on DiJiacobi divorced himself from these Lamont brothers as best he could. But whenever he formed another company with Bennett, the lawyer, to go elsewhere, he was always attacked by his association with the Lamont brothers in Altoona. There was a real big hullabaloo up in Ashtabula. That was a part of the battle in Ashtabula and Conneaut, because Time-Life, at that time, was in the cable television business. They decided to do a deal with the telephone company...to get a franchise over the top of the telephone company in Ashtabula, and overbuild the telephone company, which had to deal with these ten shareholders, including the Aiello brothers. Victor was the senior brother and he had two younger brothers who were twins, one who died of a heart attack four or five years after this period of time and the other brother is still alive today.
SMITH: These were the Aiello brothers?
TUDEK: The two attorneys were Jack Feeney and I want to remember the other guy's name, an Irish name, starts with Mc, who had their own firm. Started out with one of Pittsburgh's most prominent attorneys, who handled all of the railroad compensation cases and got a national reputation because this attorney filed the first tobacco lawsuit, going back 30-40 years. Took on the tobacco companies, I guess you might say as a gesture of good will for the nation. He was a highly successful attorney, and won all kinds of compensation cases. All the Pennsylvania cases where someone was hurt in the railroad ended up in this law firm. Feeney and this other guy were two of the prominent attorneys in that firm, and they left to form their own firm. This other attorney was at that time president of the Pennsylvania trial lawyers association. He was also president of the Allegheny Bar Association. Feeney got a lot of notoriety practicing law, because subsequently he handled all the big cases for the Allegheny County commissioners. Cyril Wecht is internationally prominent physician and pathologist, along with an attorney, who you hear about in the Kennedy assassination case. You hear how he disagrees with the committee, the Warren Commission. He still testifies in a number of cases nationwide where you...what do you call attorneys who have a medical degree?
SMITH: I'm not familiar with that term.
TUDEK: They are guys that have both degrees. He's often a consultant in the country's most prominent cases. Matter of fact, he testified in one of the nation's most prominent cases within the last couple of months. But, Cyril Wecht was a county commissioner after having been a coroner. He got involved in a huge scandal that lasted for years about his using county facilities for his own personal benefit. Feeney was his attorney, along with representing a couple of the other county commissioners. This case with Cyril Wecht lasted for years. Cyril Wecht lost the case. I don't know if he ever paid the 600,000 dollars that he owed to the county. He suddenly came back, and became once again, either a commissioner or a coroner of Allegheny County. Today I guess he's outlived that notoriety that he had and where Feeney was his attorney.
At any rate, Feeney and his partner...The firm that they worked for and the guy that was internationally prominent was McArdle. I forget his first name, had the reputation of being one of the finest tort lawyers in the country. He was the Belli of the east. He, again, filed the first cigarette lawsuit, claiming that this brought about lung cancer. That was way back, a long time ago, could have been in the '50s or the '60s when he filed that lawsuit. This was not long after a surgeon by the name of Ochner in New Orleans did the first surgery of taking out a lung. I think he did the first lung operation and he was a physician in New Orleans. It was not long after that when I think McArdle filed that lawsuit.
Each gentleman had this sub chapter S and they were fighting each other. There were seven lawsuits involved here. Three of them were class action lawsuits. The guy who put the deal together, who had been a basketball player and had a scholarship at Pitt, put together this whole package and this whole group of people got the franchises. He was helped by Joe Taylor in Conneaut. Joe Taylor worked for the construction company that built both franchises. At any rate, this gentleman had sued, claiming that he was not given the 10% of the franchises that he was promised for getting them. Joe Taylor subsequently sued, and that's why we parted, saying he and the lawyer who had incorporated them each claimed they had 5% of the franchise. DiJiacobi had a class action suit, claiming that they had taken assets from those companies to help their other franchises that they owned in Ridgeway, Pennsylvania, etc.
There was another lawsuit by another shareholder. I forget what that was about. It was the same thing. Then of course, the telephone company had a couple of lawsuits about the fact that they hadn't been paid. And the bank sued because they hadn't been paid. We were told...
SMITH: These lawsuits were against whom?
TUDEK: Against the company, and the Aiello brothers and the two lawyers. These other five guys were claiming that these five shareholders were treating the three of them unfairly.
SMITH: And why do you call them class action suits?
TUDEK: Well, because they were suing all ten shareholders.
SMITH: But only on behalf of themselves.
TUDEK: That's right. But you see, the problem was it made it very pretty difficult because in a class action suit you have to get every single person to agree before you can get the damn thing withdrawn. You can't get the majority of the class to withdraw the suit. Once the suit is filed, and assume it's accepted as a class action suit, all members of the class have to agree to it or the court has to, either one. The court can...you can't get a class action suit withdrawn without all members of the class agreeing to it.
SMITH: That is probably correct. The thing that is bothering me Bob, is that a class action suit is brought on behalf of the sue-er and everybody else in the same position they are. It's not a class action suit because it's brought against all of the stockholders. It's a class action suit because it's brought by the suer on his behalf, and everybody in the same position he's in.
TUDEK: They were suing on behalf of every shareholder, claiming that the company was taking assets out of the company to benefit them in other operations.
SMITH: This is fascinating, because if I understand you correctly, and we need it correct on the record, you're saying that each of these several stockholders, I believe ten in number, all ten of them had a suit?
TUDEK: No. Three of them had separate class-action lawsuits.
SMITH: OK, that's my point. Three of them were all suing the company on behalf of all of the stockholders, in three separate suits. That's very interesting.
TUDEK: That's why these two very prominent attorneys told me that they had given up.
SMITH: I'll bet they had.
TUDEK: DiJiacobi had hired the ex-district attorney of the county. Up there the district attorney is elected, prosecutor is the name rather than the district attorney. County prosecutor, who had quite a trial reputation, and he was now representing Hugo DiJiacobi on behalf of all ten shareholders. They were claiming that certain shareholders, and other members of the company, non-shareholders were actually taking assets out and taking it over to this company in. First there was a company in Elmira, New York. It's an Indian reservation and it's a system that has got to be sold nine or ten times. Over the years, if it hasn't been sold ten times, it hasn't been sold once. It is actually an Indian reservation. It has a rather odd name. I always mispronounce the name of the community. One of the ten owners of the system were the Aiello brothers. These three brothers and the two attorneys owned this system we're talking about up in New York state. They had Ridgeway, Pennsylvania. Incidentally, they had an option to buy the Altoona system for a mere five million dollars, and they had six months to do it. They ended up not being able to raise the five million dollars to buy it. Buying Altoona for five million dollars turned out to be a real bonanza in those days. Whenever Warner Bros. bought it... there was actually a company that bought it in the oil business that sold to Warner.
SMITH: Are they the company that was at one time was merged with CPI? Livingston Oil?
TUDEK: Could be. But they bought Altoona and they got out of the business by selling it to Warner Bros. Warner Bros. got back into the business overnight, and they bought that company including Altoona. These guys submitted franchises here and there. At any rate, we had the three class action suits. And then you had this attorney who was working and representing the telephone company. He told me that he had an actual huge filing cabinet, every single drawer filled with this one lawsuit. When we finally settled this thing and bought the company, he was a pretty sad guy. He said that he had actually put two of his kids through college on the fees through the telephone company and this was all coming to an end. He was the most prominent firms in Cleveland and also, at that time, one of the largest and most prominent firms in the country.
SMITH: And you say you got that situation directly...
TUDEK: We've got to go back a little bit. I'll tell you why we bought Columbiana, Washingtonville and Letonia. I came across Letonia, Ohio in the local supermarket the other day, in a produce market. I picked up some produce the other day and there it was grown in Letonia, Ohio. At any rate, Joe Taylor explained to us all of these problems, and how you could buy these two systems, and if you were lucky enough to buy these two systems, you could get the franchises in between and all along them and put this all together and build this whole system where you would have a 125,000 potential subscribers and probably end up with 70-100,000 subscribers someday.
SMITH: Within a 150 mile area?
TUDEK: It was 138 miles. Actually 138 miles. So he explained that the key to this would be getting the franchise in Geneva because the local banker lived in Geneva, even though he was a president of the bank in Ashtabula. The Ashtabula bank was now a subsidiary of a very large bank in Cleveland, Society National Bank. He said he could probably get the money through Stu Jackson to do the construction. Stu Jackson was the president of the bank in Ashtabula, which was a subsidiary of Society National Bank in Cleveland. He played a real big role in our company and I'll tell you why.
But we heard all of this from Joe Taylor. He said the franchises are finished in Ashtabula. So there were only two applications, mine and this other guy, a fellow from Virginia, a broker. We decided to buy Columbiana and we did. We paid 325,000 dollars for the 384 subscribers. We settled all this guy's lawsuits and his problems. We gave his widow several percent of the company going forward. And those several percent of that company ended up being far more than the 325,000 dollar loan. Far more than she got out of the deal. He got very little, if anything. As a matter of fact, she was in a fight with her husband at the time. They were in a divorce situation. Her husband as I said, was a coal miner, a strip miner. He had this beautiful farm that they lived on. Unfortunately, her husband got involved with a gal who lived on this farm. So, the owner was going through a divorce with his wife. She was an officer of the company. He needed her signature; she was treasurer. We couldn't do this deal without her. She was heartbroken about loosing her husband. We closed the deal, and her husband did not divorce her. Not long after we closed the deal, her husband was supervising a construction job in Youngstown with a high lift and he gave a signal. There was some misunderstanding, and the high lift came down on his head and it killed him. She now became a widow, and had the part of our company going forward, including this whole thing with acquisition led to this whole big thing that I'm about to describe along the way.
SMITH: Part of your total company?
TUDEK: One big part of this company was a separate subsidiary. And ended up, by the time we got her out, we had 70,000 subscribers. We were buying 384 subscribers. By the time we bought her out we had 70,000 subscribers.
SMITH: She made a lot of money?
TUDEK: She had 1% of the 70,000 subscribers, and it amounted to several hundred thousand dollars. But at any rate, it was very tragic. He was so knowledgeable in his field, working around this type of equipment all of his life. I even wonder if that wasn't a suicide on his part. Because of all the tragedy he had in reference to this unfortunate financial situation. His whole life spent in being a success. He built this cable system and all his financing gets all messed up, and he gets involved with this gal, who incidentally had quite a few children, even though she was a young girl. It was a real big mess. His own daughter, who was at that time, the head cheerleader for Purdue, and Purdue in the Big 10 were famous for their head majorette. They were famous nationwide for I think they called them the Golden Girls or something like that. His daughter was the head of the majorettes for Purdue, a wonderful girl. And he had a wonderful son who was a college student at the time. They were all down on him because of his marital problems. I really feel in my heart that he called that thing down on his head. That was his way of providing for his widow. If he ended up with insurance, deliberately committing suicide, you're not going to end up in most cases getting insurance for your widow. And of course, this is all speculation on my part. But I just kind of believe that this was what happened, very tragically. But as far as the 1% for the widow...and I needed to get her signature. She wouldn't do it...she wanted far more than that but we negotiated it down to 1%.
So we ended up buying that system. We went on up and got the franchise. That was our first acquisition. We took the company from 384 subscribers to 1,200 within three months. We did this with door-to-door sales. We put together a door-to-door company, one of whom worked for us then and still works for us today. He's the number two man in marketing and he's the assistant manager of our marketing group and still sells door to door. William Fortey. He worked for us there in Columbiana, Washingtonville and Letonia. Which is the system located right down below Youngstown in the Youngstown cable television market. But we were able to carry the Cleveland stations along with the Pittsburgh stations. Under the rules, because of our location and grandfathering, we really had a great package on there. And of course, all the three stations in Youngstown were used. It was a classic area. Everybody in Columbiana, all the homes had 20 foot, 25-foot towers along the side of each home.
SMITH: Used for UHF.
TUDEK: Yes, UHF stations, all three of the networks in Youngstown were UHF. But anyway, they had built an intrastate highway right up from Columbiana. They had an exit there. And it went south, all the way up to the Ashtabula area. A four-lane intrastate, divided highway. And, as a result, they had opened up some new banks and some new industries. This highway was going to really make this town surge, population-wise. And it had these franchise proposals going forward in effect that we only had 384 subscribers and 3,500 potential, so we did it. Within three months we had 1,200 subscribers. I came up with the idea of having Touche, which at this time was before they became Touche Rawson, before they became what they are today.
SMITH: Deloitte Touche.
TUDEK: Deloitte Touche. We still have them as our accountants. In those days, we had them do a certified, on the balance sheet, our number of subscribers. So we had an opening balance sheet of 384 to the 1,200 in three months. So we had all of that actually certified. Nobody had done that. As a matter of fact, we were one of the few companies in the country that had a Big 7 accounting firm, to the best of my knowledge at that time. I don't know of anyone who actually had certified their subscriber count. We did this for the first four or five years to show the banks that this is what we were able to do. That we were borrowing far more than the value of the company. We weren't only borrowing 100% of the money. We were borrowing the money to rebuild the company and do expansion at the same time, without putting in hardly any equity at all; in many cases not putting in any equity at all. So we had the numbers certified, and that is still part of the record. So we still have the audits showing that we went from 384 approximately, to 1,200 approximately.
So our second opportunity was now in Jackson and Wellston, Ohio, where they again had built an intrastate highway going by it to Cincinnati. And Colton, Wellston and Jackson... Colton, a small town, was the hometown of the governor of Ohio, who was governor several times and the end there were some scandals and all that sort of stuff. I guess he was responsible for building that highway, that intrastate highway. I forget his name, but he is a prominent governor in the history of Ohio. I believe this was his hometown. They built a new post office, built the intrastate highway that went right by Athens, Ohio and tied up Athens, which was the home of Ohio University. It tied in Ohio University with Cincinnati. It tied in the Jackson area with Cincinnati. A guy by the name of Ralph Squires had put together these three franchises and built the company and did not meet his projections, and was in default of his bank loans. His shareholders were local people in Jackson, Ohio, like the dentist and the doctor and the pharmacist and what have you. He was in default to a contractor by the name of Marvin Bates, and so we put together some equity with the young bucks of the Edgeworth-Sewickley area. Sewickley played a prominent role in our nation's economic history because it was the home of all the steel barons.
We're talking about our second acquisition in Jackson, Wellson and Colton, Ohio. By the way, the governor's name was Rhodes. History will show that he played a very prominent role in the politics of the state of Ohio, and was one of the most popular governors. I think he was governor and reelected. I think he was involved in a scandal in the end. I don't quite remember what happened in the end of his political career. He was the one born and raised in Colton, and responsible for building that intra-state highway, that went by that area, to Cincinnati and increased the value of the cable TV systems in that particular community.
SMITH: I'm sure that that highway wasn't known as Dusty Roads, was it?
TUDEK: No it wasn't Dusty Roads, I don't know if it had his name to it or not. It might have had the Rhodes name to it. It went by Athens. By the way, Athens was owned by Continental. That was one of their very first cable television systems and they almost sold it to me, and they agreed to sell it to me, subsequently years later. They wanted me to increase the goodwill payment from 25 to 75 or 50,000 dollars, and I balked. It was not the deal that we had, and I foolishly balked. They didn't sell it to me. That would have been their only sale. I don't think Continental ever sold anything. I don't know about now a days, but that was one of their very first systems. Bud Hostetter and Grosbeck ate Athens, the home of Ohio University. So we were next door there, and we put together a package of ten shareholders in a sub-chapter S with the young bucks from the Sewickley Edgeworth area. They all lived in that area and they were young fellows, some of whom never had to work, because their fathers were old money and prominent and wealthy. For instance, one of the fathers had put together a steel company. And others had...one of them was Malcolm Prine, who was the chairman, president and chief executive officer of Ryan Homes, which subsequently became a public company.
SMITH: Was this a steel company?
TUDEK: No, a homebuilding company, Ryan Homes. They're still a very prominent company today in home building. But at any rate, these ten young fellows, we called them the young bucks, put together 125,000 dollars I believe, 12,500 bucks apiece. We borrowed the balance of the money and we bought the company from Ralph Squires, who as I explained was in default. He was trying his best to get an SBIC loan to refinance and restructure and pay everybody off and retire and live there. He was a good golfer and he had a fine golf course there. That was his ambition. He was a pilot. He was a graduate engineer. He had a son who was working for him and a daughter in law who worked in the office. He flew us down there in his plane and we did our due diligence. We agreed to buy the thing, and we put together this package and borrowed the dough from Equi Bank in Pittsburgh, it's now called Nation's Bank. Originally they were Western Pennsylvania National Bank and now it was Equi Bank. And they had given us the money for our first acquisition and they now gave us the money for the second acquisition. And we tried to supplement the equity and the senior debt with subordinate debt. We got in touch with a guy by the name of Mortenson who had the only SBIC left in Pittsburgh. It turned out to be that he not only had the only SBIC, but that he had a cable television opportunity in Sylacauga, Alabama, the nation's marble capitol. And that's quite a story. Because at that time I liked to needle Everett and all engineers, not being an engineer. The advantage that I have is that I was the generalist, and I could needle lawyers and I could needle engineers and I could needle accountants and I could needle this and I could needle that, but they had difficulty needling me, because I wasn't anything. I was a generalist. I had this advantage, and I always needled Everett about engineers and of course I worked for an engineer James L. Palmer, who at that time bragged about being the only graduate electrical engineer in the hierarchy of the industry. He had that on his resume. So the guy who was getting all the publicity at that time was a guy by the name of Sruki Switzer, I'm sure you've heard of him.
