Victory for Hughes

Even to one of the richest men in the world another $100 million or so is a welcome windfall. And that was just the sort of present Howard Hughes received last week when the Supreme Court decided by a vote of 6-2 that a series of lower courts were wrong when they ruled that the eccentric billionaire owed Trans World Airlines $170 million in damages plus interest. "Hughes didn't stomp his feet or say, 'Hell, it's about time,' " said one of his London entourage. "But he was happy. He was absolutely ecstatic."

The TWA controversy, one of the biggest damage suits in the history of U.S. jurisprudence, had been hanging over Hughes for nearly twelve years. It was, in fact, a major reason for his self-imposed seclusion. As he said last year, "I don't want to spend the rest of my life in some courtroom, being harassed and interrogated." Besides, Hughes had good reason to think that he would lose. Since the case began in 1961, he had been beaten in every battle: in 1963 a federal judge moved to enter a default judgment against him for refusing to appear in court, in 1970 a federal district court awarded TWA $145 million in damages and in 1971 an appeals court affirmed the award. Last year Hughes sold the oil-drilling-equipment end of the Hughes Tool Co. for about $150 million--a move widely interpreted as a way of raising cash to pay TWA.

Shelter. Last week's ruling, in effect, contradicted TWA's allegations that Hughes committed antitrust violations in the 1950s, when he owned nearly 80% of TWA and made all of its major decisions. TWA charged in the suit that when jet aircraft were first brought into commercial use in 1958, Hughes deliberately procrastinated in securing them for the airline. He eventually had the line lease jets from his Hughes Tool Co. before buying its own, an arrangement that TWA lawyers said benefited the tool company more than TWA. Hughes Tool Co. had large cash reserves at the time, but by buying jets, leasing them to the airline and depreciating them against profits, Hughes Tool could shelter much of its earnings from taxes. TWA lawyers say that the tool company avoided full taxation on $20 million in this manner. By the time TWA was in the air with a sizable fleet of jets in 1959, competing airlines were months ahead. In the suit, TWA lawyers asked for damages to make up for profits the line claimed it lost because of the delay. But the Supreme Court ruled that all of TWA's aircraft deals with Hughes Tool had been approved at the time by the Civil Aeronautics Board, thereby eliminating Hughes' antitrust liability.

The ruling was a galling disappointment to TWA chiefs, but it will not seriously affect the company's finances. TWA executives have never counted the potential damage payment among the firm's assets. Still, the decision had an adverse effect on the price of TWA stock; it closed at 35 7/8, down 2 1/4 for the week. TWA's only real loss was as much as $10 million in legal fees.

Now that Hughes has been vindicated, and TWA's case against him in a mismanagement suit in Delaware weakened, he may devote his attention to investing the $150 million from last year's sale of Hughes Tool Co. stock. The sale allowed him to retain the company's helicopter and heavy-machinery businesses but dispose of its division that makes oil-drilling equipment. Hughes had never much cared for that operation, which he acquired at the age of 18 after his father died. A number of the firm's key drilling-equipment patents were about to expire, so Hughes found it an opportune time to divest. The remaining Hughes empire embraces airlines, electronics, gambling and real estate interests valued at more than $1 billion. If Hughes acts according to now-familiar tastes, he could well use the cash from the Hughes Tool stock sale to buy some ailing but important company in oil, transportation or entertainment. And now that he need not face harassment and interrogation in court, it is even possible that he may decide to show his face in public again.

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