Court docs show role of Pixar, Dreamworks Animation in wage-fixing cartel
Just when the tech giants behind the Silicon Valley “Techtopus” wage fixing cartel thought the worst was behind them, US District Judge Lucy Koh has thrown a surprise twist — refusing for now to give her seal of approval to the $324 million class action settlement.
Judge Koh has suggested the agreed settlement might be too low, but there are whispers that Koh is frustrated at being denied the chance to preside over what would have been one of the most interesting and significant Big Tech court cases ever (a frustration shared by this particular journalist and at least one of the plaintiffs in the case, Michael Devine).
But while the class action suit continues to grind towards a conclusion, there remain plenty of revelations as yet unreported from the depositions and court documents.
For one thing, most of the previous attention in the case was focused on the behavior of executives at Apple and Google. What hasn’t been fully explored is the involvement of major and minor Hollywood studios that are alleged to have been party to the same illegal cartel. The wage-fixing cartel originated with Pixar and Lucasfilm, two northern California computer animation film studios now under Disney's roof.
Disney, in particular, has received very little public scrutiny over its own role in the Techtopus, an oversight which is made all the more troubling by the fact that the company’s CEO, Robert Iger, is now heading a campaign to increase the number of foreign tech workers coming to America, using a dubious study to promote its cause.
In May, just days after the $324 million Techtopus settlement was reached, a major industry-funded report was published, claiming that more H-1B visas should be issued to foreign tech workers. This, they argued, would lead to higher wages for everyone in the tech industry. The report was funded by the Partnership for a New American Economy a powerful union of CEOs, founded by billionaire media oligarchs Michael Bloomberg (worth $34.4 billion) and Rupert Murdoch (worth $14.3 billion), and co-chaired by tech oligarch Steve Ballmer ($21 billion) and Disney CEO Iger, last year’s second highest-paid CEO ($34.3 million).
We’ve already reported on the shocking testimony and private email exchanges between tech superstars like Steve Jobs and Eric Schmidt, but actually some of the most alarming and revealing testimonies in this case, during the pre-trial period, belong to the two initiators: George Lucas, the Obi-Wan Kenobi of the wage fixing cartel; and his Pixar counterpart, Ed Catmull. Through their testimonies, we learn the names of other major and minor Hollywood studios that are alleged to have been party to the same illegal cartel, including Disney itself, after it became Pixar's parent company in January 2006 — and Dreamworks Animation, whose name repeatedly pops up as a participant in depositions and emails.
Dreamworks' Jeffrey Katzenberg: The Techtopus pulls in Obama
A secret no-poach agreement between Pixar and Dreamworks Animation would be particularly remarkable given the company's famed fierce rivalry in almost all other areas. Even more significantly, the participation of Dreamworks Animation in an illegal wage-fixing cartel would take the politics of this story to a new level, considering the mega-millions in campaign donations that Dreamworks’ CEO Jeffrey Katzenberg has shoveled into the Obama campaign.
Katzenberg, a former Disney chairman from 1984 through 1994, was by some counts President Obama’s single most important moneyman in the 2012 race against Mitt Romney. Last year, Mother Jones dubbed Katzenberg "The New George Soros," having raised some $30 million to reelect President Obama. It was Jeffrey Katzenberg who first seeded the Obama SuperPac, Priorities USA, with a $2 million check. And it was was Katzenberg who organized the infamous A-list Hollywood fundraiser at George Clooney’s house in the spring of 2012, netting the Obama campaign $15 million in one dinner sitting (Katzenberg “directed” Obama to personally make the rounds at each dinner table.)
Katzenberg’s political fundraising has served his own interests well, such as when Vice President Joe Biden lobbied China’s current leader, Xi Jingping, to open up China's markets to Hollywood — and to Katzenberg's Dreamworks Animation in particular. The result: Oriental DreamWorks, a massive movie animation operation and $2.4 billion "DreamCenter" that will dwarf its Hollywood operations.
