Stairs v. Elevator

In a modern holding company pyramid, as in a modern apartment house, when the elevators break down there are always the stairs. Last week it looked as though Financier Robert Young had made use of the backstairs of the oldtime Van Sweringen holding company pyramid.

Basement of this railroad empire is Chesapeake & Ohio, which made $34,500,000 in 1937. From the penthouse Robert Young has held control of this prize possession through ownership of 46% of the common stock of Alleghany Corp., top holding company of all. In between Alleghany and C. & O. is another holding company, Chesapeake Corp., which owns 35% of C. & O. common stock. Guaranty Trust Co. has its hands on the elevator connecting all three because it has possession of Alleghany's 71% interest in Chesapeake Corp. as collateral on three bond issues now in technical default.

Mr. Young fears that Guaranty plans to vote this stock for a switch in C. & O. officers, electing friends of Guaranty rather than of Mr. Young. Though Guaranty denies such intent, Mr. Young fortnight ago got a New York court to rule that there be no Chesapeake Corp. meeting until the court has passed on Guaranty's right to vote the stock (TIME, April 25). In the interim Robert Young has gone down the backstairs by getting the public holders of C. & O. common stock to rally to the defense of its present officers. Last week at the C. & O. meeting in Richmond they did so 3,175,000 shares (41%) strong, said to be the largest number of stockholders by person or proxy at any meeting in C. & O. history. Since Chesapeake Corp. has only a 35% interest, Robert Young felt pretty sure last week that even if he loses his control through the holding companies, the present officers of C. & O. will keep their jobs.

Key figure in this management is quiet George Doswell Brooke, 36 of whose 60 years have been spent in railroading, 14 of them with C. & O. A crack operating man, George Brooke once taught at Culver Military Academy, plays good golf, is extraordinarily neat. To his friends he is known as "Babbling Brooke" because he says so little. Says Robert Young: "He opens his mouth every other day and devotes the rest of his time to the C. & O." Mr. Young claims that the Guaranty interests would rather see a C. & O. president whose chief interest is in railroad finance instead of in trains. The issue will presumably be settled May 10 when C. & O. plans to meet again. By that time the court may have given Guaranty undisputed right to vote the Chesapeake Corp. stock, but Robert Young hopes to have an undisputed C. &.O. quorum in proxies for 51% of its common stock.

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