Finis McGinnis

"Absolute baloney!" roared rambunctious Patrick Benedict McGinnis last week to a report that he was leaving the presidency of the New York, New Haven & Hartford Railroad. Less than five hours later, McGinnis ate his baloney, said that he would quit his $75,000-a-year job because a "splinter group" of New Haven directors did not like the way he was running the railroad.

"I am sure that there will come a moment when some of my critics will want to correct a shameful wrong," said McGinnis virtuously. "I have had to face an unusual share of basic operational problems . . . Nothing justified the unprincipled and unbridled venom from some quarters directed against me."

"Too Many Headaches." McGinnis, 51, was derailed because stockholders were troubled not only by commuter complaints but also by financial danger signals ahead. "His lavish payment of dividends and his diminishing payments for maintenance made it certain that a crisis would arise," said Aetna Life Insurance Co.'s President Morgan B. Brainard Sr., who resigned from the board twelve months ago and unloaded substantial holdings of New Haven stock held by his company. Major stockholders, looking for a new president, tried to hire Werter S. Hackworth, president of the Nashville, Chattanooga & St. Louis Railway. Snorted Hackworth: "Too many commuters and too many headaches."

Instead, the New Haven board picked Boston Lawyer George Alpert, 57 (at $50,000 a year). No railroad man, Alpert had helped McGinnis win his 1954 proxy fight for control of the New Haven, became a director, has been studying ways to improve the road. He plans to hire an operating boss, said he would buy "a large number" of new diesel locomotives, boost maintenance outlays $3,000,000 in 1956, and run trains on time again. Said he: "Until proper service is accorded to the public, the investors are not entitled to a return on their investment."

Too Hot, Too Cold. In McGinnis' 21 months at the switch, passengers had been riding second-class. McGinnis blamed late schedules on last year's floods, but the timetable had fallen apart long before. When commuters protested McGinnis' $12 million slash in maintenance funds since 1953, McGinnis snapped: "I've given these politicians everything they asked for." In summer, when air conditioning broke down, McGinnis explained that the weather was "too hot." In winter, when diesel locomotives stalled because crews failed to drain condensation coils, he claimed that his engines were "freezing."

Padded Profits? McGinnis claimed that his economies resulted in a $9,275,000 profit for eleven months of 1955, almost double the 1954 net. But Frederic ("Buck") Dumaine Jr., whom McGinnis ousted as president in 1954, charged that McGinnis had used cash reserves and in come from subsidiaries, e.g., The Connecticut Co., to pad railroad earnings. Said Dumaine: "They must have lost $7,000,000 running the railroad 20 months."

Cash reserves had certainly dwindled. Current liabilities had mounted, while long-term debt rose from $193,850,000 to $199,580,000. Protested one former director, "It's a stock speculation-venture instead of a railroad business."

Five hours after quitting the New Haven, McGinnis became president of the Boston & Maine Railroad, which he and a group of Wall Street characters had won in a proxy fight last April. It is a small (1,575-mile), thriving railroad with a reputation for running its trains on time. Boston commuters feared the worst.

* McGinnis used New Haven cash to pay dividends on the preferred stock, of which he held little. But dividends on the preferred stock had to be paid before he could declare dividends on the common stock, of which McGinnis and directors held 128,500 shares. Nevertheless, the common stock skidded from a high of 39 to a low of 28 in 1955, while most railroad shares highballed ahead.

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