SMITH: Oh, yes.
TUDEK: Who at that time was making a living as a consultant for the company in Canada, where he was going to design the largest cable system in the world. I think it was for Toronto, if I'm not mistaken. He was hired by the company up there to design and select the amplifiers. And it was so important because we were going to have to run 17 miles before they had the first subscriber. So now he was interested in finding amplifiers that would show the least amount of loss before they got to that subscriber. And he was therefore very interested in Jim Palmer's high-gain concept. Palmer's high-gain concept was completely unorthodox and all the engineers had been told about the traditional spacing. Palmer's idea was entirely different. It was so difficult to convince engineers about the concept of the high gain and less loss. So Sruki Switzer came in to see Jim Palmer quite often about the possibility of using the C-Cor amplifiers to accomplish...but he was writing papers. If you go back you'll find that he wrote quite a few papers. And he had quite a few seminars where he was the lead speaker at the NCTA convention. All concerning his being consultant to design or find the amplifier that would do the trick.
So with that in mind, we go down to Sylacauga, Alabama, a system that was now owned by this SBIC in Pittsburgh, which had taken it over. I think it only owned 40% of the company. I forget who the other shareholders were. We went down to do the due diligence and we met the technician who had been hired off the street. Had only been with the company for a year or six months, something like that. And he took us up to the master antenna, up on top of the mountain. He showed us that they carried four channels, seven miles to a second master antenna, and that carried the thing down another ten miles to the bottom. So they went 17 miles before they showed a picture.
SMITH: They hadn't heard of microwave.
TUDEK: They hadn't heard of microwave at that stage of the game. But more importantly, and this is a true story, the four channels that they were sending from the one master antenna, the main one to the second, they were using old five channel tube equipment that they had bought out of a catalogue for sale. Used equipment for 75 dollars. Now, there they were down at the bottom of the mountain, 17 miles, they had these pictures that weren't really that bad. In that day, they really weren't any better or any worse than any other pictures. And I just needled the living hell out of my partner Everett Mundy. He just hated that day, because I kept telling him about Sruki Switzer, and you engineers and so forth and so on. And I just laughed, because Sruki was making a living. And here these guys, off the street, put together this situation of 17 miles in Sylacauga, Alabama. In the end, by the way, we didn't buy it. We should have. That would have been our second opportunity. And he would have been our partner in this opportunity in Jackson, and Wellston, and Colton, Ohio. He was going to come up with 125,000 of the subordinate debt, for which he would get 40% of the company. He was going to get two or three over prime.
SMITH: Now this was who?
TUDEK: This was Ed Mortenson.
SMITH: I didn't want the record to confuse him with Sruki Switzer.
TUDEK: No, Sruki Switzer had nothing to do with this other than the fact that he was making a living. And the record will show that he was making a living as a consultant for this company. It might have been Rogers. Whoever it was, was building this large cable system, I believe in Toronto. It was at that time expected to be the largest in the country, in the world, really. His problem was going 17 miles before he showed a picture. At any rate, I thought that was one of the funniest things I ever came across. And you should have seen me on that mountain when I saw what these guys had done with these old tube amplifiers. They were pushing four signals seven miles with these amplifiers, in this mountain right-of-way. You could see it from the mountain
Whenever I went back and explained the deal to my young buck shareholders, Malcolm Prine, the chairman, president and chief executive officer of Ryan Homes, which subsequently became...they took it public on the American Stock Exchange. He objected. He thought I was giving this SBIC guy too good of a deal. Forty percent of the company and two or three over prime and what are you trying to do...I said, "It's such a damn good deal, why don't you do it." And he said, "I will." So he took over that spot, and we had to replace him with one of the ten shareholders. You couldn't have more than ten shareholders in a sub-chapter S in those days. So we replaced Malcolm Prine with somebody and he became the subordinate lender, and ended up with a warrant for 40% of the company. Within 18 months...we bought 1,430 subscribers, approximately and we took it up to 2,600 within six months and we took it up to 3,600 within a year, year and a half. Again, these are all audited, certified numbers. Within a year and a half, we bought them out. So Malcolm Prine got back his 125,000 dollars, three over prime, and something like 80,000 dollars, for his 40%. This was a tax shelter, and all of these guys that 18 months because of the way tax shelters worked in that day, they got the virtue of their entire investment as a tax shelter. And they were actually in there, slightly positive or even negative. As you can recall, you could expedite your depreciation. You could double or two and a half times depreciation, in those years. You could give all these huge losses in the first and second year. So within two calendar years, they got enough losses to cover their investment, and they ended up with quite a capital gain besides. We ended up owning the company 100%. We now owned Columbiana at 100%, we now owned Jackson. Now we were working on this third deal, which was going to be our first big deal, Ashtabula and Conneaut. We were going to buy those two companies at 300 dollars a subscriber, and borrow the dough to build the rest of the stuff we were talking about. In order to do that, we were going to have to have a loan of 5 million, 4 hundred, 20 thousand, if my memory serves me correctly, approximately. The story behind how that came about was that when we got the franchise in Geneva, I got a postcard from Stu Jackson, the gentleman who was the president of the bank in Ashtabula, as a subsidiary of the Society National Bank in Cleveland. He just made a comment on his postcard congratulating us and saying that maybe we could get together and have lunch or something like that. So, whenever we got that card, we brought him down to look at our system in Columbiana, to show him what kind of company we were. We had him inspect our master antenna, and the town and the community and so forth and so on. We were folding this into our company with Ashtabula and Conneaut.
We found out subsequently, years later that what impressed him so much about us, was when he went to the master antenna, the shack, before he could enter, he had to wipe his feet on a rug. And when we went in there you could eat off the floor, and all the equipment. Everett, when we bought that company had spent something like three weeks living in that master antenna, rewiring it and putting it together and it was absolutely a showplace. He didn't say anything to us at the time, but he said, "If those guys can do that sort of thing, they have a future ahead of them."
So anyway, when we met with Stu Jackson, after that he sent us to Cleveland, to the SBIC that was run by the bank. The bank had an SBIC. Two young gentlemen, by the name of Jack Meade and.....were in charge of this SBIC. So in addition to our having to settle these seven lawsuits to buy the company, which we did. It was very touchy because I learned at that time before you can settle a class action lawsuit that has been accepted as such by the court, nobody other than the court can withdraw it unless all members of the class agree to do so. If you have one of the ten shareholders that holds out, you can't do it without the judge's approval. So I had to get all ten shareholders to agree to settle the lawsuit. And DiJiacobi got a premium of 200,000 dollars for his stock. All the shareholders had to agree to that. The guy who put together the deal, that claimed he didn't get what he was supposed to get, got 80,000 dollars to settle his class action suit, everybody had agreed to that. The third one, I can't even remember the details now. Of course, the telephone company had to agree to this deal. They were going to get paid off, so many cents on the dollar for all the lease payments that they were overdue. The bank had to settle for so many cents on the dollar. They didn't sue. So we settled all seven lawsuits BUT DIJiacobi was still not satisfied. Even at the closing, he was trying to get an injunction. He had his lawyer, this guy who had formerly been the county prosecutor, running for the judge at the last moment, trying to get an injunction, even though all members of the class had agreed to withdraw the suit. We were holding this closing in the bank building at Society National Bank. He was running around all day, this lawyer, prosecutor, trying to stop this closing. It was a two-day closing, without success. He couldn't get a judge to get an injunction so he closed the deal. And actually, nothing ever happened. I forget why he was trying to get the injunction. He was not satisfied with what had been negotiated. But he couldn't get a judge to do it, so we closed the deal.
This telephone company, by the way, was a small independent telephone company, headed by a family. It got its share of notoriety...the family's name was Case. Nelson Case was the chairman and founder of the Ashtabula Telephone Company. Subsequently, this is all a matter of the record, in New York City, not too many years later, he was arrested by the police in the apartment of a prostitute who became very prominent, wrote a book and a movie's been written about her. If I remember the name of the book, you'll know what I'm talking about.
SMITH: Oh, I'm not an authority in this field.
TUDEK: Everybody will recognize this, because when they got her she had all of these fancy fittings in her apartment, along with the fact that she could speak so many languages. She had this very prominent clientele. As I said, she became very notorious and had a book written about her, and had a movie written about her. Here's the important part that's really interesting. Nelson Case made the mistake of saying "You can't arrest me. I'm the chairman of the board of the third largest independent telephone company in the country." Because he said that, and one other guy objected to being arrested, they were in this article. None of the other guys who were arrested were named. So here, Nelson Case had this huge article that appeared in the New York Times was a fairly lengthy article. And naturally he got all this nationwide publicity about this gal. I'll try to remember for our next session her name. She had a sophisticated name.
So anyway, Nelson Case ended up building one of the largest independent telephone companies in the business. He hired the guy from Ridgeway who had a company in Pennsylvania and a number of little towns. Made him president. Formed a company called Mid-Continent with headquarters in Hudson, Ohio. Then he went public. And they are now in Texas, and now are the second or third or fourth largest. Now in another name. It is no longer called Mid Continent—telephone company in the business. I always thought that was really something about his saying you can't arrest me because I'm the chairman of the board, chief executive officer of the third largest independent telephone company in the business. This was after he had given me all this horse manure about his integrity, during our lengthy negotiations on this deal. But he tried his best to give you good tips, which I did follow up. There was another telephone company that had a lease back in the center of Ohio. It might have been Coshocton or a town near there that was eventually bought by the two brothers from Atlanta. You know the two guys who were in the business as independents; they're now over in England. They had quite a reputation of being rather sharp negotiators in our industry. Put together quite a few...made themselves quite a bit of money in the cable television business.
SMITH: At the moment, I can't.
TUDEK: Well, at any rate, they ended up buying this thing. Which we could have done from the telephone company at that time for 300 dollars a subscriber. McDonald is the name. You'll find that they are pretty active over in England today. They sold every one of their things at the very top of the market. I think they sold their stuff to Jack Kent Cooke, some of their stuff. I don't think anybody has done a better job of getting out than the McDonald brothers. Everything they owned, they got out at the top of the market.
Nelson Case did tell us about that and I never followed up. So we ended up putting together that company and we had to... as you recall, the SEC, shortly before we bought this company came up with all the regulations. You had to have a franchise; you had to have five miles in operation before you were grand fathered, by that certain date. You didn't have that five miles in by that certain date, or that three miles, or whatever it was, your signals weren't grand fathered. Remember, I mentioned earlier...
SMITH: Yes, I recall that. We can check the mileage.
TUDEK: At any rate, at this stage of the game you had to get a certificate of compliance. In order to get a certificate of compliance you had to have a franchise. You had to have your system upgraded to 20 channels within so much period of time, those were the rules. If you were within 50 miles of a big market, you had to have 20 channels. In order to get a certificate of compliance, you had to have certain things in the franchise. There were certain things that you had to have in the franchise. If you didn't have them you had to go back to the city. When you went back to the city, naturally they were going to want a franchise fee, if you didn't pay them a franchise fee before. If you had a 1% franchise fee, they now could now get 5%. There was a big backlog of certificates of compliance, if you recall. The trick was to get a certificate of compliance, because it was difficult to get the bank to release money for you to build without a certificate of compliance. You had to get wavers from the FCC in order to proceed. There were applications for wavers, and you had to get the certificate. So we now had the money which we had borrowed from the SBIC and Society National Bank. We were going to build hundreds of miles. We got the franchises in Kingsville, and North Kingsville, all the townships surrounding Ashtabula, Jefferson, which was the county seat and Geneva and Geneva on the Lake, and Madison and Madison Township and the townships around Geneva. So we now had a rectangle with the northern border Lake Erie. And for the most part, the southern border was Interstate 90. So this was like 138 miles by 5 miles. We did go below 90 in several places including Jefferson which was the county seat in Ashtabula County. Conneaut was the largest community in the state of Ohio, area wise, not population wise. It was virtually the whole county, the city of Conneaut. So we now took Ashtabula from six thousand subscribers to ten thousand, if my memory serves me correctly. And Conneaut from 3,000 to 5,000. We ended up taking the company...we bought 9,000 subscribers...We had 10,800 subscribers counting Letonia, Columbiana and Washingtonville. And we took it up to 19,100 subscribers in a year's time. And again, these are audited numbers and part of the Big 7 auditing.
SMITH: You doubled the company.
TUDEK: We virtually doubled it in a year's time. We then did an awful lot of construction. And eventually that system we built years later. About eight years later, we bought the system around the city of Erie. Eighteen thousand subscribers from the Aiello brothers. There was another system that the shareholders claimed that the Aiello brothers were favoring, in addition to Ridgeway and the one in New York. They were favoring that system around the city of Erie. That's why we had these three class action suits. But anyway, we bought that from the Aiello brothers. And now there was a town 15 miles to the east of Erie and there's where 138 miles started. When you go 15 miles to the east of Erie, all the way along the shore, to 15 miles west of Cleveland would be 138 miles. We didn't own the city of Erie but we bought everything around the city. Every single community and township, all the way through the Pennsylvania and Ohio border and all the way to within 15 miles of Cleveland. As a matter of fact, the furthest home west that we built in our system was the owner of the Cleveland Browns, his home, which we had to go out of our way to wire at extra cost. He's the guy who took his team out of Cleveland.
SMITH: Art Model.
TUDEK: Art Model is now in Baltimore, Baltimore Raiders. But we ended up buying this AML system. This one around Erie was AML. And they had the second or third dish installed in the country.
SMITH: By AML you're talking about AML Microwave?
TUDEK: That's right. It was an AML microwave system and it was a 35-channel system. They had this dish which was the second or third one installed in the country. It was a huge thing. It was dish 30, 40, 50' in diameter? It was a huge dish. I forget how much it cost. He had a 500' tower, which incidentally is still on the campus of Penn State Behrens. Right there on campus.
SMITH: They didn't have the dish mounted on the tower, did they?
TUDEK: Oh no. This was a dish with a huge concrete base. This was to get Home Box office and at that time...
SMITH: That was an earth station. It wasn't an AML.
TUDEK: No, no. They had an AML system, but in addition to that AML system, they had this earth station. Second earth station installed in the country. That's why it was so large. I don't know the diameter, I may be exaggerating. It was a huge dish.
SMITH: There were 60 meter dishes, some of them in those early days.
TUDEK: Then that was it. This was the second installed in the country and it was a huge thing. They had to get a right of way from the Penn State-Behrens campus to put their 500' tower. And that's quite a story, because they had real battles because of the airport. But they ended up putting that 500' foot tower on the campus. They had this huge earth station. They built the AML, had a 35-channel system. In order to build the system, they got wavers from the FCC to build it in spite of the fact that it violated the rules at that time. But they did that by getting, at my suggestion, the television stations to agree, by agreement, to go along. They got the three television stations in Erie to agree to what they intended to do and they gave the station certain rights and they would black out and so forth and so on. And they got a waver in order to build it. Because in accordance with the rules, there was no way that they could do what they were doing. And so they built it, and had a real fine system and had 18,000 subscribers.
Now we ended up building up at the other end, in Lake County, in Mentor and Mentor-on-the-Lake and Painesville Township, this is near Cleveland, another AML of our own, and built if not the first, one of the first 400 MHz systems in the country. Certainly if it was not the first 400 MHz system, it was the first 400 MHz AML system in the country at that time. So now we had an AML system on the western side, 54 channel, 55-channel system. We had an AML on the eastern side of this system, 35 channels. We built two-way CARS Microwave linking all of this together. So we had 138-mile CARS Microwave system in operation and 70,000 subscribers when we sold this system to TCI in 1984. My understanding is today they have about 100,000 subscribers in that complex, and this is a system that TCI has just agreed to have a joint merger with Adelphia. Adelphia is managing it and will be managing the system hereafter.
SMITH: What year was it?
TUDEK: We sold it in 1984, November 1st. We actually purchased Ashtabula and Conneaut in 1972. So in 1972 we started out with 6,000 subscribers in Ashtabula, with 3,000 in Conneaut, and twelve years later we sold 70,000 subscribers. Today they have 100,000 subscribers or so. When we built that CARS Microwave system and put that all together in 1984, without any question in my mind, it was the most charismatic system in the country. There was nothing like that that I know with a system 138 miles long with an AML on both ends, and tied together with CARS microwave. And we were able to do program origination, we did. We had a van that traveled the whole system. We were able to insert commercials, advertising, throughout the whole system.
SMITH: What kind of programming did you do with that van?
TUDEK: We did football games, high school football, and college football. We had a branch college campus there in the system. We had several colleges in Erie. We had three of them. It was the Penn State Behrens campus and we had Mercy Hearst and we had another school in town there. Then we had a branch campus in Mentor. So we had programming for the schools, high schools and the colleges and we had Little League baseball and basketball and football. We had bowling shows and golf shows and polka parties and dance parties and disc jockeys, news. We had local news. We had a gal who was in charge of program origination. We had this van, which was built special for us and painted. We put state-of-the-art equipment at the time. We had advertising insertion equipment that went the whole 138 miles. We could throw in an advertisement for the whole system.
SMITH: Were you . . . at selling advertising?
TUDEK: Yes we did. We had some effectiveness at that time. We were doing well whenever we sold that system to TCI in 1984. I don't think they did any of that. The first thing TCI did when they bought a company that did local program origination was to cut it out. I'm pretty sure they just cut it all out, I'm not certain of that, but I think so based upon what I believe has happened elsewhere. There was a school board meeting in Ashtabula that took four or five hours, and for a year that was probably the biggest entertainment that town ever had. So we were doing a lot of program origination there in that system.
SMITH: You mentioned earlier that you had recalled the name of a broker that you had talked about at some length in the last tape. Do you want to put his name on the record now?
TUDEK: Yes. Don Perry, in Virginia. The gentleman I referred to as having been the cable association president on three or four occasions in the state of Virginia. The broker that we met at our conference at the state cable meeting in Danville, Virginia, the very first week of our corporate existence. I think he also turned out to be the guy who we beat out in Geneva, Ohio in that crucial second franchise that we got that lead to the whole thing along the lake. His company had the franchise opportunity; didn't get the franchise. In addition to that, he was also the broker for the deal in the Rio Grande Valley where we earned, early in our career, a 250,000 dollar fee, for being a consultant. Don Perry is still in the business and has approximately 20,000 or so subscribers in the state of Virginia after having sold over the years, numerous systems.
SMITH: For a couple of days now, we've been talking about the early franchising activities of you and your partner Everett Mundy, and some of your early acquisitions. I don't think you've gotten all the way through that, by any means, but you indicated this morning that it might be appropriate at this point to talk about some of your early financing experiences. I agree with you, and would like you to go ahead with that.
TUDEK: Thinking about today's session, last evening, I came to the conclusion that it might be a good idea, before I'm through, to touch on early financing which played such an important role of course, in the growth of our company. Then later on, go into the intermediate financing and then late financing. But then I also said, why not talk about the brokers that played such a role in our company's history and the industry's history that I came in contact with, along with the franchising experiences that we had that were unique, that are worth telling about. And along with the council meetings concerning getting rate increases, which was a real big part of the early history of our industry, getting rate increases. In many cases, you had to get the approval of the city council before you could raise your rates. We had some very interesting situations happen there. Of course, other things too that happened in our industry. I also reminded you that our office in my home, and I've always worked out of my home from day one. I've never had an office in our corporate headquarters. In the early years, my partner Everett Mundy also worked out of his home. But after the first eight or so years of corporate life, Everett has had an office in our corporate headquarters. Until recently, where he again is now working out of his home, as vice chairman of the company.
In my home, and I guess Everett also has a similar situation, we started taking a photograph of every acquisition or financing closing. I don't know why we started, why we did it. But once we started, we kept it up. There are probably five or so photographs that have been lost. Most of them by professional photographers, by the way. We stopped hiring professional photographers for that reason. We had somebody take the photographs ourselves. Then these photographs of the closings are on my office wall. There are 122 of them. And we ran out of office space on the walls. And so we have an album with another 49 photographs. I'd say we have about ten photographs in the pipeline. Some of these photographs actually take a year or two to get into the pipeline. Then of course we never did take photographs of those deals that went down by mail. You might say, which were a part of a financing package. The main package deal would offer us an opportunity to borrow additional money to do sub deals, so to speak and those sub deals, many of them were done by mail. And so we have no photographs for them. So I would say that Everett and I and our management teams have probably done somewhere between 200 and 225 transactions in cable since we started our company in 1970. This brought to my mind our early financing for our first four deals.
When I started to think about that, I remembered the name of the black cable analyst for Fidelity Bank who played such a big role in Centre Video, my previous employer, in their corporate history. His name was C. Ricardo Johnson. And he played such a big role working with Daniel J. McCarthy who was the vice president in Fidelity Bank in Philadelphia that finally provided the financing for Centre Video. I told that story earlier in my oral history.
SMITH: You did and we'll edit it to get this gentleman's name in.
TUDEK: Daniel J. McCarthy was the gentleman who died of a heart attack at the age of 51. He was the fellow who was the board member of Shapp's company. Shapp, the head, founder of Jerrold Communications. Of course Jerrold had a number of cable systems, subscribers. At the peak, I think they had at least 100,000 subscribers but they sold to Sammons. A lot of the financing was done through Dan McCarthy at Fidelity Bank. Actually his bank was another bank that was merged into Fidelity. He did all of the cable financing out of his branch office as vice president. He had this C. Ricardo Johnson working for him.
SMITH: Let's go to your specific cases.
TUDEK: We will. It's important because C. Ricardo Johnson played an important role in our first big deal. At any rate, going back to our first financing, in Columbiana, Washingtonville, and Letonia, a system located south of Youngstown. We, at that time, still had our board of directors and our shareholders that I mentioned before. We went to the Pittsburgh National Bank, because all of our five shareholders banked at the Pittsburgh National Bank. Pittsburgh National Bank was one of the few banks in the country doing cable TV financing. Actually it had only done several deals. But they considered themselves experts in the field of cable television financing. As I said, our five shareholders, very wealthy, prestigious gentlemen that I described earlier, all banked at Pittsburgh National Bank. The history of the Pittsburgh National Bank is that it was a spin off of Mellon Bank. They took certain people who were dissatisfied with Mellon, with them as clients. So I went with Everett to call on Bob Toff who was the head of the lending department and who handled cable television's loans for Pittsburgh National Bank. At that time Bob Toff was considered an expert and headed the NCTA seminars on cable television lending. When I went in there he brought in his two assistants, and he promptly told me and Everett, that we thought we were going to be able to dip into their bank pockets, because of my shareholders, I had another five coming. And furthermore, they would not consider lending me any money unless I put up a dollar of equity for every dollar of debt. I looked at him and I was really offended. What was this all about? I mean, who in the industry was putting up a dollar of equity to borrow a dollar of debt. So that took care of that interview. And frankly, to this day, we've never done any financing with Pittsburgh National Bank. Although they did buy a bank, a Provident Bank in Philadelphia that got very big in cable lending, and we did about two or three deals with Provident before they were bought by Pittsburgh National Bank. We're about to do something with them locally here in State College. They bought a bank here in State College, Pennsylvania, and we're thinking about having them replace our long-time bank, Mellon, locally to handle all of our cash gathering in all of our systems. They happen to be more capable in that area. They call it some type of a box concept, where everything is put into a box from all of your subscribers, and they invest the money and so forth and so on for you. At any rate, getting back to that first deal, we were disappointed. That was our very first contact with the bank. I was not only hurt because of that, but because I had such an excellent relationship with the Pittsburgh National Bank because in my second position as executive director of the Muscular Dystrophy Association, the treasurer of that campaign for decades was an officer of the Pittsburgh National Bank. And so I was up there for all the time that I was with Muscular Dystrophy, I was probably in the Pittsburgh National Bank every single day of the week, concerning campaign deposits for muscular dystrophy. Everybody knew me. I had done so much for them, and had deposited quite a bit of money there. In coins alone, it was not unusual for me to have the police come down when we were doing collections in the booths and canteens, where coins could take as much as 20,000 dollars a night in bags, and a police paddy wagon to deposit in the night deposit of the Pittsburgh National Bank. I kind of thought because of all that, I would get a little bit of red carpet treatment. And I got nothing but that except, if I thought if I was going to just dip into their pockets, I had another thought coming. And we weren't talking about a lot of money; as a matter of fact with the first opportunity I think the acquisition price was 325,000 dollars. We were willing to put in 75,000 dollars worth of equity. So then I went then to Equi Bank, which was across the street. That bank started in McKeesport, Pennsylvania by the name of Western Pennsylvania National Bank, and they were a bank that was very progressive. They were the third largest bank in the city. You had Mellon, and Pittsburgh National Bank and then you had Equi Bank. But they were the first with computers. Matter of fact, they had a huge computer center in McKeesport, Pennsylvania which is where they gave birth to the bank. McKeesport is a community about 15 miles south of Pittsburgh. And Equi Bank started there, and they had a computer center there, long before Mellon and Pittsburgh National Bank. And they had twenty salesmen. I had tried to get a job there earlier before I got into cable television and if I had, they would have been paying me three times what my salary had been, and I was turned down. But Equi Bank, in addition to having computers, was the first bank in Pittsburgh to have free checking and they had a few other innovations. So we got there and it turned out that they had just gotten a new senior lending officer. This first name is Bob, his second name starts with R---. Anyway, he was just on the job. He had earlier been a vice president in the Pittsburgh National Bank, and he called on Jim Palmer in State College. And I knew him from that. He left Pittsburgh National Bank to become a treasurer of a rather large corporation and then decided to get back into banking. It was Pittsburgh National Bank's policy not to rehire people who had left. So he now ended up going to Equi Bank as the chief lending officer. I knew him slightly and he was real happy to see Everett and myself. He said "By all means, our first executive committee meeting is Friday''---and this was like Tuesday or Wednesday of that week. He said, "I will get your loan, and I will get you a loan." He was real happy with our proposal, putting down 75,000, and borrowing 250,000 or 275,000. Well, he was turned down. Here he was, the senior lending officer, new on the job, his first application to his committee, and he was turned down. So we came into the bank on Monday and he was absolutely livid. Not at us, but at his committee. He was embarrassed and he said to Everett and myself "I won't tolerate this. Matter of fact, you can forget about putting down 75,000 dollars. You're going to get the whole 325,000 dollars. I think the purchase price was 325,000. And he did. He went to that committee meeting and he got the full thing, without the 75,000 dollars. So that was our first loan.
SMITH: Did he give you any reasons as to why the committee had not approved it?
TUDEK: I can't recall. As a matter of fact, I don't he did. I don't think we asked him. I don't think he gave us the reason. But he was livid, and he said, "I'll tell you what, Everett...As a matter of fact what really sold him to go back to the committee without the 75,000 dollars was a comment that my partner made to him. When he gave us the sad news, and I wish I could remember exactly how Everett joked with him. It had something to do with Everett thinking that he, Bob was Santa Claus, only to find out that he was too fat to fit down the chimney. Bob thought that Everett's sense of humor was really appropriate rather than our being angry about it, the way Everett handled it.
SMITH: Was Bob a little bit on the heavy side?
TUDEK: Oh, no, not at all. He was a very trim, handsome guy, probably 6'2', probably wasn't a pound overweight. But at any rate, that's why he wasn't offended. Whatever that comment was, and the way Everett said it, he really enjoyed it. He enjoyed our attitude. He said, "I'll tell you what we are going to do. We're going back to committee and you can forget about that 75,000 dollars of equity. I'm going to get you 100% of the financing. I looked at your cash flow projections and I have all the confidence in the world. I'm familiar with what you did for Centre Video. They used to call on Jim Palmer. They used to call on the local banks. As a matter of fact, it was the local banks that did with Pittsburgh National Bank, in addition to lending Centre Video a million dollars, their initial loan; he also had a loan to C-Cor. The local bank, Central Counties Bank, which is today the Mellon Bank, I think, participated with Pittsburgh National Bank in a 400,000 dollar to C-Cor.
He was familiar with my history and Everett's history so he said, "There is no reason for you to put the equity down. So we went down, as I said earlier and we took Columbiana from 384 subscribers to 1,200 in three months. We just were very successful. And so now we wanted to buy the second opportunity, which I went into earlier. Jackson, Colton, Wellston, Ohio. And I told you about raising the equity from the young bucks. These were the young guys who lived in Edgeworth and Sewickley, where the Yale graduates who are senior shareholders, also lived. Matter of fact, most of the executives of the Pittsburgh National Bank and the Mellon Bank also lived in that community. This is the area earlier where people of wealth and social standing lived in Sewickley and Edgeworth. And this was the home, earlier in the century of all of the steel barons in Pittsburgh, had their mansions in Sewickley and Edgeworth. At any rate, we now had 125,000 of equity. We had 175,000 subordinate debt. Then we were borrowing the balance, which took the loan up to 575,000. The purchase price must have been approximately 25,000 or so below that. They give you money for capital expenditures. So then of course we went right back to Equi Bank. We laid this all out. Bob signed a fellow by the name of Tucker as our banking officer. Actually, his assistant was a fellow by the name of Ishler who was the son of a long-time physician here in State College, now retired. Dick Ishler working for Equi Bank was a student at Duquesne University Law School, working his way through law school and he worked at the bank. Initially played a real big role. He also assisted Bob in our first loan. They said fine, they would do this before the committee and the loan was approved. We had a closing on, let's say, a Wednesday morning at 11:00 am in Jackson, Ohio. We learned it was really important not to delay the closing because Ralph Squires, the seller of the cable system had successfully secured an SBIC loan which he had been working on for quite some time, which would have solved all of his problems. He would have been able to retire there and run that system going forward. He had the money, and he felt no obligations. He had money in the bank. But we had an iron clad acquisition agreement. And so, if we didn't show up at 11:00 am, we could kiss this goodbye and even keep our down payment, whatever it was, 25,000 dollars. I went to the bank, and Dick Ishler took our equity check for the 125,000 dollars, and he took the check for the subordinate loan from Malcolm J. Prine. I told that story where Prine objected to the deal we were giving to the SBIC man, and he came in with his own subordinate loan. By the way Prine, years later became the president and chairman of the board of the Pittsburgh Pirates. The community saved the Pirates, and he as president of Ryan Homes, came in and played the role, and became president and saved the team. The Pittsburgh Pirates are still in Pittsburgh today. A lot of that has to do with Malcolm J. Prine. I gave him this money. He had it put into the safe. We signed various papers. I was with my lawyer, Peter C. Wellington, who was with Rosch,... and Dixon. Peter C. Wellington subsequently became the chief consultant for Consolidation Coal, the nation's largest coal company headquartered in Pittsburgh, which was bought by DuPont. Then he went on to become head of the legal department of the spin-off of the huge chemical company, IGG, or something like that. It's large or larger than DuPont. It's a foreign organization. Now Peter Wellington is the number two man at Dupont. He's in charge of handling all those big liabilities, the DuPont lawsuits where they've paid already 650 million dollars to settle suits in Florida where people who used chemicals have had difficulties with their flowers and plants. Anyway, Pete Wellington was very much embarrassed as a result of what happened that day. We signed all the papers, and then it came time for us to get the certified check from them, to take with us to go to the closing. But the safes were locked. It was after 5:00. This was now about 5:15. Ishler who was this guy training to be his lawyer, and was the assistant, let that happen. There was no way we could get the check to go down to the closing. I called Everett and Everett said, "Well, what are you worried about, did you guys ever hear of wiring." The bank could just wire the money. This had not even occurred to Dick Ishler and myself. We were all rookies, remember that now.
The first thing we had to do was check to see if the bank had wiring instructions. It turned out that they didn't exactly, but they did. And they could handle it. Of course the trick would be to get the money to the bank, before they got in, and that isn't necessarily easy to do. If you put money in a pipeline, quite often it doesn't get there until late in the afternoon, and sometimes the following day or several days, especially if you try to do it on a Friday. The banks will latch on, I learned later on, to keep the money for the float over the weekend. So you never try to do a closing, I learned on Friday.
SMITH: I'll remember that.
TUDEK: You don't want to do that, because it happened several times. They said they would wire it. That, again, didn't let us out of worry, because, what if the bank says we're not going to close because we haven't got the money. Everett had the plane, and Everett flew Wellington and myself down to the closing the following day. It all went smoothly, even though the money had not arrived by 11:00, but it was in the pipeline. They were able to identify the fact that the money was on the wire. They had a number. They weren't concerned about the fact that it wasn't in the bank at the time. And we closed the deal.
Now Ralph Squires was a real gentleman about the whole matter. He could have easily broken that deal. Many guys in his position would have done so.
SMITH: He could have tried to break the deal. I really believe that many, many guys in his position would have done that, and then maybe they would have made the settlement with us or something like that. Gave us a five or ten thousand or 25,000 dollars to part go on our way. But he didn't. He made a deal and he kept the deal, no question about it. He was very sorry that we did the deal. He was unhappy. But he was a gentleman about it. Ralph played a big role in the history of cable thereafter in Ohio, because for a living, he became the cable TV coordinator for the city of Columbus. All those years, that's how he made a living. Columbus rather than grant one franchise in the city of Columbus, they broke the city into four neighborhoods and grant four franchises. And this is what they did. And today, there are still two left. Coaxial Cable Company owned by Senator Mack, US senator from Florida. He was a descendent of Connie Mack from Philadelphia. He's a nephew of Connie Mack.