Katzenberg also serves as the liaison between the White House and Hollywood studio interests, and between Hollywood, Silicon Valley and the White House, playing go-between during the ugly battle to pass Hollywood’s pet SOPA bill, which Obama ultimately helped kill. Katzenberg reportedly did not lobby Obama to support SOPA; but when the bill died, it was Katzenberg who directed Obama’s rapprochement with Hollywood studio heads.
Court docs clearly show Dreamworks Animation's involvement in Techtopus
Private emails sent by Pixar’s president and co-founder, Ed Catmull, and found by Pando amongst court documents, clearly state that Katzenberg's Dreamworks Animation was party to the same secret non-solicitation agreements that the Department of Justice deemed were illegal antitrust violations that served to suppress workers’ wages. Catmull's deposition in 2013 for the class action lawsuit further demonstrates that Dreamworks Animation was party to the illegal wage theft conspiracy.
For example, in February 2004, Catmull emailed Steve Jobs — who served simultaneously as CEO of Pixar and Apple — to complain about Sony Pictures chiseling in on the computer animation business and not playing by the rules. Which, as Catmull wrote to Jobs, meant Sony was trying to poach Pixar’s tech specialists by offering them higher pay: "Sony has approached all of our producers trying to hire them. They all just ignored Sony,” Catmull wrote Jobs, explaining:
"We don't have a no raid arrangement with Sony. We have set up one with ILM [Lucasfilm] and Dreamworks which has worked quite well."
Catmull tells Jobs he plans to visit Sony’s animation people, to rope them into the wage-fixing cartel:
"I probably should go down and meet with [REDACTED] and Sony to reach some agreement. Our people are become [sic] really desirable and we need to nip this in the bud."
In January 2006, Disney bought Pixar for $7.4 billion in an all-stock deal that turned Pixar’s largest shareholder, Steve Jobs, into Disney’s largest shareholder with a 7% stake, and the media conglomerate’s most powerful new board director.
The following year, 2007, Ed Catmull — now a Disney executive — disclosed in a private email to the chairman of Disney at that time, Dick Cook, that Pixar-Disney was still maintaining its secret wage-fixing agreement with Dreamworks Animation, as well as with Lucasfilm and other smaller computer animation studios, and that Disney’s newest partner, Bob Zemeckis’ animation studio ImageMovers, was violating the non-solicitation cartel's agreement by raiding one of its members, Dreamworks Animation:
From: Ed Catmull
To: Cook, Dick
Sent: Sun Jan 14 2007
Regardless of what John thinks about motion capture, we have a serious problem brewing.
The HR folks from the CG studios had their annual get together in the bay area last week. At that time, we learned that the company that Zemeckis is setting up in San Rafael has hired several people away from Dreamworks at a substantial salary increase....
I know that Zemeckis’ company will not target Pixar, however, by offering higher salaries to grow at the rate they desire, people will hear about it and leave. We have avoided wars up in Norther [sic] California because all of the companies up here – Pixar, ILM [Lucasfilm], Dreamworks, and couple of smaller places – have conscientiously avoided raiding each other.
At the very least, I would like the kind of relationship that Pixar has with Disney in that people cannot be considered to move back and forth. However, even raiding other studios has very bad long term consequences [i.e., drives up wages and hurts profits—M.A.] To which Disney’s chairman replied:
“I agree. We will reaffirm our position again. As for Pixar or Disney, they absolutely know they are off limits.”
In another email in March 2007, Catmull once again reiterated Pixar-Disney’s no-poaching deal with Dreamworks Animation:
“While we do not act to prevent people from moving between studios, we have an agreement with Dreamworks not to actively pursue each others employees. I have certainly told our recruiters not to approach any Dreamworks employees. Either you had not been informed or the policy has changed. If the policy has changed then please let me know."
This last email was read out in Catmull’s deposition, taken in early 2013. Catmull was pressed by the plaintiffs' attorneys to explain what he meant in these emails, and if he was referring to wages and labor costs. After hemming and hawing, Catmull finally came clean:
CATMULL: Well, them hiring a lot of people at much higher salaries would have a negative effect in the long-term.
Q: On pay structure?
