Abandoned Mayflower

In person and by proxy the stockholders of an unusual U. S. investment trust assembled last week in Jersey City, there solemnly voted their corporation out of business. The trust was no down-at-the-heel affair with a sorry or unsavory history. It was Mayflower Association, Inc. with assets of some $19000,000 and one of the best records in the field. Its stock was launched on the full crest of the 1929 boom at $60 per share. Its liquidating value today is more than $77, after past distributions of some $27 in cash and stock.

One reason for abandoning Mayflower was the possible long-range effect of the undistributed profits tax on Mayflower's theory of operation. When President Robert Earll McConnell was on the witness stand last October in the SEC's investigation of investment trusts, he pointed out that Mayflower was not an investment trust in the usual sense. Explained Mr. McConnell: "Its avowed purpose is not merely to purchase and hold securities for income, but rather to undertake hazardous ventures; to pioneer in new enterprises, and to develop new sources of minerals and raw materials."

Among Mayflower's "hazardous ventures" was to put up $300,000 to further the seismic explorations of F. Julius Fohs, an oil geologist. Eventually Geologist Fohs discovered the English Bayou Oil Pool in Louisiana and Mayflower stock-holders received stock in Fohs Oil Co. now worth $2,500,000. Another venture was a $4,000,000 investment in Rhodesian copper properties, a commitment which was long thought to have been fabulously profitable. Actually, Mayflower lost $1,000,000.

In a letter to stockholders proposing liquidation the Mayflower directors argued that a twelve-month tax year was too short a yardstick for this type of investing, observing "The successful realization of its [Mayflower's] objectives requires the averaging of profits and losses over a period of years, and a substantial portion of the profits of one year must be available to absorb losses of other years. Sound business judgment does not permit the annual distribution of all earnings."

More than one-half of Mayflower's stock is owned by the directors and their families, biggest stockholder being President McConnell. A tall, spare onetime mining engineer, President McConnell was born 47 years ago in Colorado's Uncompahgre Valley, early stamping ground of Jack Dempsey, Harold Lloyd and Billy the Kid. His first practical mining experience was on a steam shovel on a copper property at $4 per day. Even in high school, however, he was taking long shots on penny mining stocks with notable success. In 1921 he went East to unload a big stock of gasoline owned by a pinched oil company, stayed to form his own New York Stock Exchange firm two years later. About him he gathered a group of people mostly oldtime mining men, who also liked long shots. They promoted the centrifugal method of making cast iron pipe, a process which revolutionized that ancient art. They put $2,000,000 into the neutrodyne patents of an obscure Stevens Institute professor named Louis Alan Hazeltine, "the man who took the squeak out of radio."

It was this same McConnell group which founded Mayflower as a logical development from their private syndicate operations. Management of the trust was in the hands of one man--President McConnell--who got handsomely paid if he made money, got nothing if he lost. In Manhattan he lives at the Park Lane Hotel, but he prefers his farm in Virginia, where he likes to hunt the fox. Last June he went to the Republican convention in Cleveland as a Virginia delegate. Even if taxes had not looked so grim, President McConnell might have considered abandoning Mayflower. The profit motive has lost its appeal for him. "Just grew out of it," he says.

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