SMITH: The senator is even named Connie, isn't he?
TUDEK: That's right. Senator Connie Mack. But they had the company called Coaxial Cable in Columbus. It turns out that Time Warner owns the other three because we, Tele-Media, four, five, six years ago, sold them the black section of Columbus, which we owned. That's a story in itself. We ended up selling that at the height of the market. That was one of the great things we did. We sold it to Time-Warner for 2,700 dollars a subscriber.
SMITH: By all black section, are you describing the nature of the neighborhood, the area?
TUDEK: Yes. Columbus was a middle class area, really. There was one slight section that was several blocks, that was lighted and being reconstructed at the time we bought the system. But the balance of that whole neighborhood, and I was very much impressed with that from the beginning. We bought it from a black lawyer in Columbus, from a prominent law firm, who put that system together with money from Washington D.C. There was a black group who had some government backing for minorities. So he put together a package and built that system. The other system was ATC. Then Warner had the other. This is where Frank Nowaczek worked. Whenever Time-Warner merged, that became one. Then they bought our sections so they now owned three fourths of Columbus.
But Ralph Squires for years was the cable TV coordinator in Columbus, and he played a role in the state, as a result, of cable television. We ended up closing that deal. And as I said earlier, we took that company from 1,430 subscribers to 2,600 in six months. Then up to 3,600 in a year, year and a half. This is where we came in contact with Tony Swain, who was a technician in that system. Actually, he was a young boy, and I made him the manager, and actually taught him bookkeeping and cash flows, which he's remembered to this day. We did our own book keeping in that system, right there. We had a girl in the office that we taught, and Tony. We did our own deposits and monthly financial statements to the bank. I audited of course with the balance sheet, notes. It was good training for Tony. Of course, Tony, since then has had just about every position we have in our company. He's now our chief engineer; senior vice president, chief engineer. But he even headed acquisitions. I think the only position he hasn't had in our company is marketing, or actually the head of our marketing department. He's headed all the other departments of our company. He came with us early there in Jackson, Ohio. We then went to try to get the financing in Ashtabula, Conneaut and Geneva. I talked about that earlier. We had gotten a franchise in Geneva, and this led to this huge system that we eventually put together along the lake. We did our cash flow projections, and we wanted to raise five million, four hundred and twenty thousand, my memory says. We wanted to follow that up and borrow an additional million dollars after that, to take that loan up to about 6 million, a half million dollars. I told the story about Stu Jackson, being a president of the bank in Ashtabula, which was a subsidiary of the Society Bank in Cleveland. I told the story about how Stu Jackson who was a resident of Geneva wrote me a postcard and we ended up meeting him. He was impressed with the way we did things in Columbiana. But we didn't know about his being impressed by our master antenna, its neatness and everything, until later. But he was kind enough to introduce us to the two gentlemen who headed the SBIC for the Society National Bank in Cleveland. And I mentioned earlier, Jack Snead, who was the vice president, and his analyst was Gary Pease. Gary Pease was a very successful radioman, who just sold out his radio stations in a kind of bonanza of somewhere between five and ten million dollars. He operated up in Peekskill, New York and before that in Albany. Is still, within the last six months or so. At any rate, Jack Snead played a really big role. He is a banker out in the state of Oregon and has been all these years. He left the bank to save his marriage. His wife was dissatisfied with Cleveland and that type of environment. So he went out and bought a home along the mountainside in Oregon and he's been there all these years. They came in and they looked at our cash flow projections and they wanted to pursue the matter. Their idea was that the SBIC would loan us a hundred thousand dollars, of the 5,420,000 that we needed. They would arrange for the balance of the financing from the bank. We would put in 750,000 dollars of equity at the end of this partnership. Which is what we did in the second deal, the first deal was a sub chapter S in Columbiana and our second deal was going into partnership in Jacksonville, Everett and I being the general partners, to take advantage of the tax laws. We've got 375,000 dollars of equity and then the equity holders had to put in a bond for the balance and have it in by the following March. So it had to be in September of 1972 or August. They put in 375,000 and we asked for the balance of their 25,000. I think the units were either 25 or 50,000 dollars by the following March. So we raised the equity of 75,000 dollars. It wasn't easy. Actually Rosch... Dixon led us to all these people. A guy by the name of Nevin Shroes of that firm, introduced us to all these people. So we managed to do that.
And I learned at that time that banks in this country don't know very much about letters of credit, New England banks. In Pittsburgh we had to get letters of credit in order to assure getting the money from the limited partners that was still due. The Mellon Bank for instance, had one individual in the whole bank who prepared letters of credit, and he happened to be on vacation, an extended vacation. So I learned how to do this from one banker. I had to teach the three other banks in Pittsburgh how to word a letter of credit. This is a true story. Subsequently, learned that the banks in New York were just as ignorant about it, believe it or not, even in New York City. Although there was always somebody in the bank up there that knew about it. Other people didn't even know how to get to that person, banks were that large. In foreign countries, in certain banks that was just the way of doing business and had been for centuries, forever.
SMITH: In my practice of law, letters of credit to finance applications for construction of television stations was very common.
TUDEK: It was really amazing. In Ohio, the banks up there and the banks in Pittsburgh...it was really funny. And here in State College. They simply didn't know and had no reason to do letters of credit. And I actually had to send them a form letter. That's a true story. And it's kind of funny, because we had deadlines to meet, and I had that problem of bankers refusing to give me a letter of credit at Mellon, because the guy was on vacation. And I had to have this money for the closing. I had them call the bank and get pretty furious with the bank. After all, the guy had a couple million dollars in the bank, and he's only getting the letter of credit for 25,000 dollars and they wouldn't give him a letter of credit. That was one problem, we put that together. The important part of this story is that while these two young gentlemen, and they were very young—and Gary Pease was much younger than Snead. He was just out of college. He was a hometown Ashtabula boy. And the bank had...one of their key guys was their credit man, who had been with the bank for 30-35 years, and the gentleman who I subsequently used as my credit reference. He looked at the package and he agreed to it. But the problem was the Society National Bank was the first mutual bank to get out of that in the nation. Convert to a regular bank. They got approval to do that, and the depositors became the shareholders of the bank. It so happened that the largest depositor of the Society National Bank later became Senator Metsenbaum.
SMITH: (Smith dictates letter to T. Dowden). You mentioned Senator Metzenbaum.
TUDEK: Yes, who later became, you might say an enemy of our industry. I would think most people regarded him as an enemy of the cable television industry, in a sense. He was one of our foremost critics of our industry. At that time, of course, he was not a senator. He ran a parking lot at the airport in Cleveland. And by virtue of that parking lot, he had all of these coins and deposits so he was the largest depositor of the bank, and became the largest shareholder of the Society National Bank. Therefore, a member of the board of directors and chairman of the executive committee, finance committee. All the loans had to go through him. It so happens that the lending limit with the bank was something like ten to twelve million dollars. But their house limit was five million. And we were wanting five million, four hundred and twenty thousand. Then we wanted to borrow an additional million after that. Metsenbaum was very much opposed to this loan. But before we get to that, I want to talk about the role that C. Ricardo Johnson played in our getting this loan. He's the black gentleman that I talked about with Fidelity Bank, the analyst who played a big role in Centre Video. Early in our negotiations with these two gentlemen, the first thing that happened was Stu Jackson talked about us, Tele-Media, Tudek and Mundy with these two gentlemen in Cleveland, at his parent bank. He arranged for them to come and meet us at his bank offices in Ashtabula. This was in the middle of the winter. There was a really, really bad snowstorm the day before we were supposed to have them come in from Cleveland, Ashtabula. Ordinarily, without any bad weather, it's an hour's drive but we were real concerned that the weather would postpone their coming in to meet us. And Everett's wife prayed for the storm to end, and the day to be a good day so that the bankers would come in. She prayed to her favorite saint, the saint who protects travelers. I'd always needled my partner that the reason that the weather turned out so nice and the sun shone the following day, is that she having to live with him all those years, had her prayers heard. Sure enough, thereafter, I always said that whenever her prayers were heard about the weather being good because the bankers were coming in, they didn't really understand was that all Fran, Everett's wife, was praying for that following day. It seems like that has stayed that way throughout Tele-Media's whole career. I'd say that we had somewhere between 80 and 100 bankers visit us over the years visit us over the years. We've only had two or three days where we've had bad weather. No matter what the weather is prior to their showing up, it turns out we always have great weather whenever the bankers show up.
SMITH: Mrs. Mundy should have charged for her services.
TUDEK: Oh, she should have. And I think, as I said, the reason her prayers were heard is that she's had to live with Everett Mundy. Everett of course, just smiled about that, and I never meant that. Anyway, they did show up. We had a nice meeting. They said they were very interested in seeing and working with us. That they would have to do an analysis of our deal and the cable industries. They had no cable television loans. They hadn't known much about the industry at all. As a matter of fact, they talked about their lending in communications. They were one of the first lenders for Storer. And Storer Broadcasting was the name that I kept trying to get in my first session with you, when Stuart Blair, I told you, was up in New York and having dinner and I called him about the million dollars that TCI was supposed to give to us and he couldn't arrange for that. He was up there because he was making an offer from TCI to buy the stock of Storer Broadcasting. That was the transaction in cable. Storer subsequently became one of the large cable companies, and in the end TCI along with three or four other industry members bought Storer Broadcasting.
Society National Bank was one of the earliest lenders to Storer for not only a radio station but a television station, which Storer still owned at that time in Cleveland. I forget which one of the three networks. Storer was into television. They talked about being in communications and never having done anything in cable. So I invited them to the convention in Chicago, NCTA Convention in Chicago. I guess it was probably at the Palmer House, as I recall.
SMITH: Very likely was.
TUDEK: This was at the convention in 1972, May probably. I was standing in the lobby of the hotel, with Gary Pease and Jack Smead, just talking to them. And we had our badges on. Up to me walked C. Ricardo Johnson, the black analyst. And he turned my shoulder and he pointed to my badge and he said "Bob Tudek, as far as I'm concerned, the most knowledgeable and best manager of cable television in the industry." He looked at the badges of the two bankers. "I hope you guys are talking about lending money to Bob, because this guy gave me projections to build 33 communities around the city of Pittsburgh. And he met every single monthly, quarterly, semi-annual and annual budget in marketing, and cash flow. No one has ever done a better job than Bob Tudek." He shakes my hand and left. Now these two guys were absolutely...you should have seen their eyes. And of course I learned much later that they went and called him, or even visited Philadelphia, to get all the details. So this was one of those breaks in life. Can you imagine something like that happening? I couldn't possibly have done it, no matter who I had hired, I could have probably hired, if I had the money, the nation's most imminent public relations firm and paid them a fee of a million bucks. They couldn't have done the job that this guy did for us, unasked, out of the clear blue sky. So we ended up getting that loan.
SMITH: Did you let Mr. C. Ricardo...
TUDEK: Oh my yes. As a matter of fact, he plays a role even later on with another bank.
SMITH: He didn't go unthanked.
TUDEK: Oh, no. As a matter of fact, I let him know from the bottom of my heart, Everett and I, how much we appreciated what he did. And he said, "Bob, all I did was tell the truth." We got the loan. However, Senator Metzenbaum was very unhappy. And he went along with the committee on the provision that these two men report to him on a weekly basis concerning the progress of this loan. Gary Pease, who was a finance major in school, came in and visited our offices on a monthly basis, and did what is known as a long form audit. Very few CPAs even know what a long form audit happens to be. What it is, is doing actual bookkeeping. Every little tiny detail. And long form audits just aren't done. That's why CPA's don't even know about them. But he actually did himself, personally, a long form audit on a monthly basis. And then he reported on a weekly basis to Metzenbaum. We did so well. I told you earlier that we bought, in that package we had 10,800 subscribers, audited numbers. Tousch audited numbers. And within a year's time, we took them up to 19,100 subscribers. So this was really very, very successful. What we did here, within a year, year and a half, we refinanced and took out Society Bank and the SBIC, who had 40% warrant by virtue of putting up that hundred thousand dollar loan, and arranging for the balance of that loan. For that 40% they got a million dollars. And they got the loan paid off which was three over prime. Now, whenever I went to Cleveland to negotiate that with Gary Pease and Jack Smead, they wanted to get into an appraisal of the value of their warrant and all that sort of stuff. I said to both of them, "Look, you've had to report to Metzenbaum on a weekly basis, do a long form audit. It's all worked out fine. Wouldn't it be great if you went to your committee and you said you're not only going to get the loan paid off in eighteen months and get a million dollars and you only had a loan giving you three percent?" Along with, I think, 10% compensating balance. Ten percent compensating balance, three over prime, and they're going to make a million dollars. You've always seen my cash flow projections and you've worked with me so closely, you know that we met them but there was no room above them. And this is all I can do. If you want more than a million dollars, I can't do this deal and you're not going to be a hero. You're not going to get the million dollars. And who knows, things may go bad, this loan may go bad, you might end up loosing your job. But if you do this, I assure you, you're going to make vice president, both of you." They did, no more arguments. We did the refinancing, they got the million bucks, they got their vice presidency, subsequently. Matter of fact, Smead left and Gary Pease took over as vice president.
And then of course, we did with the bank the refinancing of Jackson, our second deal. That was within 18 months. They loaned us 650,000 dollars. We had originally borrowed 525,000. And we bought everybody out, or whatever it was of that company. Then they also gave us some investment in our parent company, the SBIC at three over prime. And they doubled their money of 90,000 within a year's time. Then they also loaned us some 200,000 dollars in a deal in Port Clinton, Ohio, and I made another real big bonus on that one. Then there was still another loan in Celina, Ohio. So every single one of their loans were very, very lucrative for the bank. And made Gary Pease's career in the bank, before he left to get into the radio business.
So now we were through our first, our second and our third opportunities, and it came to the fourth. And that was a franchise that we secured in Celina, Ohio on the Ohio/ Indiana border, 30 or 35 miles below Lima, Ohio. We were led to that franchise, by the way, by Joe Taylor again. I went into his background. And he was with Jackson Communications. That was a name I was struggling with, who was very prominent in construction in those early days. A pioneer in cable television construction, Bill Jackson, Jackson Communications, who had built Lima, Ohio and subsequently ended up owning that system. He used to do things like Shapp and Vicoa, take a part of the system, while he was doing construction. Therefore, he ended up doing some great systems. If I recall correctly, he owned Washington, Pennsylvania and Uniontown, Pennsylvania at one time or another. He put together packages, which he sold out. He eventually sold his construction company to a public company. They did very poorly, and he bought it back for a song. And he brought Joe Taylor; took Joe Taylor away from Jack Kent Cooke, and brought him in and made him president of Jackson Communications. Joe Taylor took the company up to 100,000 subscribers. They were mostly in Kentucky. They were sold by Daniels, I forget who they were sold to. And then Jackson built an A ML system, one of the first in the country, down around the Dayton, Ohio area and he took away a franchise from us that belonged to us right next door to one of our systems. They put into this AML system.
SMITH: Bob, that is the first time you've mentioned Daniels in these interviews, unless I'm mistaken. We might identify him as Bill Daniels the head of Daniels and Associates, a prominent brokerage firm in the cable television industry.
TUDEK: Yes, and with whom we've done something like 90 deals. They will affirm that we have done more deals with Daniels than any other client over the years, not in total dollars, but in number of deals. The number is something like 90 transactions. Bill Jackson was a pioneer and should be mentioned because he played a big role in construction back in those days. He had, I guess there were maybe two or three construction firms that would do things on a national basis. And Jackson was one of them. And in addition to construction, he actually was a vendor also. He sold materials to everybody, cable and hardware. He had a separate company that did that. And then he was an operator, and in those days one of the large operators. In those days if you had fifty or a hundred thousand subscribers, you were the top 30 or the top 50 in the country. He's the guy who had the heart attack, after I had the negotiation with him at the NCTA Convention in Boston, that I mentioned in our last session. It was that session where they had all that heat. As you recall, you mentioned that was so uncomfortable because the air conditioning at the Hilton went caplouey .
SMITH: It was the Sheraton.
TUDEK: The Sheraton, right. I had a negotiation with him where he was going to do construction for Centre Video. This was while I was still with Centre Video. He was going to rebuild the Kane, Pennsylvania system. After having built for Centre Video 125 miles of cable TV systems in the Pittsburgh area... Ambridge. The first 125 miles of system that Centre Video did in the Pittsburgh area. He came in after a guy by the name of Frank Chiodo, who had a construction company...started out doing the construction and got in trouble with the unions. Tried to organize them. And Frank was kind enough to step aside. He didn't have to because the union shut him down. But he gave up the contract and Jackson came in and did the job. Chiodo, himself became an operator of greater significance. He was one of the pioneers in cable. His first system in Nanty-Glo, he claims, started in 1950 or '51. Which means that he would have been one of the earliest guys in the business. And his wife was taken into the Pennsylvania Pioneers, the very session that I became a member of the Pennsylvania CATV Pioneers. This was after she had just survived a surgery or chemotherapy for cancer. She had her head shaved when she was inducted into the Pioneers with me, and she subsequently passed away. And then Frank Chiodo just passed away here recently of a heart attack, I'd say within the last six months or a year. Subsequently, his company was sold to Adelphia, including his headquarters.....which was right next door to this huge Penn Hills township that I talked about, that I built with Everett and the management team for Centre Video. Frank Chiodo also sold to Adelphia, prior to that the Mt. Lebanon franchise, which is one of the most prestigious communities in the Pittsburgh area.