CATMULL: Well, I'm just saying that if they -- I don't know what you mean by pay structure. The -- for me I just -- it means the pay. All right? If the pay goes way up in an industry where the margins are practically nonexistent, it will have a negative effect. Right then, Catmull's attorney cut him off:
Ms. HENN: Counsel, this might be a good time for a break.
Although we have no indication yet that Obama’s Department of Justice pursued what appears to be clear executive evidence that Jeffrey Katzenberg, Obama's biggest fundraiser, was involved in the largest wage-fixing cartel in history, the plaintiffs’ attorney from Lieff Cabraser, Richard Heimann, did manage to press Pixar’s Catmull for more details about his deal with Katzenberg’s company, Dreamworks Animation.
Catmull, like so many other tech executives in this story, tried to pin all blame on Steve Jobs' dead shoulders:
Q: In the email you wrote, “While we do not act to prevent people from moving between studios, we have an agreement with Dreamworks not to actively pursue each others employees. I have certainly told our recruiters not to approach any Dreamworks employees. Either you had not been informed or the policy has changed. If the policy has changed then please let me know." First of all, do you recall this incident at all?
Q. Was it correct that you had an agreement with Dreamworks not to actively pursue each other's employees?
CATMULL: The only recollection I have was that conversation with Steve [Jobs] that he had talked with Jeffrey [Katzenberg], and I don't know what he said.
Q. Well, is it correct that at the time you wrote this, you thought that you had an agreement with Dreamworks not to actively pursue each other's employees?
CATMULL: Well, I told this person that.
Q. Well, you weren't lying to him
CATMULL: No. I said I told that person this.
Q: So that was your belief at the time?
CATMULL: My belief at the time was that Steve had talked with them, that we weren't actively going after each other.
* * * *
As PandoDaily has previously reported, Steve Jobs was the key figure who brought the original wage-fixing cartel from the rarified world of movie computer animation into Silicon Valley’s big leagues, strong-arming Google, Adobe, and others into joining the illegal conspiracy, which then took on a life of its own. In 1986, a year after Apple fired Jobs, he financed Pixar’s spin-off from Lucasfilm, and eventually took over the company.
Through these central figures in the wage-fixing cartel, you get a sense of how powerful Silicon Valley grew in relation to Hollywood from the time Jobs took over the struggling Pixar in the mid-1980s, to Jobs' triumphant sale to Disney two decades later, making him Disney's largest shareholder and most powerful board member. You also get a sense of how the two leading California industries’ interests have quietly meshed in ways we aren’t exposed to: common interests in keeping their employees’ wage costs down, so that profits and company valuations continue to soar; common interests that arise across industries, when wealth and corporate power concentrates in fewer and fewer hands, as revealed in the overlapping relationships on boards of directors, relationships that allow for secret wage-theft deals to be cut...and we learn that these common interests appear to outweigh areas where Big Tech and Big Hollywood publicly clash, such as the much-hyped rancor over the SOPA bill.
In the next article [UPDATE: here it is] on the Hollywood-tech origins of the Techtopus, we’ll reveal more about the role of George Lucas, who spent decades couching illegal suppression of his workers’ wages in the language of “ethics” and “responsibility” and ended up selling Lucasfilm in 2012 to Disney, in exchange for becoming a Disney’s second-largest shareholder after the estate of Steve Jobs, or the largest living shareholder, with about four and a half billion dollars in Disney stock.
By George Lucas’ own deposition testimony, those billions he made were only possible by illegally and secretly conspiring to fix his tech employees’ wages and job mobility.
We’ll also show how Lucas couldn’t have kept Lucasfilm afloat all those years without controlling and manipulating his employees’ incomes and lives for the worse. To have played fair, Lucas argued, would be unfair to everyone, not to mention irresponsible.
Oh, and we'll also tell you what happened when Catmull flew to meet with representatives from Sony to persuade them to join the cartel. Spoiler: It didn't quite go according to plan.
Follow all of our Techtopus coverage here.
Pando contacted Disney, Pixar, Dreamworks Animation and the Department of Justice prior to publication. Only the Justice Department and Dreamworks Animation responded although neither has yet provided comment for publication.
Other documents cited in this article: