Bull's-Eye Against Allegheny

As a holding company, Alleghany Corp. controls a stock empire whose assets include 20% and working control of the giant New York Central Railroad, 50% of Missouri Pacific Class B stock. 18% of Webb & Knapp real estate firm, plus 24% of the voting stock in Investors Diversified Services, an investment trust worth close to $3 billion. All told, Alleghany's assets amount to $134 million, and they are enough to give any group of managers all the leverage they need to wheel and deal. But last week Alleghany's wheeler-dealers were laid low by a small stockholder who did not like the way they were running things. He is Randolph Phillips, 48, a tough, Harvard-educated financial marksman who has been sniping away at Alleghany's top brass for five years and finally scored a bull's-eye with a thumping victory in court.

Phillips, onetime aide of the late Railroader Robert R. Young, was a strategist in Young's successful proxy fight to win control of the New York Central in 1954. But after the Central victory, Phillips fell out with his boss. Since then, he has been at war with everyone connected with Alleghany, first with Young, then with Young's old friend, Alleghany Chairman Allan P. Kirby, 67, and all his allies. Phillips' complaint: Alleghany's executives were conducting Alleghany's affairs "primarily in the interests of themselves and a small group of insiders." He argued his case vigorously.

Out of Pocket. On behalf of himself and other small stockholders, Phillips charged that Bob Young had no right to make a deal in 1955 that gave 130,000 shares, or almost half of Alleghany's voting stock in Investors Diversified, to Texas Millionaire Clint W. Murchison. He also complained that Young, Kirby, et al had illegally used Alleghany funds during the Central fight by making loans that enabled Young's good friend Murchison to buy 800,000 shares of Central stock, thus insuring a proxy victory. Hauling the defendants through one court after another, Phillips demanded that they reimburse the company for the use of its funds--and pay it out of their own pockets. This was the unkindest cut of all.

Last week Stockholder Phillips won a signal victory. In an out-of-court agreement approved by a Manhattan federal judge, Murchison agreed to hand back to Alleghany's treasury his 130,000 shares of I.D.S. voting stock (thus giving Alleghany 48% control), in return for a like amount of nonvoting stock. In addition, the defendants will pay $3,000,000 in cash to Alleghany to settle the claim. Chairman Kirby will fork over $1,250,000; Bob Young's widow, Anita O'Keeffe Young, will pay another $1,050,000; and the remaining $700,000 will come from the Murchison interests.

Shocked & Gratified. Actually, Phillips' case looked so good that a settlement has been in the works since 1955, only to be blocked by one legal snarl after another. Recently, Chairman Kirby decided to break the impasse, at least as far as he was concerned, by offering a separate $1,100,000 settlement that would free him of all liability. At first he ran into strong objections from Murchison and also from Mrs. Young, who fired off a telegram that she was "shocked" at the offer. But Kirby argued that a settlement had to be made sooner or later; he also threatened to kill the deal unless everything could be settled before Dec. 30 and the end of the tax year. Mrs. Young and Murchison finally capitulated.

The one thing that Chairman Kirby was able to salvage in the suits was a $15 million refinancing plan that had been held up by Phillips ever since 1955. Alleghany's management wanted to refinance $15 million worth of corporate debts with another $15 million collateral loan from seven New York banks, while Phillips contended that Alleghany should liquidate part of its assets to retire the notes. Last week a special appellate division of the Interstate Commerce Commission ruled that the financing arrangement involved no question of law but was merely a matter of "managerial discretion." Said Alleghany Chairman Kirby, happy to get Phillips out of his hair: "I am deeply gratified. We can now go forward with sound and constructive plans for Alleghany without the distraction of time and energy caused by these lawsuits."

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