At any rate, going back to Jackson, he had built Lima. Joe Taylor worked for Jackson as a foreman in his construction. Now Joe Taylor was our manager in Columbiana. We had purchased Columbiana. We had purchased Jackson. Joe also handled Jackson for us. We had purchased the big opportunity in Conneaut and Ashtabula. Now we were going into this franchise in Celina, Ohio. I described, when I went down there to get the franchise... First of all, Joe told me that the franchise proposals were due two days after he told me about the opportunity. We sent Joe down there to Celina, and he hired a stenographer that he gave up on. He actually did the proposal on a yellow tablet in his own handwriting that I dictated by phone. We met the deadline and he submitted his proposal actually on the yellow tablet, because the girl started to type. She just couldn't do the job. You never would had to have gotten it done in time. It turned out to be our opponent was the local radio station. They wanted to grant him the franchise so bad, it hurt. But our proposal was so superior to this other guy's proposal, that they just rejected both. So now, a month or so later they decided they would do it the second time around. The second time around, the same thing happened. Our proposal was so much superior to the guy that approved this proposal, but they rejected both again. So they hired a consultant this time. The successful bidder was going to have to pay the consultant, if I recall correctly 25 or 30,000 dollars. This consultant handled the communications department of a university in Indiana. It wasn't Indiana University. It might have been Purdue. He came in and he did specifications and he gave the community a proposal where the cable television operator would have to build a separate system for the community. An A system that they would serve the community and a B system, a 20 channel system, if I recall correctly or a 35 channel system, I forget which now. Whatever was state of the art at that time. I think it was 35, but I could be wrong. Could you imagine the successful bidder was to give a separate 35-channel system to the community?
SMITH: I've heard of some pretty ludicrous proposals by self-styled cable consultants in the history of this industry. Of course, that's a good example.
TUDEK: Here we were in our third attempt to get Celina. I should say here, that in our proposal, we told them orally and in writing that it was our intention not only to get the franchise in Celina, but the various franchises all along the border of Ohio and Indiana, including the communities of Coldwater and St. Henry which were south of Celina and Greenville, which was south of Celina. They were all in a row right along the border. And the communities north of Celina were Danworth and Paulding. Up in the corner of the state in the last exit on Interstate 90 was the community of Bryan. And around it were West Unity and Montpelier. So it was our intention that to get those franchises and build them all and build the microwave system, and tie them all together. And provide them with an independent station, channel 4 from Indianapolis. And there was also an independent station, Taft Broadcasting; I think it was channel 19 in Cincinnati. So we would provide them with two independent non-network stations by method of CARS Microwave. Which we subsequently did. We got all of those franchises, built it all from scratch, and added an acquisition around Bryan of Archibald and Striker, which had its own head end. All of that we put together, built except for that one acquisition and built the CARS microwave system. And these systems were all twenty-five miles apart, which was a perfect hop for CARS Microwave in those days. That microwave system, along with one that I talked about that we built along the shore up in Lake Erie in what we call our Blue Book which we like to get out every year but we don't. Sometimes it takes two or three or four years before we get out a new addition. We have a diagram and a history of construction of those microwave systems, including the microwave system that we built later on in Key West.
SMITH: You might like, if I may interrupt to consider trying to provide the National Cable Television Center and Museum with a set of your blue books as a reference source in connection with this oral history interview.
TUDEK: Fine. They mentioned...I don't know if you ever visited my home and my office and saw the photographs of the closing.
SMITH: I have.
TUDEK: At that time, several people at the Museum made inquiries as to whether I would end up giving these photographs to the Museum of all these closings. They have just about everybody in the industry. They're all up there in these photographs.
SMITH: The Cable Center has a marvelous, and I use that word advisedly, a marvelous photographic morgue dating back almost to the beginning of the industry. Those photographs would be a very valuable and useful supplement.
TUDEK: So, we happen to have a set and my partner has a set, and there's a set in the headquarters. So we could easily give, someday a set of all these closing photographs to the Museum. What you would be capturing here would be a photograph of those individuals and how they looked and appeared at that given time. A good example is, Malone appears very early on our wall. I happened to check last night, and he appears in a transaction, somewhere around transaction 20, give or take a couple. This would have been in 1973 or '74. He was a very young guy. This must have been right after he came on board.
SMITH: Those are very important photographs.
TUDEK: This must have been right after he came on board. He's involved in that first acquisition of 10,000 subscribers that TCI made from us. So now we're back at Celina. We had to deal with this consultant who wanted a separate, complete system built for the community. And here's how I handled it. We submitted a proposal. By the way, this was not recommended or wanted by the consultants. But we ignored his specifications and submitted a proposal for Plan A and Plan B. And we would give them the 35 channel system, including, I think we decided to give either four or six channels to the community use. And we would charge only $4.85 a month for this service, providing they did away with the franchise fee of three percent. If they wanted a franchise fee, it was five dollars a month for subscribers. But if they wanted what the consultant wanted, and we built a separate system, Plan B, which gave you a complete, separate system for the community. Then the rate was going to be $8.95 a month or some number, I forgot what it was. It turned out to be there were two other proposals, and one of them was done by Omega. Amica? These two gentlemen were brothers who ended up with a headquarters, a company in cable, in Indianapolis. They were the sons of the gentleman who started Economy Finance, and did cable TV financing in those days. Which subsequently became First Mark. Their name starts with an S, and just recently sold the Pennsylvania system within the last year to Adelphia. They had been in the business all these years. Matter of fact, they got into the satellite business. They had a big dispute with the city of Indianapolis, where the city insisted that they needed a franchise to sell satellite dishes in Indianapolis. I think they went to the courts and the FCC, and I think they prevailed in that battle with the city of Indianapolis. They were one of the first companies in the country to sell C-band dishes nationwide. The first dishes that were sold. These two, their names may come to me, the two brothers. They submitted a proposal exactly as the consultant wanted. They had a rate of 7.95 or 8.95 a month. And here, they're competing against my 35 channel system, $4.85, and giving the city six channels. I pointed out to them, that the schools...as a matter of fact, Wright State University happened to have a branch there at Celina. They're headquartered in Dayton. They happen to have a fully equipped studio that had never been used. I think there was 200,000 dollars worth of equipment and they had yet to do their first program of any kind.
SMITH: At the University?
TUDEK: At the University. Wright State branch. And the schools had no equipment and no personnel. Nevertheless, we were going to be giving them six channels, if they could use them. We qualified that. They had to justify being able to use them. So we ended up...I'll never forget. The chairman of the committee who ran the store there in the community—it wasn't Sears, I forget the name of the store. It was a chain type of store. He really was for this other group because he was interested in the education for the community and he just though this is what they ought to do. The third entry here, at the last moment was Warner Bros. Now they had just reentered the industry. And they had bought that second largest company. And that name, we struggled with it and we never did find out the name of it. Was it Stern?
SMITH: Al Stern.
TUDEK: Who was the rival with Kahn? I told the incident about the phones in the car and all that.
TUDEK: The name of his company was bought in this deal. And he became chairman of their cable company.
SMITH: You're talking about Al Stern?
TUDEK: That's right, yes. In addition at that same time they bought this oil company out of the business that owned Altoona. Livingston, whatever that company was that got into the business. Warner bought that, overnight reentered the business by buying that oil company and the second largest company in the business, and Stern became the chairman. And a guy by the name of Jim Gray came up. He had represented some independent system nearby Celina. It had been there for some time. I forget the name of the town. Now became the head. I just read where Jim Gray is retiring after helping to select the new president of Primestar. Jim Gray, these last so many years has been the head of Primestar.
SMITH: He has been the chief operating officer.
TUDEK: That's right. And he's now going to retire after they end up hiring the new president. Jim Gray became a part of the Warner empire by that acquisition at that particular time. And I forget the name of the town. If I had a map I could probably find the name of the town. It wasn't St. Mary's, which they acquired at that same time, but it was another system.
SMITH: You'll get the transcript to edit, and those things that are escaping you right now, you'll have an opportunity to put them in.
TUDEK: What happened was, the meeting was at seven or eight o'clock. As I told you, in those days, I just made the meetings on time. Or was always a few minutes late. I come rushing up the stairs. These meetings were held in council chambers. They were rather large. It was kind of like an amphitheater. They were down below, almost like a surgical amphitheater. It was up on the second floor. Or maybe the third. I come running up the steps, and there was this group of ten to twelve or more individuals on the landing. Jim Gray was there and he shook my hand. He knew me because he had been...I'm getting a little bit confused, because Jim Gray actually was the head I think of Canton. There's where I met him. Maybe he was not the guy here. I may be wrong and getting mixed up. Jim Gray actually headed the Canton, Ohio franchise. This was where I met him, whenever I was...we did the deal in Columbiana. And later on, I think he was called and headed out and headed their operation and was Nowaczek's boss I believe in Columbus. At any rate, these ten or twelve guys were representing Warner Bros. on the landing. And we introduced ourselves to each other very rapidly. I said, "What's going on?" They said, "They asked us to step out. They want to talk about the situation, then they'll call us in." I said, "I see where you guys just reentered the business." This was a day before or a couple days before or couple weeks before. And I said "By the way, don't ask me why I was smart enough to ask this question. Who do you report to?" And the guy said, "I really don't know." He said it might be so and so, so and so. I know he started as the chairman. But beyond that I don't know who. So, we were called into the meeting and they said each had ten minutes to make a last oral presentation, and then they would vote. I can't recall a thing about the other two brothers making their presentation. Can't recall a thing about that. Matter of fact, maybe this third time around or fourth time, I think it was the third. But, Warner Bros. was first. And they took more than ten minutes showing a slide projection about the great job they were doing with the school system in one of the systems they now owned, nearby. But because they took so long and it was a slide projection, they were boring everybody. I could tell that. They really should have been stopped by the president because he said he was going to time everybody and I think they took about twenty minutes going through this dry slide projection.
It became my turn, and I gave them, in a few minutes, what we were doing in program origination, and by the way we were doing quite a bit up there in our system in Geneva, Ohio. We were doing full time---eight hours a day or even longer, ten or twelve hours a day of program origination seven days a week or five days a week in Geneva, Ohio. We were actually doing some things in one of our other systems besides. But especially in Geneva where we had a fully equipped system and we had built a two way system up there in Geneva. So I told them about that in a minute or two. And then I said to them, "You know Warner Bros. if you had problems with this group, mind you, they don't even know who to call. You won't know who to call. I said this is what it's all about. So anyway, they voted 5-2 in our favor.
SMITH: This is Tape 8 of the oral history interview with Robert Tudek. This is August 18 and this recording is being made in Mr. Tudek's residence. During our last session, we were talking about some of the problems and interesting situations you had run into in financing your earlier acquisitions and construction. I think we were to take up today, and discuss your fourth of the eighteen opportunities. Is that correct?
TUDEK: No, not the fourth of the eighteen opportunities. We'd already had eighteen opportunities, and we selected Columbiana as the one to do. That all worked out real well. But then I went into explaining additional financing situations that occurred in our early history and about how fortunate we were. I talked about our second deal in Jackson County, Ohio and how we put that together. And then how we put together our first big deal with the Society National Bank in Cleveland. And how we were lucky because the banker from Fidelity, Johnson met our two bankers at the NCTA Convention in Chicago and put in all those great words for us in front of our bankers Gary Pease and Jack Snead. And how that led to the loan and how Metzenbaum was involved. Metzenbaum later became the Senator, U.S. Senator out of Ohio and ended up being, you might say, an opponent of our industry for years. He got an introduction to cable back in 1972 when we made that loan and he was the largest shareholder in the Society National Bank. And I explained why he was. And how the bankers had to report to him on a weekly basis. He was very leery about cable and the fact that we were too young and inexperienced. We weren't really young. He thought so. I was then in 1972, having been born in 1926, in 1976 I would have been 50 years old, right? So I was actually 46 years of age. And Everett was 48. But we were just starting out. So we ended up getting the largest loan of any single entity. (telephone)
SMITH: When the telephone interrupted, you were beginning to talk about the early history of Celina. Would you like to continue?
TUDEK: Yes, actually it was our fourth deal, I remember it as such. Maybe I'm wrong. Celina, Ohio. As I explained earlier, we got that franchise on the third time around. We put together a package along the Ohio/ Indiana border, where the systems were all 25 miles apart. Bryan and Van Wert and Paulding and Celina and Coldwater and Greenville and St. Henry. We eventually put it all together in microwave and tied in and brought in two independent stations, one from Cincinnati, Channel 19 and a channel 4, an independent station from Indianapolis. With those independent stations and a modern 30 or 35 channel system, I can't recall, whatever it was was state of the art at the time. We were some of the first systems of that caliber built in the country. We were very successful. We put it all together. The first one was Celina of this entire system. We put together the financing through a group of friends of the banker Jack Snead for Society. He brought in his brother, and his dad, and they brought in a number of friends including four lawyers from a law firm in Cleveland. It was a Sub chapter S and they put in whatever it was, I can't recall, either ten or 20 thousand apiece. Matter of fact, it must have been more that that, must have been 50,000 or close to that. We raised 400,000 dollars exactly. It must have been something like 40,000 or 50,000 apiece. We borrowed the money from various banks, including some of it from the local banks in that area. But what makes this unique is the fact that part of the systems that we built in this group of systems in Van Wert and Bryan, we actually built them. The contractor was Marvin Bates who was kind enough not to bill us until we had finished constructing the system, and had added the subscribers and now had the cash flow. And then we went to the bank and borrowed the money and paid for the construction of the system. He not only provided us the labor but the material with which to build the system.
SMITH: That sounds like a real sweetheart deal.
TUDEK: Well, it was. Of course this gave him work and he did all right. He got his money and he charged us the appropriate interest. And it all worked out for all the parties. Bates, I mentioned to you earlier perhaps off the record, is a legend in the industry. He was a mountain boy from the hills of West Virginia, who I first met in our Columbiana system when we hired him to do installation and found out that he had been in the business for years and had a construction company and was a shareholder in several systems, which we eventually bought. He's actually in business, still in the cable business today. Has been in and out several times. He owns the cable system in Toronto, Ohio where he overbuilt Times Mirror. And eventually bought Times Mirror out by trading them a system that he owned in Minnesota. He has the system in Bethany, West Virginia, where they have the Bethany College, which he bought from us. We originally bought from him. But the thing about Marvin is that he used employees in his construction company that were on probation. A judge from Steubenville, Ohio, would give these alcoholics or offenders, misdemeanor type of offenses, and he would let them go to work for Marvin. Marvin was a probation officer or guardian. These were his construction employees. He had to nurse them and keep them out of jail and other problems, and keep them sober and so forth and so on. But he built these systems and built good systems. Matter of fact, in Celina they had an outside consultant who got paid a 30,000 dollar fee and actually hired technical people with all the equipment and we had to pass them at that stage, in 1974 it was one of the tightest franchises technically written by a consultant. All of that passed, and things worked out pretty well for Marvin Bates over the years. He told me that in addition to the two 400 acre ranches he owns near the Lisbon, Ohio area, he has made his two sons millionaires and they're down south, one of them buying and selling stocks on his own and the other one, I don't know. And he has his daughter running a bowling alley, and he's about to give her a million dollars. So for a little old country boy, who started out as an installer, he's done quite well.
I wanted to talk about those early breaks and that one was a really great one when he was willing to actually provide us the material and the labor to build the system. We would then market them, and we met all our goals. Then we went to, in this case, a local bank, along with some banks elsewhere, to borrow the dough to build these systems.
SMITH: But you had the systems in as collateral, so to speak, to back up the loans.
TUDEK: That's right. He had that collateral too of course, when he provided the construction and materials, but then when he got paid off, the banks had the systems as collateral. And since we met our projections, they weren't over-leveraged. The ten investors in the Sub-chapter S, actually did quite well. We met our goals, and if I recall correctly, they got 25% IRR on their money.
TUDEK: Internal Rate of Investment. And as we had promised them. And of course, in addition, it was a tax shelter and they had the maximum tax shelter permissible by law at that particular time. So the 25% IRR did not consider, take into consideration, the tax shelter. The tax shelter's rate of return was somewhere between 50 and 75%. But they actually made a big mistake because we offered them the opportunity to remain in the company. We intended to do the leverage back into some of the others. And that we were going to do at that time. And instead, they decided to take their money out of the company. As a matter of fact, the company that we were going to leverage that into was Kent Ravenna, Ohio, the home of Kent University, which of course, everyone knows about the Kent University situation. So we were going to leverage Celina into Kent Ravenna, Ohio, and instead they took their money. This was very fortunate for us because in the Kent case, the company was put together by a pioneer in cable who was one of the early treasurers of NCTA, and the number two man for Stern's company. You and I have been struggling for the name of Stern's company, which is the number two company after TelePrompTer, until Sterns sold out to Warner.
