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Welles toyed with various ideas for his first project for RKO, settling briefly on an adaptation of Joseph Conrad's Heart of Darkness before ultimately rejecting it. RKOs budget projections made it impractical. In a display of his avant garde sensibility, Welles' plans for that project included filming the action entirely from the protagonist's point of view.
Welles was once again the centre of controversy with his first film, Citizen Kane ( 1941). The gossip writer Louella Parsons convinced the yellow-press magnate, William Randolph Hearst, that he was the basis for Kane, with the result that Hearst's media empire boycotted the film. On its release, this event overshadowed the film's radical formal innovations. Welles is said to have sardonically remarked, concerning Hearst's attitude, that if he were to do a movie about the journalism magnate, the fact would be more grand and shockingly unbelievable than the fiction. This possibly apocryphal quote is uttered by Liev Schreiber (as Welles) in the 1999 TV movie RKO 281 .
Welles' second film for RKO was the more traditional The Magnificent Ambersons, adapted from the Pulitzer Prize-winning novel by Booth Tarkington, and on which RKO executives hoped to make back the money lost by Citizen Kane
Simultaneously, Welles worked with his Mercury Theatre fellows on a spy thriller, Journey Into Fear , which he co-wrote with Joseph Cotten. In addition to acting in the film, Welles was also a producer. Direction was credited solely to Norman Foster, but the film contains several expressionistic sequences indicating input by Welles. Welles denied having directed the film, but the visual style is very similar to his credited works. Whatever the case, Welles played a major role in its production, but he expressed disappointment at the finished product.
During the production of Amberson's, Welles was asked to make a documentary film about South America on behalf of the U. S. Government. Welles left the United States to begin shooting this documentary after putting together the first rough cut of The Magnificent Ambersons, on the understanding that further editing decisions would be carried out via telegram. At this point RKO, in a perilous financial situation and fearing another commercial failure, wrested control of the film from Welles' Mercury Productions staff, cut over fifty minutes of footage, and added a reshot, upbeat ending: the cut footage, including Welles's original ending to the film, has been lost, apparently permanently. This event marked the beginning of a recurring pattern in Welles' Hollywood career of damaging executive interference. Ironically, Welles' South American documentary, entitled It's All True , never saw completion in Welles' lifetime. The surviving footage was released in 1993.
In 1946, Metro-Goldwyn-Mayer released The Stranger , starring Edward G. Robinson and Loretta Young as well as Welles himself. A noir-ish suspense film about the hunt for a Nazi war criminal, The Stranger was Welles' only commercial success as a director. Welles supposedly made the film to prove that he could make a conventional picture within time and budget constraints. He followed The Stranger with another noir drama for Columbia Pictures, The Lady from Shanghai . Welles played the protagonist, while his second wife, Rita Hayworth, played one of the villains. Like The Magnificent Ambersons, The Lady from Shanghai suffered heavy editing by its studio, and the excised portions are believed to be lost permanently. Columbia removed an hour of footage from Welles' final cut. Welles' notes for the film suggest that the excised footage would have aided audiences' comprehension of the story. Despite the editing, the theatrical cut still contains many examples of Welles' Expressionist film-making. Once released, the film was savaged by critics for its convoluted plot, and audiences disliked Hayworth as a villain. Welles' marriage to Hayworth -- already troubled during filming -- ended shortly after the film's release.
Welles changed studios once again, moving to Republic Pictures, a studio with a reputation for making B-movies. The move marked a return to Shakespeare for Welles -- he chose to direct and star in an idiosyncratic production of Macbeth . Working with a very limited budget, Welles fashioned a Macbeth that emphasized the darkness of the play's themes and characters. Unfortunately for Welles, the finished film once again proved unpalatable to the movie-going public.
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