Mutual Funds: Those I.O.S. Loans

The long-delayed annual report of Bernard Cornfeld's Investors Overseas Services, Ltd., was finally made public last week. As expected, it was an explosive document that disclosed several reasons why the $2 billion mutual-fund complex tumbled into trouble.

First, the 1969 consolidated net earnings were a dismal disappointment. They came to only $10.3 million—down from $14.4 million in 1968, and far from Cornfeld's predictions that I.O.S. would "double its income every year." Had it not been for a controversial revaluation of some of the company's Arctic oil lands, I.O.S. would have earned less than $600,000. More important, the 1969 earnings were...