SMITH: You wouldn't be talking about Gordon Fuqua, would you?
TUDEK: Yes, I am talking about Gordon Fuqua. Gordon Fuqua was treasurer of NCTA whenever I got into the business in 1965. Sterns and his company got the franchise in Akron, Ohio and they borrowed the money I believe from Aetna, which I think was the first money of any consequence borrowed from an insurance company. Things did not go very well for them in Akron, but in the meantime, Fuqua and Sterns got into some kind of internal feud about who was running the company and Fuqua spun off and got the franchise in Kent Ravenna, Ohio. First he secured financing through the Pittsburgh National Bank in Pittsburgh, Pennsylvania. And he had raised, if my memory serves me correctly, several hundred thousand dollars in a limited partnership. He was a general partner. He got Jerrold to put up to put up a three hundred thousand or four hundred thousand dollar guarantee for the privilege of providing the equipment and doing the turn-key construction of the system. Jerrold did a state of the art 35-channel system. And this was a rather large system for something like 30,000 potential or more. I think in the end closer to 40,000 perhaps before it was all over with. But at the time I think they built cable passing 30,000 homes.
Gordon Fuqua, unfortunately, had a heart attack and was in the hospital. While he was in the hospital, things went from bad to worse in the company. In the end they had to go into actual bankruptcy. The system was taken over by the Pittsburgh National Bank. Pittsburgh National Bank hired Daniels to broker the thing. I got a phone call from the broker Hugh Matella of Daniels. He started to tell me about the system. I said, "How much do they want for the system?" He said "$450,000." I said, "Buy it." He said "What?" I said "I want to buy it, don't talk to me anymore, but don't waste any more time. Call them immediately and tell them I want the system." He said, "Do you mean it?" I said certainly I mean it. I already knew that the system was a modern 35-channel system, passing 30,000 homes.
SMITH: You didn't have to do your due diligence on that one.
TUDEK: No I didn't care about what it was. I knew doggoned well. I knew that you couldn't possibly build a system like that for 450,000 dollars. We put 10,000 down and the bank accepted it, cashed the check. And then they came to us and said, "We're sorry. We can't do the deal with you." I said "Why?" He said "Well, after we signed the deal with you, a lawyer representing Jerrold came to us." Harold Schmidt of my law firm Rose Schmidt and Dixon. Jerrold hired Schmidt who was one of the most prominent trial attorneys in Pittsburgh to represent them. He informed the bank, Schmidt did, that they did not follow the commercial code. They had to bid this out and do the blind bids and do the best job they could. Jerrold thinks that they could have gotten more money for the system. Jerrold wasn't about to put up that 300,000 they owed for guaranteeing that part of the system. And of course, he was correct. They hadn't followed the commercial code and they had to start all over again. Believe it or not, we let them do it without suing them. John Previs, our legal counsel actually was hired by the bank to come up with a new specification, so it could be bid fairly in closed bidding and the bankers would go out and let everybody know that this bid was going to be done at such and such a time. Bids had to be in by five o'clock on a certain date. Sealed bids.
The reason we found out that Jerrold took their position was because of a gentleman by the name of Hermanoski, who subsequently became involved in the cable TV system in Miami, Florida among other places. But at that time, he had just been deposed as president of Vicoa. Vicoa was the number two manufacturer of amplifier and provided cable in the country next to Jerrold. So he was looking for something to do. He knew about Jerrold's guarantee, and he wanted to represent Jerrold and take over the system. He told Jerrold he was willing to pay more than 450,000 dollars. We had the sealed bids and I could not make the bid closing. I asked out attorney to go there with four or five envelopes. If he walked in and he saw that nobody was there, and the bankers come rushing up and put their arms around him, that he was to submit the first bid, which would have been 450,000 dollars. But if he saw Hermanoski there, then he was to submit bid number two. I figured that Hermanoski would improve things. He had offered already by then 500,000, so I thought he would jump to 525,000 and he would also add a thousand. So the second bid that I asked Previs to submit was $527,999.99. And then we had a third bid in case there were several other people there. And the fourth bid and the fifth bid. And if I recall correctly the fifth or sixth bid was 975,000 dollars.
SMITH: You were willing to go that high.
TUDEK: That's right. And so whenever Previs showed up, there was Hermanoski in his cowboy boots, which he always wore. And they asked for the bids. Hermanoski sealed his and walked up and Previs submitted number two bid. They opened up the bids and Hermanoski was 526,000 dollars. They opened up our bid was 527,999.99.
TUDEK: In that particular system within two and a half years, we borrowed...well first of all before we go that far, I'd already been turned down by the shareholders of Celina, Mercer County. They did not want to be a part of this. So I thought we'd go to Wall Street and we would get involved with a Wall Street firm. I'd been introduced to a firm called Oppenheimer. I was going to use this as an example of what we could do and how we could meet our projections, and we would go on from there. I was trying to develop a relationship. All I wanted them to put in was I think either fifty or seventy five thousand dollars. I know it was some kind of number like that. I know it was not more that 150,000, but it could have been as low at 50 or 75,000. I think it was 75,000 dollars. We would borrow the balance. As a matter of fact we would borrow the 527,000 dollars. I needed the 75,000 dollars for capital expenditures, and working capital. So I went up there to meet with them. I showed up, checked into a hotel, went over and they told me they couldn't see me that day; that I had to come back the following week. Some things came up. I went back the following week and the same thing happened. I got pretty discouraged. They told me this had never happened to them ever before, come on back the third week. I came back the third week. Finally they kept me waiting for about three hours, and they called me into this meeting in the headquarters. I was meeting with eight or nine or ten executives, senior executives. They kept walking in and out of the meeting, it was really hectic. I thought I was making progress about how all I wanted them to put in was 75,000 dollars. We would borrow the money, and we develop this and we would prove to them that we knew what we were doing and we would develop this relationship and go on forward. Finally, the guy in charge brought out a report. I now realized that the reason they'd delayed meeting with me was because they had hired this consultant, who was going to do an investigation of Tele-Media. The consultant that they hired was the guy who deposed as the general partner, I don't want to put this on the tape, but he was deposed as a general partner in a system that I knew about, and that we had been hired as a consultant although we never actually acted in the role as consultant. Matter of fact, we could have ended up buying the system and we should have. It was one of the biggest mistakes we ever made. But this gentleman was deposed and went on up into another part of the country, and remained in the business. In a way it was unfortunate, it wasn't for him. This particular gentleman built a little empire all his own and in a year or two sold out and made himself quite a bit of money. But at this particular time, he was in hock. He was in a great deal of trouble with his fellow general partners who had deposed him. So I was offended by the fact that they hired this particular guy to check on us. He was a guy who I would have hired to actually negotiate his exit from this messy situation that he was involved in. So I just got up and walked out of the meeting. Went down to a public phone on the street, and I called a friend in Chicago with Heller Oak, a gentleman by the name of Loren Young, who was with Heller Oak in Chicago. And I had borrowed from Heller Oak two or three million dollars in the Rio Grande Valley deal where I acted as a consultant, where I ended up with a 250,000 fee. This is where we got the money from Home Life, and I'll go into that too, later.
So Loren Young was with Heller Oak. And I ran out there and called him and said I was coming out. I hopped on a plane right from New York to Chicago, and I was to meet him the following day at noon. Actually I got in about 11:30 in the morning, 11:45 and he said, "Bob, my daughter is in town. She's a student at Michigan State, and we're going to go to lunch. Join us. And I did, and found out that she was actually a speed skater and was going to try out for the Olympics. We had a wonderful conversation at lunch. No mention was made of borrowing money or anything like that. We got back to his headquarters, and he said, "Bob, I'm really tied up here, I've got a few minutes. What's on your mind?"
So I told him in a hurry. We bought this system. I said new construction. We had less than 450 subscribers, 30,000 potential. It had been botched from the beginning and I told him the story. And I said "What a buy. This is absolutely unbelievable that we've been able to buy this thing for 527,000 dollars." I was trying to borrow 550,000 dollars, 100%. Actually, I told him I wanted to get 75,000 of equity, but I could get by without it. He said, "Wait a minute," he called in his number two man. I told him we had to close in two or three weeks, it was that fast to meet the specifications. He called in the number two man and asked him "Could you run out to Kent Ravenna, Ohio and do due diligence for the next couple days." The guy said, "Well, if you want me to, I will." "OK, go ahead and do that." So the guy went out the following day and spent a day or two out there. I remember we were very much impressed with his due diligence. He seemed to know more about what to look for in a cable system, especially financial records and what have you than other bankers who had done due diligence. He went back and Loren Young said, "You got the deal and the 75,000 besides. We'll lend you 625,000 dollars." So we closed the deal. Within two years, we borrowed two and a half million dollars on the company. Within four years, if I recall correctly, we borrowed six million dollars on that company.
Shortly thereafter, we ended up getting a ten million dollar loan from TCI on the system, for the privilege of their purchasing the system. In 1984, which would have been probably around six or eight years after we bought the system, we sold it to TCI for something like eighteen million dollars.
SMITH: When you say that you subsequently got a two million dollar loan and then after that a four, four and a half, whatever the figures were, you mean you were borrowing on the system as an asset?
TUDEK: That's right and we were leveraging the system.
SMITH: And finally sold it for eighteen million.
TUDEK: That's right. Bought it for 527,000 dollars, borrowed 100% of the money, after having gotten mad at Oppenheimer. So anyway, that turned out to be the real easy one and a great story. Not long after that....
SMITH: Could I interrupt you? I'd like to ask a question. Did Oppenheimer follow up after you walked out on him?
TUDEK: No, nothing. Never had anything to do with him until many, many years later where they were involved with a huge company that we should have bought and that's another story. We'll get into that. They were advisors to that company. And if we had bought the company, we might have prevented an awful lot of headaches for the entire industry. But we'll get into that later on. Also, we bumped into them many, many years later. Just recently they were involved in a radio company that just bought our radio company. Or at least one of their executives. And he helped bring that deal about. I think we just sold our radio company a couple of months ago. But other than those two situations, we never had any further contact with them.
While we were very lucky and things went our way, we had a very interesting thing happen with us in Key West, Florida about that time. I had been working on an acquisition in the Pittsburgh area. We were going to buy out Frank Chadoe. I had mentioned him earlier in my tape. Frank is the contractor who we hired to build the first 125 miles of cable system for my former employer Centre Video in the Pittsburgh suburbs. He had union problems and he asked to be relieved of the contract. He was the gentleman who got started in Nanty-Glo, Pennsylvania very early. He claims something like 1950 as an operator. Matter of fact, his systems, including Nanty-Glo, were just sold to Adelphia within the last year, after Frank's death. I had mentioned that I was inducted into the Pennsylvania Cable Pioneers with Frank's wife, who was trying to recover from cancer, and she didn't. Not too long unfortunately, after she was inducted with me, she passed away. But this was before Frank passing away. At any rate, Everett and I were going to become partners with Frank in his company. He had a number of little systems in Western Pennsylvania. In addition to Nanty-Glo, he had a company in Windber, Pennsylvania. Frank's headquarters were in Plum Boro, which is right next door to Monroeville and Penn Hills and east of Pittsburgh. And again, this is all owned by Adelphia today. And Frank owned Mt. Lebanon, which again Adelphia bought from him ten years ago. And then south of Mt. Lebanon, which is a suburban well to do community in the Pittsburgh area, there were other towns called Peter's Township in Upper St. Clair. This was all on Frank Chadoe's cable system. We were going to merge with him. Frank was going to get a million dollars in cash. And he was going to end up owning possibly 30% of Tele-Media. And he was going to be our partner. Everybody in the industry knew that he would not close with me. But I had every reason to believe that he was going to close, because we were golfing together and getting along fine. We always did respect each other, and got along with each other. And we had been negotiating, and we had everything out of the way. Except the closing date. That was the only blank in the purchase agreement. We had raised the equity and the debt. So I went in one final time to golf with him and negotiate the closing date, when Frank changed his mind. He wasn't ready to retire. So this kind of got me disappointed. And then at the same time, we were going to add to that system that he had in Mt. Lebanon, Upper St. Clair and Peters Township, which were in a row going south of Pittsburgh toward a community called Canonsburg. Several of these communities were in Washington County, which was a country south of Pittsburgh. I had lived in one of these areas, Peters Township for some time. So Canonsburg we were going to add to Frank's properties. And we were buying it from a Navy veteran who got into selling TV sets, and he made a loan on the real estate that he owned from the Mellon Bank. This was Mellon Bank's entry into the cable business. A loan that they did not know they had in cable, subsequently. And again, I had been negotiating with this gentleman along with Frank. This went on for six months; again we had everything except the closing date.
Meantime, my wife and I and our family took a vacation in the Bahamas, we went to Cape....... Had a wonderful time, on the way back, we were flying over Key West to get to Miami, when I looked down at my wife and I said "Look how beautiful it is down there. Wouldn't it be wonderful to own a cable television system in that area."
SMITH: You might have been looking down on me too. I lived there at the time.
TUDEK: And so we came on home. As soon as I got home, I had mail. We had been gone for three weeks. I had mail backed up several feet high. I was going through it, and I went through one of our industry publications. I see that Canonsburg was sold out from underneath me while I was on vacation. The owner had not even extended the courtesy to call me to tell me, that after six months of negotiations and all I had was a closing date to negotiate, a broker came in from Daniels and sold it overnight and I was furious! Disappointed because of loosing that opportunity, along with the opportunity to merge with Frank Chiabo. When I got a call from a broker who you know.
SMITH: Edward P. Whitney.
TUDEK: This was later on in the morning or early afternoon, and at that particular time Ed Whitney had a problem with alcohol. He was slurring his words and he started out by saying "Tudek, how would you like to own the cable television system in Key West?" He talked when he was slurring.
SMITH: I knew Ed very well.
TUDEK: And I said, "By all means, buy it" and he said, "What do you mean?" I said "Exactly that. Buy the system, I'll buy it." "You don't even know the details." "I said, "I don't even want to know the details." I was reacting to my disappointment. And I remembered flying over there and seeing that. He said "Let me tell you a little bit about the system." I said, "It isn't going to change my mind. I want to buy it." Arrange for me to meet. He said, "Do you mean it." I said "Yeah." So that particular evening or the next evening, I had a dinner with John Previs, our attorney in Pittsburgh at a little gourmet restaurant; a little hole in the wall. I guess when you have little holes in the wall, you have to become a gourmet restaurant because you have to charge a lot of money because you can't feed a lot of people. So while I was there I got a phone call. Apparently Whitney had called my wife and my wife knew where I was having dinner, so they had a phone there. It was actually a public phone in the restaurant. So at that time, he was really slurring words. This was calling me about 7:30 in the evening. And he says, "Tudek, I have arranged for you to meet with the owner, Senator Spottswood or Sheriff Spottswood. At times he called him the Senator, at times he called him the Sheriff. I said "Great, when." He told me when. So Elsie and I along with Previs, and we brought along the tax expert from the Tousch office in Miami. We went down and spent three days with State Senator Spottswood, the former sheriff of Monroe County, a legendary figure, and find out what it was all about. We stayed at the Holiday Inn in Homestead, and then early in the morning on that first day we drove down to Key West. As we were driving through the upper keys, I stopped, and looked at television pictures off the air in some establishments, and I think we may have even asked some people, if we could watch television in their homes. And I realized that this area of the Keys was not built. Matter of fact, I already knew by then that the only parts of the whole county that had been built was Key West itself. And the city of Key Colony Beach up in Marathon. And all the rest of the Keys had not yet been built. And here, as far north as you can go, in Key Largo, I was still looking at a classic situation as far as cable was concerned, because there was so much interference, for several of the channels that were coming down from Miami. Now the transmitters were located north of the city of Miami. And they had some problems, electrical interference and what have you. So even in Key Largo, the network stations and the educational stations in particular, which was a really powerful and very prominent station to this day, Channel 2, you could not get very well in Key Largo.
SMITH: Were you aware at the time that the entire Monroe County was under the Key West franchise?
TUDEK: No, I didn't know that. Yes, Whitney did tell me that. And he was with us. He was in the car, and he spent that evening with us and we had dinner in Homestead. And at that dinner, he explained to us everything he knew about the system. He also explained to us who our competition was, and also his own relationship with Spottswood. Ed Whitney, as you know, was one of the first presidents of NCTA.
SMITH: No, he was the second executive director. I was the first, he was the second.
