Empire for Sale

As U. S. businessmen go, the Van Sweringen brothers are relatively young. Brother Oris Paxton is 56, Brother Mantis James is 54. Less than 20 years ago they were merely two notably successful Cleveland realtors--farm boys who had gone to the city, worked hard, saved their money and by shrewd investment piled up about $500,000 between them. Then they got into railroads, purchasing the decrepit Nickel Plate. By 1929, not long before they took their first & only vacation, they estimated their mutual fortune at $100,000,000. From their adjoining offices on the 36th floor of their Terminal Tower building they directed coal mines, trucking companies, street car lines, $150,000,000 worth of real estate and 23,000 miles of railroad--largest personally-controlled railroad system in the U. S. Last week it was announced that the entire Van Sweringen empire would be auctioned off Sept. 30 at 3:30 p. m.

At that time in a public auction room at No. 18 Vesey St., Manhattan, Adrian H. Muller & Son will sell for J. P. Morgan & Co. the collateral pledged by the Brothers Van Sweringen for loans and accumulated interest now amounting to $50,000,000. Among the securities which the House of Morgan and allied banks took over when the loan fell due last May was stock-control of the holding companies through which the Van Sweringens rule virtually all their vast possessions. On the block will go about 50% of the common stock of Allegheny Corp., representing all but one of the Van Sweringen railroads, Wheeling & Lake Erie, whose stock is pledged with RFC. The man who owns that block of Alleghany stock can hire & fire the executives of Chesapeake & Ohio (3,100 mi.), Pere Marquette (2,200 mi.), Erie (2,700 mi.). Nickel Plate (1,690 mi.) and have a voice in the reorganization of Missouri Pacific (12,000 mi.) and Chicago & Eastern Illinois (900 mi.). Also for sale is stock control of Van Sweringen Corp., representing the Van Sweringens' principal real estate holdings, including Cleveland's 52-story Terminal Tower.

That by no means completed the list of securities advertised by J. P. Morgan. In their desperate effort to shore up their cracking pyramid in 1930, the Van Sweringens scraped their strong boxes for such items as 196 shares of Long Lake Co.. 250 shares of Huron Fourth Co., a past-due note of Higbee Co. for $1,292,534, second mortgage bonds of Cleveland Terminals Building Co. now in default, a $2,595,399 subordinated note of Van Sweringen Corp, due last May.

There were also blocks of listed stocks, some of which were odds & ends from the Van Sweringen holdings, some of which were acquired, in their open-handed efforts to help local banks & businessmen in the early days of Depression when most of Cleveland turned to the "Vans" for ready cash. Biggest parcels were 35,000 shares of Lehigh Valley Coal, 63,000 shares of Otis Steel, 10,900 shares of Erie, 3,300 shares of Chesapeake Corp.

But the public's interest in the auction will centre on the 2,064,000 shares of Alleghany, worth $3,000,000 at the market price. A notable procession of blasted business dreams have passed across the auction block of Adrian H. Muller & Son, including the shades of the Insull utilities and Continental Shares, once the pride of that other Clevelander, Cyrus Stephen Eaton. But never before has such a private empire been sold substantially intact.

Who will bid for it? That question kept Wall Street buzzing last week. The Morgan banking group made it clear that they would do no more than place bids amounting to upset prices. Old bush-bearded Leonor Fresnel Loree, who two years ago stepped out at 74 to buy a 10% interest in New York Central for his rich little Delaware & Hudson, was spotlighted as a likely bidder. Another suggestion was Frederick Henry Prince, crusty septuagenarian Boston banker who jumped into Armour & Co. a year ago. While either Loree or Prince could undoubtedly lay hands on enough cash, neither at his age would probably be eager to undertake the rehabilitation of $3,000,000,000 worth of properties.

Much as Wall Street enjoyed speculating about possible buyers, the final answer probably lay in a simple statement that emanated from Cleveland's Terminal Tower. It read: "Messrs. O. P. and M. J. Van Sweringen and their associates have completed arrangements to bid for the collateral at the sale and have also arranged for new capital to carry on the enterprises."

"O. P." and "M. J." are not rich today, nor are they precisely penniless. Their "personal basket," Vaness Co., is still supposed to yield them $250,000 annually. (Alleghany is their "public basket.") During the past few years they have staved off disaster through a series of heroic financial efforts, most important of which were voluntary adjustments in publicly-owned issues of Van Sweringen Corp. and Alleghany that were about to default. The Morgan loan was obtained five years ago largely to pay off nearly $20,000,000 owing to the brokerage firm of Paine, Webber & Co. and to purchase Government securities to bolster the shrinking collateral behind Alleghany debentures.

Despite the staggering declines in Van Sweringen securities, the two bachelors of railroading have kept their old friends. Names of the "associates" who will furnish them funds remained a profound secret but one thing was certain: J. P. Morgan is not financing the Van Sweringen comeback.

In the Missouri Pacific reorganization Morgan had to defend the interests of bondholders while it was directly interested in the common stock through the Alleghany shares reposing in its vaults--an embarrassing position for which it has been bitterly criticized. To plunge deeper into the Van Sweringen rehabilitation would merely multiply the sources of embarrassment. Thus the Brothers Van Sweringen turn back to the Midwest for their bankers & backers.

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