Time Warner Steps In to Save Apollo Theater, Calming Spitzer Storm

A proposed deal between Time Warner Inc. and the State of New York to run the nonprofit Apollo Theater Foundation is moving closer to fruition and could be announced by the end of spring. And nobody will be more relieved than State Attorney General Eliot Spitzer.

Under the terms of the proposed deal, Time Warner would get to use the historic 1,600-seat theater for HBO, CNN and its movie, television and music divisions, in exchange for “adopting” the troubled facility, providing board members, technical assistance, equipment and funds. In addition, Time Warner would review the role of Harlem politician-turned-entertainment mogul Percy Sutton, whose deal with the Apollo became the subject of a legal action brought by former Attorney General Dennis Vacco in the heat of last fall’s political campaigns.

In the meantime, The Observer has learned, the Apollo Theater Foundation has filed a malpractice lawsuit against the law firm of White & Case, saying that if attorneys had filed papers in accordance with the foundation’s wishes, the Attorney General would have no basis for legal action.

Mr. Vacco’s suit was filed against the theater’s board members, including its chairman, Representative Charles Rangel of Harlem. And that’s the heart of the problem for Mr. Spitzer: Mr. Rangel, a fellow Democrat, is not a good target for a young Attorney General who spent $9 million of his family’s money to win the state’s top law enforcement job. Under the Time Warner deal, Mr. Rangel would leave gracefully, and that’s all the state wants, officials said. Mr. Rangel wants that, too, so long as it doesn’t look like he’s being pushed-in which case, “I tell them to go to hell,” Mr. Rangel told The Observer . But if he can leave on good terms, he’ll be happy. “God knows I have better things to do,” Mr. Rangel said.

But Mr. Rangel, the dean of New York’s Congressional delegation, wouldn’t be Mr. Spitzer’s only problem if he isn’t rescued by Time Warner. Mr. Rangel’s lawyer is Victor Kovner, a bona fide friend of President Clinton-not somebody an ambitious Democrat would wish to annoy. And Mr. Sutton owns the WBLS-FM and WLIB-AM radio stations, both of which play a crucial role in getting out the black vote in New York City. These are all bad opponents for a man who clearly doesn’t intend to finish his political career as Attorney General. But if Mr. Spitzer tried to wriggle out of the lawsuit, he’d have the Daily News editorial board to contend with-the News won a Pulitzer Prize this year for its editorials on the Apollo, helping to inspire Mr. Vacco’s investigation. The News ‘ editorial endorsement is also a sought-after prize in any political campaign.

“If [Mr. Spitzer] wants a long-term future, he has to figure out how not to piss off [Mr. Rangel],” said one high-level Democratic supporter of the Attorney General. “But he’s a Democrat who benefited from black support, and if he makes it go away, he looks like he’s corrupt.”

“We are pursuing it wherever the facts take us,” Mr. Spitzer said from his car phone while stuck in traffic on the F.D.R. Drive. “I am absolutely confident that the public will see that politics has no role, nor will it.”

To understand the story of the Apollo Theater, you have to listen carefully to both sides, each of which fervently promotes an elaborate conspiracy theory for its adversary while denying anything but the purest motives for itself. And if you listen to the sides even longer, you’ll find both want essentially the same thing-a revitalized Apollo Theater as the anchor of development along 125th Street, a professional board with members of the entertainment industry, and an exit strategy for Mr. Rangel. They just blame each other for why it isn’t there yet.

The saga of the Apollo began in the early 1990’s when the Apollo Theater Foundation was formed, operating under a lease with the state of New York. It was seen at the time as an act of salvation by the state. Mr. Sutton, who was an investor in the Apollo and a close ally of Mr. Rangel’s, was given a five-year contract to produce Showtime at the Apollo . The badly underfunded Apollo collected only $50,000 a year. Critics charged that Mr. Sutton had gotten a sweetheart deal.

In 1997, with the Apollo in deep financial trouble, Mr. Rangel and Mr. Sutton approached Time Warner chairman Gerald Levin and president Richard Parsons, according to Mr. Rangel and to Time Warner sources. Mr. Rangel was trying to get out of his role with the foundation, and discussions were initiated to bring Time Warner in. Time Warner had twice held its board meetings at the Apollo, and a Time Warner source described a possible adoption of the Apollo as consistent with “where the company’s values are.” But when Mr. Levin’s son, Jonathan, was murdered in June 1997, the talks became stalled.

In April 1998, members of the Daily News editorial staff, apparently at the behest of state officials, took a walk through the Apollo. In a series of editorials, “Showdown at the Apollo,” the page decried the theater’s condition, and pointed the finger at Apollo board members who, the News charged, had failed to collect the fees owed by Mr. Sutton, because, the paper alleged, of the close relationship between Mr. Rangel and Mr. Sutton. The Empire State Development Corporation, in the hands of Gov. George Pataki, a Republican, and his economic development czar, Charles Gargano, also made the cronyism charge. But Mr. Rangel’s partisans accuse Randy Daniels, a vice president of the E.S.D.C. and a Harlem resident, of stirring up trouble. They say Mr. Daniels is out to exact revenge on former Mayor David Dinkins through Mr. Dinkins’ friend Mr. Rangel because Mr. Dinkins dismissed Mr. Daniels from a top communications post when he was hit with a sexual harassment charge that was never proven.

