Victory for Eaton

Cleveland's wary old Cyrus S. Eaton had lost most of his battles with the Securities & Exchange Commission, but now it looked as if he might win the war.

The promise of victory came in a decision last week by Federal Judge James W. Morris in Washington. The court ruled that Eaton's lawyers did not have to answer the question: Had they, on Cyrus Eaton's orders, inspired the stockholder's suit which permitted his Otis & Co. to break off its $10 million underwriting contract with the Kaiser-Frazer Corp. last winter (TIME, Feb. 16 et seq.)? As evidence of "fraud and collusion," SEC had dug up records of telephone calls, just before the suit, between Stockholder-Lawyer James F. Masterson at one end of the line, and Eaton and his lawyers at the other. Judge Morris ruled that SEC had not dug up enough evidence to justify making Eaton's lawyers break the traditional lawyer-client confidences.

Crowed Cyrus Eaton: "The decision has knocked the false and malicious claims made by Kaiser-Frazer Corp. and the SEC into a cocked hat." Said Henry Kaiser: "If Eaton has done nothing wrong . . . why does he proclaim it a victory to conceal his activities from the people and the courts?"

Forced to drop its plan to bring criminal proceedings against Eaton, SEC prepared to go ahead with its attempt to revoke Otis & Co.'s permit to sell securities. But as this was also based chiefly on the Masterson suit, SEC would find revocation a tough job.

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