Editing Mutual Broadcasting System (section)

==== Turmoil, propaganda allegations, and bankruptcy ====
[[File:Hal Roach Jr. circa 1950.jpg|thumb|Hal Roach Jr.]]
The network soon changed hands again: in September 1958, it was acquired by the Scranton Lace Company for $2&nbsp;million (equivalent to ${{Format price|{{Inflation|US|2000000|1958}}|}} in {{Inflation/year|US}}).<ref>{{Cite news |date=September 12, 1958 |title=Mutual Network Brings 2 Million; Radio System Is Purchased by Scranton Corporation in Move for Expansion |page=50 |work=The New York Times |url=https://www.nytimes.com/1958/09/12/archives/mutual-network-brings-2-million-radio-system-is-purchased-by.html |access-date=February 13, 2023 |archive-date=February 14, 2023 |archive-url=https://web.archive.org/web/20230214001802/https://www.nytimes.com/1958/09/12/archives/mutual-network-brings-2-million-radio-system-is-purchased-by.html |url-status=live }}</ref> Scranton was under the control of the F. L. Jacobs Company, whose chairman, [[Alexander Guterma]], envisioned a media empire uniting Mutual with another purchase that year, [[Hal Roach Studios]].<ref name="Broad19580915p27">{{Cite magazine |date=September 15, 1958 |title=New giant growing in radio-TV? |url=https://worldradiohistory.com/Archive-BC/BC-1958/1958-09-15-BC.pdf |magazine=Broadcasting |volume=55 |issue=11 |pages=27–28 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131024143/https://worldradiohistory.com/Archive-BC/BC-1958/1958-09-15-BC.pdf |url-status=live }}</ref> Guterma's tenure as Mutual president was brief: he resigned on February 13, 1959, amid increasing financial shortfalls, overdue payments to affiliates, unpaid phone bills with [[AT&T]], and an ongoing investigation by the [[U.S. Securities and Exchange Commission]] (SEC).<ref name="Broad19590309p36">{{Cite magazine |date=March 9, 1959 |title=SOS from Mutual as courts and creditors close in |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-09-BC.pdf |magazine=Broadcasting |volume=56 |issue=10 |page=36 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131030013/https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-09-BC.pdf |url-status=live }}</ref> [[Hal Roach Jr.]] took over as president,<ref name="IndPrT19590322p4">{{cite news |date=March 22, 1959 |title=Roach Jr. Loses His Film Post |page=4 |work=Independent Press-Telegram |agency=United Press International |location=New York |url=https://www.newspapers.com/clip/56955043/hal-roach-jr-loses-film-post/ |via=Newspapers.com |access-date=February 14, 2023 |archive-date=February 14, 2023 |archive-url=https://web.archive.org/web/20230214001801/https://www.newspapers.com/clip/56955043/hal-roach-jr-loses-film-post/ |url-status=live }}</ref> but the SEC labeled him "a Guterma puppet" due to how he assumed Guterma's shares and questioned his ability to run the network.{{r|Broad19590309p36}} A week after resigning, the SEC indicted Guterma on federal securities fraud charges,{{r|Time19590914}} which led Roach to be removed as president of the film studio, though he retained his position as Mutual president.{{r|IndPrT19590322p4}} The SEC also ordered [[stock trading]] for the F. L. Jacobs Company suspended.<ref name="Broad19840910p43">{{Cite magazine |date=September 10, 1984 |title=After 53 years the feeling's still Mutual |url=https://worldradiohistory.com/Archive-BC/BC-1984/BC-1984-09-10.pdf |magazine=Broadcasting |volume=107 |issue=11 |pages=43, 46, 51, 54, 58 |access-date=February 15, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131024228/https://worldradiohistory.com/Archive-BC/BC-1984/BC-1984-09-10.pdf |url-status=live }}</ref>

