• U.S.

Business: Overloaded

3 minute read
TIME

In a long and successful career analyzing the securities of railroads that have undergone or are going through reorganization, New York Financier Patrick B. McGinnis has developed a sharp eye for good buys in railroad stocks. A group he headed got control of the Norfolk Southern Railway Co. in 1947; the following year he helped Frederic C. Dumaine Sr. get control of the New York, New Haven & Hartford railroad, and later got a large chunk of common stock in the Central of Georgia Railway Co. But as a railroad officer, his batting average was not so good: stockholders eased him out last year as board chairman of both the Central of Georgia and Norfolk Southern. He is currently engaged in a fight with Frederic C. (“Buck”) Dumaine Jr. for control of the New Haven (TIME, Feb. 15). Last week the Interstate Commerce Com mission issued a lengthy report on McGinnis’ management of the Norfolk Southern which helped to explain his failure to hang on to his railroad jobs: ¶ Board Chairman McGinnis and three other top officials paid themselves “inordinate, extravagant and . . . wasteful” total salaries and fees, ranging from $61,488 in 1947 to $191,800 in 1951. In the five years before their regime, the Norfolk Southern Railway had only one top officer who was paid $15,000 to $24,000 a year.

¶ The same group received hundreds of thousands of dollars in expense money, including large amounts listed only as “miscellaneous.” “additional.” “special,” and “extraordinary” expenses. In 1951 President J. T. Kingsley’s expense account totaled $78,986, McGinnis collected $32,250, the chief item being $20,865 for “entertaining, luncheons, dinners, etc.” Kingsley’s listed expenses included $2,746 for “beverages and provisions” for a penthouse on Miami’s swank Ponce de Leon Hotel and $1,290 for membership and fees to the equally plush Surf Club in Miami Beach. The Norfolk Southern also paid out $7,200 for trips of officials and their guests to the Kentucky Derby in 1950 and 1951.

¶ Interest-free loans were made to McGinnis, and railroad funds were used in “stock speculation.”

At the hearings, the McGinnis group defended its action by claiming that it had brought the railroad from the brink of bankruptcy to a point where stock dividends were resumed. But earnings last year, after McGinnis left, increased to $772,813 (from $525,406 in 1952) in spite of a drop in operating revenue. Since the railroad is under new management, the commission, which had started the investigation on its own, ended the proceedings. But it urged that the Interstate Commerce Act be amended to safe guard stockholders against improper use of railroad funds.

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