TUDEK: In addition, when he was the executive director, the national NCTA show was held in Miami. And Spottswood got into an argument with him because he wanted the show to be held at such and such a hotel, where Spottswood could come up from Key West with his boat and dock and attend the convention, that way. And Whitney, for good reason, elected another hotel that Spottswood could not come up to with his boat. So Spottswood had never quite forgiven Whitney about the matter and was angry with him. So Whitney had to get over that hurdle with Spottwood. But he also told us that we had at least two other competitors. And that first competitor was a famous member of the DuPont family, who was in the cable business in a small way. And his package was put together by Strat Smith, the gentleman who's conducting this interview. Am I right?
SMITH: Essentially, you are right. The Dupont Nicholas DuMont, however was not actually in the cable business, but I had been trying to put a package together for him.
TUDEK: Didn't he own one system.
SMITH: No, he did not.
TUDEK: I thought he had one system in the Carolinas or something.
SMITH: No he did not. In addition to which he did not have the money, notwithstanding the fact that he was a DuPont. He didn't have the money to buy the system. And the banks wouldn't loan it to him. His money was in a spendthrift trust and that is why he didn't get to buy them. Because I was active myself, selling it to him, and that deal fell through because he couldn't raise the money. That's when Ed Whitney brought you in. I was intimately involved in it.
TUDEK: Alright, but then the other competitor was Leonard Tall, who was just starting out in his company called Century. He explained to me about the franchise situation, and that all of the county was under franchise. So we went on down, and by the time I arrived I knew that this was a golden opportunity because the rest of the Keys were not built and they were in a classic situation. So if we bought Key West and Key Colonies Beach, that was an unbelievable opportunity. Of course, while it was an unbelievable opportunity, there was an unbelievable handicap and problem that was keeping everybody else away from the system. And that's because, earlier the county commissioners of Monroe County had voted to bring in five translators to provide these five signals to the residents of Monroe County free of charge.
SMITH: The five signals from Miami.
TUDEK: Right, actually three networks and educational station and an independent station. And the cable system only had four channels. They only had the three networks and the independent station. They did not have the educational station.
SMITH: For the record, Bob, how did the cable system get its signals down in Key West? That's a distance of over a hundred and fifty miles.
TUDEK: This is quite a story and you were involved in it. And you can help me as I go along. As I recall the legendary figure that I was meeting with was Barry Hill at the time. Very gaunt and bones sticking out. His teeth were loose and his rings were so loose on his fingers that quite often when he gestured they flew off and hit the walls. But he was a fourth generation Key Wester, and had been a lieutenant colonel in the service and the briefing officer for some general. Came back from World War II and decided to apply for a radio license. I guess you were involved.
SMITH: Not at the time he got the radio license.
TUDEK: But when he got the radio license and before it was actually approved at the FCC, a threatened hurricane came about, and he asked the FCC for permission to go on the air early to warn everybody about the hurricane. And they granted him that permission. He went on to the air and had this first radio station, and only radio station. It was an AM in the Keys.
SMITH: Station WKWF.
TUDEK: Alright. And then of course most people who were contemporaries, will remember that our President Truman's favorite place was Key West. And it was then regarded as the second White House. So, when the president was down there, on one of his numerous vacations, he was going to cut the vacation early to go back to listen to his daughter in her debut as a classic singer. If I recall correctly, the program was emanating from Detroit, Michigan and being carried by one of the main networks at that time.
SMITH: That is correct.
TUDEK: And when Spottswood found out that the president was going to leave early, he wrote the President a letter and said there was no need to do that. That even though his station was on another network, he was certain he could get permission to carry the program. To make a long story short, that's what happened. The President didn't cut his vacation short. Spottswood carried the daughter singing in her debut. And of course Spottswood, as a result became friendly with the president and developed a relationship that led to his numerous contacts with people in politics and so forth. He had a little island that he owned at that time that many people in government and in the military used on vacations. When we met him, he had photographs on his wall down there in Key West of various generals and admirals and politicians, including four or five who either ran for president or were presidents of the United States. He had autographed pictures of Nixon, Muskee, Kennedy, who else am I forgetting? The Senator from Minnesota.
TUDEK: As a matter of fact, I think he had one photograph where he had all of them in one photograph. Quite a valuable photograph. I know Muskee was in the photograph, along with Nixon and Kennedy, and I think Humphrey. But at any rate, we went down there and we met this gentleman, as I said he was very skin and bones. He had difficulty talking because of how loose his teeth were. And he had this rasp in his throat, but he was a raconteur and he could tell story after story. Matter of fact, he had John Previs, our counsel, laughing so hard that Previs actually had sore ribs from laughing.
END OF TAPE 8
BEGINNING OF TAPE 9
TUDEK: The way he finally got the cable television franchise was very unique, as you can work with me on this. As I recall, it was the only franchise that I know of granted by a state to an operator.
SMITH: In my experience, in the industry, that is the only state granted franchise that I know about.
TUDEK: The state granted him the franchise for the entire county. But he was not satisfied, and he ended up getting a county franchise for the entire county. Even there, he was not satisfied, and he ended up getting franchises in each of the cities; in the city of Key West and in the city of Key Colony Beach.
SMITH: Bob, I'm going to interrupt you for a moment and not contradict you, because I'm not positive, but I think it may have been this way if I recall the story that John told me. And that is, he had the franchise at least in the city of Key West if not the others. And his lawyer in Miami, called him up one day and said "John, I've got some bad news for you. The city of Key West and cities in Florida, do not have the right legally, to issue a franchise. And John at the time, if I may finish was the senator from Monroe County in the Florida legislature. And he worked with his lawyers to write this franchise, and got the legislature to pass it for him to shore up what might have been a faulty franchise that he had from the cities.
TUDEK: You're correct. That is why he did go to the state, but in fact, he did have a state franchise, a county franchise, and a franchise for the city.
SMITH: That is correct.
TUDEK: And then subsequently, it was determined and cities routinely gave out franchises in the state of Florida.
SMITH: That was because of a change in legislation that permitted them to do it.
TUDEK: You're probably right. But he was not satisfied when he went to the state, he actually came back, or before he got the state franchise, he had the county franchise. So he had three franchises. But perhaps, more importantly, he had them expiring at different times. He said to me that you should always get a renewal of the franchise when you're in the good graces of the county politicians, even if it's a one-year extension. But by all means, when you're in good with them, go get extensions, and never have them expire at the same time. Someone's going to dispute your city franchise, then you're operating under a county franchise. And if somebody's going to dispute your county franchise, you're going to be operating under a state franchise.
But in addition to that, he had negotiated a pole attachment agreement with the power company, which was actually owned by an authority created by the city of Key West. Where he had a twenty-year pole attachment agreement and the payment I think, was a dollar a year per pole. In addition to that, he had five plots of property twenty-five miles apart, on which he had towers to bring down the television stations from Miami by method of microwave. But he owned the property and he owned the towers, and he leased those towers to AT&T, so they could provide telephone by microwave throughout the Keys. But in addition, that was the route on over to Cuba. I think he had an underground cable somewhere from that area over to Cuba.
TUDEK: Underwater. So he really had those under one-year agreements with AT&T, so that they couldn't raise his rates per pole for the rest of the poles or anything else that he had. Anything he had to do with the telephone company, he didn't have to worry about, because he would threaten them with a cancellation of the agreements for their microwave. And so, in the beginning, when he built the system, and maybe you can help me here, but my memory is that he built the original Key West system in something like 1953. Is that about the right time, as you recall it?
SMITH: That seems a little early. But it could be. Could very well be.
TUDEK: I was told that it was the first microwave system in the South. He didn't bring the microwave in until much later. In the beginning, all he had was a television station or two from Cuba, along with his radio station that he had on the air, on the cable system, along with what he bragged about—Hoot Gibson movies on one of the channels. They had tried to get another station off the air from Tampa, perhaps, which they really couldn't do. And then they couldn't get anything from Miami because the Miami towers were north of the city of Miami and so they were a good 150 miles away from Key West. And there was one station, however that was built afterwards, Channel 6 the independent station, that actually had a tower south of Miami. And so that could be seen down through the middle Keys, but you could hardly get the channel 6 in the Key West proper.
SMITH: I think what you're saying is correct. And it's correct about the microwave, but I think it is also the fact that Key West was the first cable system in Florida. Now we can double-check that. That may surprise you.
TUDEK: No, it doesn't surprise me. I know it was the first microwave system in the southeastern part of the country. And also, I think you're right about it being the first cable system in the state of Florida. But he had this difficulty, and he wanted to bring in the networks. He arranged for this through AT&T in a unique way because when he asked them for the price of bringing in the networks, the cost of doing that was prohibitive. And so, what he did was ask for the price of bringing in the educational station. He wanted the educational station, but they weren't equipped to do so or didn't plan to do so. AT&T provided a different rate to the PBS stations. One, it was black and white charge, not color charge, even though subsequently they provided color, cause they no longer even used black and white. But the rate was much, much less to provide the service to a PBS outlet. He had managed to get those stations, the three networks, for PBS rates. His contract called for black and white pictures, but they gave him color pictures. So he now had the three networks, and he had his own program origination studio on the second floor of the La Concha Hotel, which he owned. And this studio was equipped with quality broadcast equipment. I was equipment that was aged, but quality. The problem with it was that none of it was manufactured and there was only one guy in the country qualified to maintain it, but it was still quality equipment. And he was already doing automatically on his program origination channel, showing the county and city council meetings and the county commissioner meetings. He had it actually set up so the meetings were covered automatically from their studio remotely. You could operate the cameras in the city council chambers and in the county commissioner chambers. So he carried the city and county meetings, and he had program origination. Had a pretty good schedule. I think maybe 12, 14, 15 hours a day of programming to supplement the three networks. Now, of course, as I explained, the county commissioners had voted to provide five channels, translator channels, free of charge to the residents of the county. And that argument started about the fact that the people wanted the educational station. Spottswood couldn't get AT&T to provide them with that educational station or they said it was going to take them three or four or five years to do it. So the county passed this resolution and Spottswood had sued to try to prevent them from doing this on the basis that the county couldn't do this without having a referendum. And the matter was in the courts at the time. So this was why people weren't banging down the door to buy the thing. Because he had a five channel tube system on the pole that had been up there all those years. This was 1975, something like July 1975. And if he had built this system in 1953, you can imagine it hanging on the poles for over 20 years in that saltwater area. The system was in horrible shape, without any question. And the people were angry with them as a result. And he had been in politics having been the sheriff of the county, and now he had been a state senator, was no longer the state senator when I met him. He was ill, and his financial empire was crumbling. He had all kinds of leans and lawsuits, but he had some very interesting situations, and he wanted to sell me the stock of his company which would have given us in addition to the cable system, would have given him the two hotels, the La Concha Hotel, which today is a Holiday Inn. The family leased to the Holiday Inn the property for 99 years, then the property reverts back to the family. In addition, at that time Spottswood's empire owned the famous hotel, which was built with Belgium cement before and after World War I. It was the most southernmost hotel in the country. What was it called?
SMITH: Henry Flagler was the one who built it. The railroad magnate.
TUDEK: The hotel he bought with teamster money. Teamster pension fund. He borrowed the money to build this hotel and he had owned it now for seven years, and was using personnel in the cable company to upgrade the hotel. When I arrived and we went over to see it, they had a new roof on the hotel, and they had taken out all the sinks, all the plumbing from the various rooms. They had a new outdoor swimming pool built that was in operation and they had a bar that was in operation on the ground floor. And they had put in new elevators. So in addition, this hotel was bought subsequently by the Marriott and I'll get into that a little later. My wife and I went over to visit the hotel, and she was so impressed with it that she advised me to forget about the cable system and buy the hotel. It had far greater value, she thought, than the cable system. I didn't listen to her because we could have bought this whole empire. In addition to the two hotels, they owned a large number of commercial properties—office buildings, etc., along with a number of homes they owned. And in addition they had three blocks around this southernmost hotel that is now the Marriott. So all of this we could have gotten for another 750,000 dollars over the 4.1 million dollar purchase price of the system. He wanted to sell us the stock that would have given us the radio station and his real estate empire and the cable system. When we first got down there, I think he wanted something like 5.7 million dollars for the whole empire. But by the time our negotiations were over, I could have gotten the entire empire for less than five million dollars. I wish I had listened to my wife, but instead we gave, the following day, that evening by the way we had a cocktail party at his home where I learned that he and his family had entertained President Truman's wife and his wife's sisters at a barbecue in that very home and that subsequently they were still friendly with the two Truman—Mrs. Truman's two sisters who I guess annually visited the Keys. At any rate, I also learned that Spottswood had given a dinner for the President at this hotel. He had a photograph of that dinner. Oh, no, the dinner wasn't at the hotel, the dinner was at the Air Force Base. No, not the Air Force Base. The Navy had a submarine base there and they had the facilities and this is where Spottswood had a dinner in honor of the President. And he had photographs to show all of that. At any rate, after that dinner that following day, he gave us the whole day to make our presentation as to why we were the best company to buy the system from him. And we made our pitch, and our pitch was that we wanted to do a limited partnership and a tax shelter. That we were only interested in buying the assets. If we were to follow our plan, we had to buy assets, we couldn't buy stock. My experts had told me that our particular proposal was much better for him than his proposal. In his proposal, he was being guided by a Big 8 accounting firm also, I forget which one it happened to be. Pete Marwick or Arthur Anderson. We went on home, and I was really much impressed with the system and the opportunity. But I got to studying his proposal that he made to us, and I questioned my lawyers about it and my tax expert very closely and I came to the conclusion that he was right. That his proposal was much better for his family that our proposal. And so I wrote him a letter and I said Dear John; after thorough study of your proposal, I realized that your proposal is far better for you and your family than the proposal I made to you. Therefore, I very reluctantly inform you of that and wish you nothing but the very best in your attempt to dispose of your assets. And I meant it. So anyway, he called me as soon as he got the letter and he said, "Bob, you really want this system don't you." I said, "Yes, I do." He said "Come on down, it's yours." So I flew down, and we entered into an asset purchase agreement. Subsequent to that, he had a heart attack. I was called, and I rushed on down there, he was in bed at his home and he had nurses attending him and family. I went into see him and I was told that he suffered this heart attack and they took him up to the Miami Heart Institute. And that he had ripped everything off of him, the needles and everything and left the heart institute of his own accord and hopped on a boat, I believe, that took him down to the Keys. And he wanted no parts of all the restraint and so forth. And he told me "Bob, the system's yours. I know you'll take care of my family." So I went back on home and found out that he had been talked to by his family and his physicians, and he decided he would go up to the Miami Heart Institute for further treatment. I was asked to come down and visit with him. At the time that I arrived, I got in the taxi and told them where I wanted to go to. And it turned out that this was a home that belonged to the family of the Reynolds Aluminum Company of America, who was related to Mrs. Spottswood, I believe. And it was a huge mansion that was being used. But that very day, on the way, before I hopped in the taxi, I purchased a newspaper and the headline was the big drug scandal in Key West. I've just got to tell you this story, because it's absolutely fantastic. It turned out to be that the fire chief was involved, Bumfardo, who was the Democratic chairman, and I think he was the fire chief or the assistant fire chief...
SMITH: It was the police chief. Bumfardo had been involved years earlier in a drug scandal and disappeared and nobody knew where he was.
TUDEK: No, this was when he disappeared. Let me tell the story, then you tell your remembering.
TUDEK: When this happened, Bumfardo was the fire chief and he was chief of the Democratic Party in the town. The police chief was involved also, but not in the scandal. But he was involved because he was the stepfather of the city solicitor. The city solicitor was involved. And the city solicitor was a top graduate, graduated first in his class I think at Florida State University. Subsequently, years later ended up in prison and may still be in prison. But he was helped through school; his tuition was paid through school by Spottswood. Spottswood kind of regarded him as you might say, a foster son. But whenever they made this arrest in Key West—and this is what got national publicity along with publicity on national television. And the reason they did was when they came to take away the fire truck, which was loaded with drugs, they found out that the tow truck that came to pull the fire truck, also had drugs in it. And that's why it really made the evening news. Not only that the fire truck had drugs, but the tow truck that came to pull the fire truck also had drugs in it.
In the end, the city solicitor was acquitted in this particular situation. Bumfardo, however, disappeared. They didn't arrest him; he took off. And his wife who last I knew was still very active in the school system, and Bumfardo has never been heard of again. Matter of fact, for years the kids used to wear T-shirts 'Where is Bumfardo'. Bumfardo disappeared before this arrest. They never got hold of him. The city solicitor was acquitted, but years later, he was rearrested and when he was, the judge set one of the highest bonds ever set in any drug case. It was so high that the bond wasn't put up. And eventually he was convicted and sent to prison. Of course that would have been in the early '80s.
But whenever I arrived in that taxi, with these newspapers, Jack Spottswood, the son was there, and the father was on the telephone talking to the police chief who was the stepfather of the city solicitor, who again, as I said was the foster son of Spottswood. Spottswood paid his way through law school. It was very disappointing to Spottswood naturally, that it turned out this way, but in the end, as I said, he was acquitted in that particular situation, which could have happened within six months or a year after this arrest.