Scranton was under pressure to sell Mutual. The March 9, 1959, issue of ''[[Broadcasting & Cable|Broadcasting]]'' magazine stated Mutual had a deficit of $1.05&nbsp;million (equivalent to ${{Format price|{{Inflation|US|1050000|1959}}|}} in {{Inflation/year|US}}) and was losing up to $100,000 a month. AT&T threatened to cut off Mutual's telephone service within 24 hours if all outstanding charges were not paid, which would sever the network from its affiliates.{{r|Broad19590309p36}} An attempt to sell the network to [[Max Factor]] collapsed after the cosmetics manufacturer could not find a way to create a [[tax advantage]] from the existing financial losses.<ref name="Broad19590302p9">{{Cite magazine |date=March 2, 1959 |title=At Deadline: Mutual on the block |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-02-BC.pdf |magazine=Broadcasting |volume=56 |issue=9 |page=9 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131032142/https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-02-BC.pdf |url-status=live }}</ref>{{r|Broad19590309p36}} When AT&T made another threat to disconnect phone service, network news director Robert F. Hurleigh engineered a last-minute deal with businessman Malcolm Smith, whose transaction to buy the network included $1&nbsp;million of advertising time and payment of the outstanding AT&T phone bill, which totaled over $400,000.<ref name="Broad19590316p118">{{Cite magazine |date=March 16, 1959 |title=Mutual keeps walking tightrope: Intermountain stations depart as Smith group keeps up talks |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-16-BC.pdf |magazine=Broadcasting |volume=56 |issue=11 |pages=118–119 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131023904/https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-16-BC.pdf |url-status=live }}</ref> The deal, however, failed to stop [[KWDZ|KALL]] in [[Salt Lake City]] and its 41-station regional "Intermountain Network" from switching to ABC.<ref name="Broad19590330p27">{{Cite magazine |date=March 30, 1959 |title=Rescue squad takes over at MBS: Creditors okay deferments of old debts to keep network going |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-30-BC.pdf |magazine=Broadcasting |volume=56 |issue=13 |pages=27, 30 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131025849/https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-30-BC.pdf |url-status=live }}</ref> The Don Lee Network folded on April 26, with all 20 affiliates switching from Mutual to ABC and ABC purchasing Don Lee's remaining programming.<ref name="Broad19590330p30">{{Cite magazine |date=March 30, 1959 |title=Don Lee to quit; ABC gets 20 affiliations |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-30-BC.pdf |magazine=Broadcasting |volume=56 |issue=13 |page=30 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131025849/https://worldradiohistory.com/Archive-BC/BC-1959/1959-03-30-BC.pdf |url-status=live }}</ref> Yankee Network lead station [[WRKO|WNAC]] severed ties with Mutual in August to become independent, but Mutual was allowed to affiliate with the other Yankee stations individually.<ref name="Broad19590511p58">{{cite magazine |date=May 11, 1959 |title=Mutual and Yankee plan August divorce |volume=56 |page=58 |magazine=Broadcasting |issue=19 |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-05-11-BC.pdf |access-date=February 25, 2020 |via=World Radio History |archive-date=October 21, 2020 |archive-url=https://web.archive.org/web/20201021224054/https://worldradiohistory.com/Archive-BC/BC-1959/1959-05-11-BC.pdf |url-status=live }}</ref>

{{Quote box
| quote = Mutual apparently refuses to believe that we have disaffiliated. We are sympathetic to their problem, but we have definitely affiliated with ABC Radio.
| author = Lynn Meyer
| source = president of the Intermountain Network/[[KWDZ|KALL]], on their March 1959 disaffiliation from Mutual{{r|Broad19590330p27}}
| width = 250px
| salign = right
}}

The troubles with Mutual worsened. While on a [[press junket]] to [[Ciudad Trujillo]] in May 1959, Hurleigh received confirmation that [[Dominican Republic]] dictator [[Rafael Trujillo]] secretly provided money to Guterma, Roach and Scranton Corp. vice president Garland Culpepper. Guterma accepted up to $750,000 from Trujillo, and in turn, Mutual newscasts were to have up to 425 minutes of [[Puffery|puff pieces]] favorable to Trujillo's regime broadcast per month.{{r|Time19590914}} One story read by [[Walter Winchell]] regarded plans by Hal Roach Studios to film future movies in the country, while another story about [[Fidel Castro|Castro]] allies planning attacks against the Trujillo regime was read by Fulton Lewis Jr.; assorted "news releases" were also sent intended for newscasts but never broadcast.<ref>{{Cite magazine |date=September 7, 1959 |title=Grand jury indicts Guterma trio: Charged with selling MBS as Dominican propaganda vehicle |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-09-07-BC.pdf |magazine=Broadcasting |volume=57 |issue=10 |pages=68–70, 75–76 |access-date=February 16, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131023853/https://worldradiohistory.com/Archive-BC/BC-1959/1959-09-07-BC.pdf |url-status=live }}</ref> Outraged over the arrangement, Hurleigh went to the [[United States Department of Justice|U.S. Justice Department]], which also received a complaint from a Trujillo lawyer after Guterma failed to give the money back. By September, Guterma was indicted for failing to register as a [[foreign agent]], with Roach and Culpepper as defendants.<ref name="Time19590914">{{Cite magazine |date=September 14, 1959 |title=High Finance: The Price of Publicity |url=https://time.com/vault/issue/1959-09-14/page/96/ |magazine=Time |volume=LXXIV |issue=11 |page=94 |access-date=February 9, 2023 |archive-date=February 10, 2023 |archive-url=https://web.archive.org/web/20230210033718/https://time.com/vault/issue/1959-09-14/page/96/ |url-status=live }}</ref><ref>{{harvp|Ward|2005|pp=152–155}}.</ref> Guterma, who pleaded [[Nolo contendere|no contest]] to the charge, was sentenced to federal prison for stock fraud, but it was never proven that he actually fulfilled his part of the deal and arranged for slanted coverage.<ref name="Broad19840910p43" /> Nonetheless, the incident, combined with the network's precarious financial position, led to a reported 130 stations ending their Mutual affiliations.<ref>{{Harvp|Cox|2002|p=127}}.</ref><ref>{{harvp|Jaker|Sulek|Kanze|1998|p=155}}.</ref>