Bidding War

After the tour of the theater, the News demanded that Mr. Vacco, a Republican, open an investigation. Mr. Vacco did. Meanwhile, the Apollo board opened bidding for a one-year extension of Mr. Sutton’s contract. Mr. Sutton’s bid came in at $1.5 million-many times the $250,000 he’d paid for the full five years before. A second bidder, African Heritage Network, also came in at $1.5 million. As a board decision was being made, Mr. Sutton was allowed to increase his bid by $100,000. The other bidder was not. The contract went to Mr. Sutton. “A board is entitled to give a contract to whomever it wants,” claimed a defense source.

In late September, Mr. Vacco offered Mr. Rangel a choice: resign or be sued. Mr. Rangel wouldn’t budge. A lawsuit was filed on Oct. 1, with Mr. Vacco asking for removal of the Apollo board, and that the board members be held personally liable for failing to collect the fees due from Mr. Sutton.

Defenders of the Apollo’s current management make a curious claim. The state’s lawsuit contends that the board did not collect all it should have from Mr. Sutton. But the original 1992 contract between Mr. Sutton and the board, the defense argues, did not reflect the wishes of the board: It defined Mr. Sutton’s profit, upon which the Apollo’s fee would be based, too broadly. That’s why lawyers for the foundation have filed a malpractice claim against White & Case, which drew up the original contract. Bolstered with memos and depositions, the complaint argues that the board never intended to collect much from Mr. Sutton.

“We gave our client too much money,” said Philip Schaeffer, general counsel for White & Case. “Their claim is that it was too good for them. They think Mr. Sutton and his counsel were misled.”

To Mr. Spitzer, all of this must have appeared like a fragrant pile of excrement, waiting for him at his corner office on the 25th floor of 120 Broadway. Privately, he has complained to associates the lawsuit was “badly drawn.” Mr. Vacco’s chief attorney on the case, Matthew Sansverie, has been let go. He was replaced by Beth Golden, formerly a U.S. attorney in Minnesota who just happens to have worked for Penn & Schoen, now President Clinton’s pollsters, back in the 1980’s. (More conspiracies!) After a court date, Ms. Golden murmured something to a reporter about the case being “premature.”

A spokesman for Mr. Spitzer, Scott Brown, described Ms. Golden’s title as “Deputy Attorney General for Special Proj-ects.” What’s a special project? “Investigations such as this,” he answered. Witnesses and attorneys involved in the case charge that Mr. Spitzer is desperately trying to back off it. But most revealingly, when asked for a copy of the complaint, Mr. Brown was careful to describe it as “Vacco’s complaint, not our complaint.”

But while Mr. Spitzer handles it gingerly, Mr. Rangel, the state and Time Warner have been vigorously pursuing an adoption agreement. All three parties seem to be shrugging off Mr. Vacco’s lawsuit. “We don’t give a shit about the Attorney General’s lawsuit,” said a state official, who said the goal was always to bring the Apollo back to life. Time Warner seems to feel likewise. “They thought it would run its course and get cleared up,” said a source familiar with the discussions.

An Outsider?

So Mr. Levin and Mr. Parsons have met with Mr. Rangel and Mr. Daniels. Mr. Spitzer has also talked to Mr. Parsons. And a Time Warner team has visited the Apollo. Toni Fay, Time Warner’s vice president of community relations, has been mentioned as a potential board member, perhaps even board chair. “I really can’t comment on that,” said Ms. Fay. “I think that’s premature.”

Mr. Rangel snorted at the notion that the board chair would be an outsider. “That’s just silly!” he roared. Evelyn Cunningham, a dissident board member who quit earlier this year after a verbal altercation with Mr. Rangel, speculated that the new chair might be actor and current board member Ossie Davis. “He would satisfy both sides,” she said.

Mr. Vacco had said that his lawsuit was designed to prevent the Apollo board from handing out another five-year contract to Mr. Sutton. That goal may have been achieved-the board has agreed to hand out a one-year contract, “until the Time Warner people come in, and review it,” said a source familiar with the discussions.

Still, Mr. Sutton’s role-the basis for the lawsuit, and all of the brouhaha-may not, in the end, change. Mr. Sutton’s Inner City Broadcasting has a long-term relationship with Time Warner’s cable systems unit, and “there’s a lot of sympathy at Time Warner for Percy Sutton,” said a source familiar with the negotiations. “They feel he genuinely tried to help the Apollo, and lost a lot of money.”

What will happen on 125th Street? It may just be that Mr. Gargano gets his way. But that is also Mr. Rangel’s way. And Mr. Spitzer’s way. Out of all this politicking, some good may come.

And Mr. Spitzer will have dodged a very powerful bullet.