Off the record
After reflection, I think you're right that Bumfardo's disappearance occurred the first time around, and so this was the second scandal. Whenever I got there, in this Reynolds mansion, Spottswood, as I said, was talking to the city solicitor Manney's father who was the police chief. I'm reasonably certain that the police chief was not one of the ten people who were arrested. I'm not absolutely certain of that, maybe I'm wrong, maybe the police chief was also arrested.
SMITH: He was not arrested. He expected to be, but he wasn't.
TUDEK: The thing is this got headlines and got national coverage particularly because of the tow truck coming to pick up the fire truck, and it also having drugs in it. So we had this big scandal. But we really didn't spend any time on it at all in our discussion with the Senator. I heard him talking to the police chief about Manney. And I think what he was asking was the likelihood of a conviction. He wanted to know from the police chief what kind of evidence they had on Manney. That was his question. And I didn't hear the answer. But he hung up. We spent a few minutes together. He was so much better in appearance. He had put on about fifteen pounds. His teeth fit, he now could talk. He no longer had the rasp in his throat. He looked 20-25 years younger. He said to me that he was going in to have open-heart surgery, in I think two or three days. He wanted to make sure the deal was still on. I said fine, and took off and I happened to have business in New York City. I always checked in with my wife several times a day and I checked in with her. This was late in the evening and I was at the Pennsylvania Station, apparently about to hop on a train to go up to Connecticut or something like that. I called Spottswood from the Pennsylvania Station in New York City. He was in the Miami Heart Institute as an in-patient. He said to me "Bob, I'm going in tomorrow morning for open heart surgery. The doctors tell me that this shouldn't be any problem, and all that, but you never know. I want you to know that I trust you, and I have informed my family that if anything happens, that they are to go along with you. And I know you'll do the right thing by my family." I said, "Thank you John and you know that I will." He said "I know that Bob." Well, unfortunately he went into open-heart surgery and the doctors thought the surgery was successful. He was returned to his room, but I'm told that his team took off for a holiday, after the surgery. They thought everything was fine. And they took off for the islands, and subsequently complications arose. I don't know if this was seven hours or eight hours or twelve hours later. And they rushed him back in again and this time he did not survive. So now it came time for me to deal with his son, who rolled up his sleeves and went to work until 5:00 the following morning. His dad had left the entire empire in shambles, financial shambles, no question about it. And so I negotiated a deal with the son, but I had to go back and renegotiate because in order to get the financing I needed more than a million and a half of equity, which I had a great deal of difficulty raising. And I had a great deal of difficulty erasing the senior debt, because the Reit's had gone caplouey on Wall Street and all the banks in the entire half of the nation had Reit investments in Florida that were really hurting. No banks wanted to talk about doing anything in Florida. There were two banks up north that weren't hurt by the Reits in Florida and was State....Bank in Boston and perhaps Society Bank in Cleveland. Every other bank had one or many investments one way or another in real estate in Florida. The banking system in Florida was rather unique. Spottswood was in default of his loan, and Southeast Bank of Florida, which was the largest bank in the state...we were trying to deal with the third largest flagship bank and we were only trying to borrow a million dollars from them. They were going to have to put it through and get eighteen resolutions from eighteen banks in order to borrow a million dollars. To give you an example of the banking system in Florida. Really, all the other banks outside of Florida were doing the banking in Florida, is about what it amounted to. So we were having difficulty raising the senior debt. And there's a story behind that. And I finally did get three commitments. Usually I got two of them after I didn't need it, that's the way those things work. Once you get one the other ones come. One that I got for the senior debt was from a guy by the name of Bruce Poston of Union Commerce Bank in Cleveland. And Bruce resigned the following day to become the financial advisor for George Steinbrenner, the owner of the New York Yankees. He became Steinbrenner's financial advisor and built a big home down in Tampa with a swimming pool, and after a year or two Steinbrenner fired him. Which is nothing new. Steinbrenner fires quite a few people including Billy Martin, his manager, he fired four times, I guess. But he also fired I don't know how many secretaries in a few short years. And he fired Bruce Poston. I was sorry to hear that, because he played such a big role and I'd had such great difficulty trying to raise the money. He came down and did due diligence and he was one of the few guys that I ever dealt with, a banker, who had to deal with inclimate weather. We had a horrible storm and he got himself a bad cold. But nevertheless, things didn't work out so well for Bruce. I don't know whatever happened to him. The last I heard, he was selling co-leases in the state of Kentucky.
But I finally got the commitment from him. And we finally raised a million and a half in a limited partnership, which I tell you—nothing is ever tougher. We put the deal together and we closed the deal, after I got Spottswood to take a million dollar note. For that million-dollar note they got a warrant for 40% of the company. We in turn started out...they were supposed to have 9,500 subscribers, but the truth of the matter is that with the shakeout we had a little over 8,000 subscribers. So in the four and a half or five years or so that we owned the system, we took it from 8,200 subscribers up to 30,000 basic subscribers, along with 30,000 Home Box Office subscribers, because we ended up building the entire Keys, the entire Monroe County. We ended up putting in a CARS Microwave system, using our own facilities. We built on our own towers, but using frequencies that are usually reserved for the utilities.
SMITH: Common carrier facilities.
TUDEK: We used a low megahertz system, the only one ever approved by the FCC for anyone in our industry to use that particular frequency. If I recall correctly, it was either four or six gigaHertz. In order to accomplish that, we had to get a letter from AT&T stating that they did not object to it, to our getting that situation. That was a toughie for me to get from them, but I managed to get them to write the letter that they didn't object to our doing that, using that frequency. So we ended up having, I forget how many channels that we had going both ways in the Keys. So we built the entire county to a 20- channel system, which was a state of the art at the time, if I recall. And we added Home Box Office. That was early in the situation. Matter of fact, we also added ESPN. I think ESPN just came on at that time. Of course Christian Broadcast Network was on the satellite so we put in a satellite dish. People told us you couldn't do that in the Keys, we ended up using one of those horn type satellite dishes. And we brought in Christian Broadcast Network and channel 17, Ted Turner's, along with Home Box Office. And then we also brought in, one of the first in the country, a little later, that Spanish channel. So we had the microwave, the dish, we built the whole county. We rebuilt the whole five-channel tube system that we had bought. We took it from 8,200 subscribers to somewhere between 27-30,000 subscribers and I think 30,000 Home Box Office subscribers, and we agreed to sell it to TCI for 20 or 22 million dollars. I think it was 22 million dollars. But they loaned us five million dollars for the privilege of buying it, and we didn't have to serve this five million dollars either principle or interest until we actually closed the Key West transaction. So, we had a loan of five million and they closed. I sold this. Marcus was the broker, he really shouldn't have been, because the actual introduction was handled by another broker in the firm CEA, Don Russell.
SMITH: You mean to broker the sale to TCI.
TUDEK: Yes. Marcus was with CEA at that time.
SMITH: CEA is Communications Equity Associates.
TUDEK: Headquartered in Tampa. And Don Russell was with them, having left the National Bank of North America. I had done the first couple of deals he did as a banker. He knew me. And he called and he actually made this deal but it was taken over by Marcus who was a founding partner of CEA, Rick Michaels. Marcus then arranged for me to meet with John Malone who was at that time president of TCI. Came down to spend a couple of days with me in the Keys. We took him deep sea fishing. Got to know each other pretty well and I negotiated this deal with John. So we end up closing the deal, and Spottswood then ended up making more money for his boy. I think he made something like 5 million dollars before taxes, or 5.5 million dollars before taxes, for having loaned us that one million dollars of paper, taking a subordinate note. Of course the purchase price originally was 4.1 million which all went for paying debts. I think it was 3.2 million that they were in debt to Southeast Florida Bank. So now he actually got working capital of 4.5 million dollars, which he has used to bolster the family financial fortunes. So that was the Key West story in Tele-Media's history.
Really I wanted to talk, which I did, about the financing, our early financing situations. That five million dollars that TCI loaned us, that we didn't have to serve, enabled us to buy other cable systems. We leveraged it several times and with it we bought a number of cable TV systems. TCI still owns the Key West system to this day. Matter of fact, the translator situation was such that we kept it from being built the entire time we owned the cable system and while we were rebuilding up the whole county, by virtue of this lawsuit which we took all the way to the US Supreme Court. Our position was that...several positions we had that the county had no right to get into building this kind of communication system because it was a conflict of interest. But in addition, Congress didn't have the right to override the state legislature on the state's rights question. More importantly, we claimed that the actual law in Florida required them to have a referendum before they did something like this. The Supreme Court didn't hear that appeal and so we lost the case. However, the county decided after we sold to have a referendum, and they had the referendum and TCI did not participate, did not campaign against the referendum. The referendum only won by a very small margin of votes; something like 500 votes. So the translator was built and is still operating today in 1997. It's not very successful. As a matter of fact, the people got angry; even the non-cable customers who want nothing to do with the translator are taxed. And are paying a tax for the upkeep of the translator, so they are very unhappy about it. In addition, there's a wireless system that's in operation with 2,500 subscribers in Key West. I don't know that the translator or the wireless system has hurt the system that much, but that's the latest report I have about Key West.
SMITH: That is quite a story.
TUDEK: Yes, especially since you were so intimately involved, and you lived down there, and you also ended up with that radio station that I talked about that we could have bought had I bought the stock, we would have owned the radio station. Instead, after we bought the assets of the cable system, you came down and you acquired the assets of the AM radio station and subsequently you built the FM station in the Keys.
SMITH: That is correct. My initial involvement was being the Washington D.C. attorney for John Spottswood, representing his cable interests and then his broadcast interests. That would explain why I had the background that I helped you fill in on the tape.
TUDEK: In those days, we were very fortunate, although I do recall that when I finally closed the Key West deal, and raised the equity and raised the senior debt and I renegotiated with Jack Spottswood for that million dollars worth of paper, I was exhausted. Absolutely nothing before or since was so difficult as that particular deal. I just couldn't seem to convince anybody what a great opportunity it was. Here it was, the whole county in a classic situation to be built and it was obvious on the face of it to me that this was a real valuable situation and it turned out to be that, but I couldn't get anybody to believe me. This was one reason I keep telling everyone I'm not much of a salesman. I really tried so hard with all the banks and everybody, I talked and worked my head off. And had such difficulty. We were very fortunate. And I forgot to mention in the meantime, we did refinance it about twice while we were rebuilding it. Once, maybe twice. We needed all the capital to rebuild the whole county. I think we refinanced it the first time within the year and we refinanced it the second time. I didn't have any difficulty doing that. I'm talking about a lot of the good things that I accomplished, but I should mention here again, another mistake that I made, and over the years there were many. Because right after the closing, I got a letter from a widow who said something like the following. "I am a widow and I own the cable television system in the city of Homestead, Florida. I have 2,000 or 2,500 subscribers" and I forget how many potential homes that they had, 20 or 30,000 or some number like that. Some rather large number. "And it so happens that I have the franchise for the entire county of Dade County. Nobody else has the franchise for the whole county." I made the mistake, because I was so tired and wanted to just rest for a little while, of giving this to one of my lieutenants to check into, and he did and he wasn't enthused about this matter and we didn't follow up, and before I could get involved, a broker by the name of Bob Homan came in and very rapidly sold the system to Hermanoski. Hermanoski is the gentleman that I talked about earlier that I beat out of the system in Kent Ravenna, Ohio. But I also didn't tell the story about the fact that I beat him out in Port Clinton, Ohio. In the interim a widow also owned that system which was in debt to Jerrold, because Jerrold had done a turnkey. This widow was married to a gentleman now deceased, who had run for U.S. Senator in Ohio, and owned several radio stations. He passed away and she was in default, all of her loans were in default, including the loan to Jerrold for the system. And we went up there and I negotiated with her a deal where she stayed in. She gave me paper. I straightened out all of her loans. I went to the banks and restructured them. They forgave most of them. She had two banks in Toledo and a bank in Cincinnati. So I straightened out her problems, and bought the system out from underneath Hermanoski who was trying to buy it through Jerrold. He wanted Jerrold to take it over because of the money Jerrold was owed. So when I refinanced it, we paid Jerrold off. So Hermanoski subsequently, years later, told me that the reason he was down there and took that thing away from me, he didn't even know he was taking it away from me, in Homestead he had nothing to do. Remember he had been deposed as president of Vicoa. I beat him out in Kent Ravenna and I beat him out in Port Clinton. At that time he was living in Long Island. And he had a boat, which he took with him down to Florida. And he bought the system in Homestead. And he bought this home, which was the southernmost home on the east coast. Subsequently I visited him there, spent a day with him in his home. And it had a long lot, about a block long, narrow and long, down to the ocean. Again, the most southernmost home on the east coast, not including the Keys. He bought it out of a bankruptcy he told me the story. It had a garage and a guest home in which his daughter lived. But at any rate, he bought that home at that time, shortly after he bought the system in Homestead for 600,000 dollars. And he had a fight with Bob Homan and Daniels about the fee for the brokerage part that they settled out of court; a 25,000 dollar fee. So Hermanoski then, ended up with the homestead system which he financed several times and built up and eventually sold to Adelphia for 92 million dollars years later. Matter of fact, ignoring the bid that we were willing to give him, which was several million higher.
SMITH: Just for the sake of the record, Bob, I think I finally recalled what Hermanoski's first name is. Let me confirm it with you. Was it Charley?
TUDEK: Charley Hermanoski. Who later was very much involved with TCI in the city of Miami as a partner. He was a general partner. That's another story that we got very much involved with, with the Spottswood family, with Charley Hermanoski, with John Malone concerning the Miami situation. That's a story in itself. But at this particular time I would rather want to concentrate on the huge, stupid error that yours truly made, no only in letting him knock us out of the city of Homestead franchise for 600,000 dollars, when we had purchased the Keys. And you know Homestead is right at the top of the Keys, Monroe County. But in addition, he had this franchise for all of Dade County. Subsequently, the county fathers did give out four or five franchises in various areas of Dade County. But, to this day there is only one overall county franchise, which is owned by Adelphia. Subsequently Adelphia did buy Homestead from Charley Hermanoski and with that they got the franchise for all of Dade County. That was one of the big boo boos that we pulled. Whenever he sold Homestead to Adelphia I think he had 45,000 subscribers approximately. And he was charging 175 dollars for installation. So all Adelphia did was lower the installation fee and add many, many subscribers. Which of course hit with the last hurricane. A Homestead of course was devastated in the hurricane. As was the system, which has since been rebuilt, and I understand they virtually have back all the subscribers that they lost in that hurricane. That was the error that we pulled.
We did pull one other good thing off because while Charlie had Homestead, we ended up buying and taking away from him the Homestead Air Force Base. We bought that from a gentleman whose name escapes me right now. He owned a company called US Cable, Meyers I think his name is, something like that. He just sold out part of his last stuff to TCI, around Chicago. He owned that Homestead Air Force Base and naturally Charley wanted it real bad. We were able to buy it from this gentleman, who has done a number of joint ventures with the gentleman I'm talking about, with TCI and John Malone. I golfed with him not too long ago, he's really a great golfer, he's almost a scratch golfer. But we bought Homestead Air Force Base, and then when we sold Key West to John Malone and TCI, we sold them Homestead Air Force Base. But Charley got back at me, because when we sold it, there was only two and a half years of remaining franchise or less that that. And when a franchise expired, Charley took it away from TCI. And in addition, TCI took Charley to court and I think went all the way up to the Supreme Court on that deal and won the case. But it was too late. The thing wasn't decided until years later. In the meantime, Charley had taken them off the poles. I guess unless he sold the system, until this day, Charley still owns Homestead Air Force Base. He did take it away from TCI. John Malone bought Key West from us, he was not able to retain the Homestead Air Force Base.
SMITH: We're at the end of the tape. This will amuse you. I have been trying to think of the name of the other hotel Spottswood owned right on the ocean.
TUDEK: Casa Marina.
SMITH: I was going to say I remember the name of the bar in it. It was the Birdcage. And I wondered if I mentioned Birdcage if it would trigger in your memory, but you got it. The Casa Marina was what it was.
TUDEK: As a matter of fact, it really has quite a history, and is a very well known hotel. It was one of the premier hotels in the country when Henry Flager had it built.
SMITH: That is correct.
TUDEK: With the Belgium cement, which delayed the construction until World War l, was over, so they could get resumption of the cement from Belgium.
SMITH: Well they wanted that because they were building a hotel that no hurricane could take down. That's what they were trying to do.
TUDEK: They were trying to build one that was hurricane resistant, using Belgium cement. By the way, that reminds me, I told you the story about the guy who owned the Detroit News, Booth. He was involved family wise in Blacksburg, Virginia in the cable system underground. We had a chance to buy it, and that was the home of the Virginia Military Institute. It's not, I made a mistake. That's in Lynchburg and it's Virginia Technical Institute.
SMITH: We'll correct that in the edit.
TUDEK: The town is Blacksburg.
END OF TAPE
END OF ORAL HISTORY