In the wake of the Trujillo scandal and affiliate defections, Smith sold Mutual to Hurleigh for $1 on July 1, 1959, which was followed by a voluntary [[Chapter 11, Title 11, United States Code|Chapter 11 bankruptcy]] filing. Businessman Albert G. McCarthy took over operations, arranging to settle the network's over $3&nbsp;million in debts (equivalent to ${{Format price|{{Inflation|US|3000000|1959}}|}} in {{Inflation/year|US}}) while seeking an owner interested in running it on an ongoing basis.<ref>{{Unbulleted list citebundle|{{Cite news |last=Adams |first=Val |date=July 2, 1959 |title=Mutual Network 3 Million in Debt; Files Petition in U.S. Court Seeking Settlement While Continuing in Control |page=53 |work=The New York Times |url=https://www.nytimes.com/1959/07/02/archives/mutual-network-3-million-in-debt-files-petition-in-us-court-seeking.html |access-date=February 13, 2023 |archive-date=February 14, 2023 |archive-url=https://web.archive.org/web/20230214001759/https://www.nytimes.com/1959/07/02/archives/mutual-network-3-million-in-debt-files-petition-in-us-court-seeking.html |url-status=live }}|{{Cite news |last=Adams |first=Val |date=July 5, 1959 |title=News of TV and Radio; Garry Moore To Use 'Candid Camera' As Sporadic Feature in Fall -- Items |page=6-Section ART |work=The New York Times |url=https://www.nytimes.com/1959/07/05/archives/news-of-tv-and-radio-garry-moore-to-use-candid-camera-as-sporadic.html |access-date=February 13, 2023 |archive-date=February 14, 2023 |archive-url=https://web.archive.org/web/20230214001801/https://www.nytimes.com/1959/07/05/archives/news-of-tv-and-radio-garry-moore-to-use-candid-camera-as-sporadic.html |url-status=live }}}}</ref> WOR signed a new contract with Mutual despite previously indicating the station would drop the network,<ref name="Broad19590727p50">{{cite magazine |date=July 27, 1959 |title=WOR New York keeps its Mutual affiliation |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-07-27-BC.pdf |magazine=Broadcasting |volume=57 |issue=4 |page=50 |access-date=February 13, 2023 |via=World Radio History |archive-date=November 8, 2021 |archive-url=https://web.archive.org/web/20211108151449/https://worldradiohistory.com/Archive-BC/BC-1959/1959-07-27-BC.pdf |url-status=live }}</ref> becoming the lone RKO Teleradio station to renew ties as WGMS, KFRC, KHJ and [[WHBQ (AM)|WHBQ]] joined WNAC in independence.{{r|Broad19590511p58}} At the same time, WOR started to identify as "WOR-AM-[[WEPN-FM|FM]], owned by RKO General," eschewing on-air mentions of Mutual after listeners mistakenly thought WOR was ''also'' in bankruptcy; concurrently, Mutual changed their station cue to "the Network of Independent Stations".<ref name="Broad19590720p9">{{cite magazine |date=July 20, 1959 |title=At Deadline: Cue: station 'break' |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-07-20-BC.pdf |magazine=Broadcasting |volume=57 |issue=3 |page=9 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131032503/https://worldradiohistory.com/Archive-BC/BC-1959/1959-07-20-BC.pdf |url-status=live }}</ref> A three-part reorganization plan resolving all debts was approved in [[United States bankruptcy court|bankruptcy court]] on December 23, 1959, allowing Mutual to emerge from Chapter 11; a network spokesperson commented, "this means we start out with a clean slate; we are now divorced from any previous managements."<ref name="Broad19591228p9">{{cite magazine |date=July 20, 1959 |title=At Deadline: MBS reorganization approved by referee |url=https://worldradiohistory.com/Archive-BC/BC-1959/1959-12-28-BC.pdf |magazine=Broadcasting |volume=57 |issue=26 |pages=9–10 |access-date=February 13, 2023 |via=World Radio History |archive-date=January 31, 2023 |archive-url=https://web.archive.org/web/20230131025239/https://worldradiohistory.com/Archive-BC/BC-1959/1959-12-28-BC.pdf |url-status=live }}</ref>