The Woes of Wolfson

Controversy keeps dogging Louis Elwood Wolfson. On grounds that he had milked the company of millions, the Government in 1956 refused to renew his contract to run the Capital Transit bus-and-trolley line in Washington, D.C. In 1958, Merritt-Chapman & Scott Co., of which Wolfson is chairman and controlling shareholder, pleaded nolo contendere to charges of bribing a county official in Washington State to help win the big Priest Rapids Dam construction job; the company paid a penalty of $50,000. Also that year, the Securities & Exchange Commission charged that Wolfson tried to drive down the market in American Motors stock after he had sold short.

Controversy has not abandoned Wolfson, now a greying man of 54, although he has abandoned most of his ventures except Merritt-Chapman and his profitable hobby of breeding race horses at his Harbor View Stable in Florida (1965 winnings: nearly $1,000,000). Last week a federal grand jury in Manhattan hit him with the first criminal indictment in his career.

Unregistered Sale. Wolfson and an associate, Elkin ("Buddy") Gerbert, were charged with conspiracy in the 1960-62 sale of 690,000 shares of Continental Enterprises, Inc., a Jacksonville company that operates movie theaters. The heart of the indictment is that Wolfson and some associates unloaded the shares without registering the transaction with the SEC, as the law demands for such sales of "control" stock.

According to the charge, Wolfson, his associates and his family controlled both Continental and the patent to an aerosol-dispensing device called Propel-Pak. They swapped the licensing rights on the patent to Continental in return for 35% to 40% of royalties from sub-licensing contracts. Then, says U.S. District Attorney Robert M. Morgenthau, Continental used publicity to puff the price of the stock from $2.75 to $8.50 a share. During and just after the publicity drive, Wolfson sold off 407,000 shares, and his family and friends--including Gerbert, who placed the sell orders with eight different firms--sold off 283,000 shares. In all, Wolfson and his group got $3,500,000 for the stock, and Wolfson's profit alone came to about $1,500,000. Since the sale, Continental has run in the red every year, and the stock that was sold is now worth less than $350,000.

Pay Cut. Hinting broadly that Wolf-jon was being victimized because of his notoriety, his lawyers said that the charges against him normally would be the basis for only a civil -- not a criminal -- indictment. If convicted, Wolfson faces a maximum sentence of five years in jail and a $5,000 fine on each of the 19 counts against him -- a total of 95 years and $95,000.

That is not all of Wolfson's woes. In April, as a result of several shareholder suits, Merritt-Chapman & Scott agreed to slash Chairman Wolfson's annual compensations from last year's $525,-000 to $150,000. The settlement came unstuck when the SEC asked the New York State Supreme Court to adjourn the case temporarily. The Commission's lawyer said that it was completing an investigation that could have consider able bearing on the case. Court hear ings resume this week, and the SEC plans to return with what it calls "ma terial facts" concerning shareholder charges of improper activities by Wolfson and other officers.

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