The New Haven Decides

In a gloomy New Haven office last week, Boston's Frederic C. Dumaine Jr. and Wall Streeter Patrick B. McGinnis met for the decision in their fight for control of the New York, New Haven & Hartford Railroad. They were there, along with 200 New Haven stockholders, for the railroad's annual meeting which would decide who would walk out as boss of the $500 million line.

23,200 & Out. While tellers counted proxies representing 96% of the New Haven's stock, President Dumaine and Challenger McGinnis waited nervously, trying to go through the motions of holding a normal stockholders' meeting. At one point, a woman stockholder asked what McGinnis could do for the New Haven that Dumaine had not done. "Pat," said "Buck" Dumaine, "she wants to know what you can do better than I." Snapped McGinnis: "How long do we intend to stay here? I've written 48 1/2 pages of literature on that subject."

After 41 1/2 hours and eight recesses, Pat McGinnis could finally relax; he had won. The final vote: McGinnis, 488,939 proxies and eleven directors; Dumaine, 481,302 proxies and only ten directors, including himself. Without a word, Buck Dumaine turned and left the room. Said McGinnis with a happy sigh: "I'm weary."

What swung the balance to McGinnis? Some thought it was the 23,200 shares owned by Stockbroker John A. Munro of Morristown, N.J., who had criticized Dumaine's interests in outside businesses such as American Woolen. Munro would not say. But there was no doubt that McGinnis had voted his proxies more shrewdly than Dumaine. Under the New Haven's cumulative voting procedure, one share of stock counts for 21 votes. They can be spread out across the railroads entire slate of 21 directors, or lumped on one director. Knowing it would be close, McGinnis concentrated his strength on eleven directors, winning them all for a bare majority, while Dumaine split his among 15, won only ten. As it turned out, McGinnis might have walked off with even more directors had he risked spreading his votes a bit thinner.

Eyebrows & Aluminum. Though McGinnis does not have much elbow room on the board of directors, he does not need much. Smooth, sharp-witted and a proven good railroader, he knows the business from roundhouse to board room. The son of a New York Central foreman, he learned to specialize in railroad securities, now bosses his own Wall Street firm, commuting by ferry from a sprawling, century-old mansion on Staten Island, overlooking New York Harbor. Railroaders rate him as a top authority on financing, call his book (Guide to Railroad Reorganization) the best in the field. Sometimes he operates with eyebrow-raising methods. The ICC recently criticized his whopping expense accounts while he was boss of the Norfolk Southern (TIME, Feb. 22). He also had so many troubles with stockholders of the Central of Georgia after he won control of the road that he withdrew. But McGinnis argues that his heavy expenses paid heavy dividends in new business for the Norfolk Southern. As for the New Haven, McGinnis knows it like his own backyard. He helped Buck Dumaine's father grab control in 1948. Before that, he was a consultant when the New Haven was reorganized after going into bankruptcy in 1935.

Now that he controls the New Haven, McGinnis plans to install himself as president and John E. Slater, president of American Export Lines, as board chairman. He has big ideas for the 1,800-mile line. He wants to pay off the remaining $4 a share of back dividends on preferred stock, then start paying dividends on the New Haven's 525,789 shares of common stock. He hopes to boost long-haul passenger traffic by faster trains, is toying with the idea of a low-slung aluminum train something like Spain's 120-m.p.h. Talgo express that could zip from New York to Boston in fewer than three hours. He plans faster, better service for commuters, thinks he can do it without boosting fares. But he is not going to take over Dumaine's private car. He quipped: "I'd be afraid to after what happened on the Norfolk."

Wall Streeter McGinnis knows that he will have to have help from Buck Dumaine, if he hopes to push his ideas through. Said he: "I don't think Buck's going to oppose my ideas just because they're mine. After all, he's got a tremendous investment [more than $18 million] in the New Haven." Buck Dumaine would only say: "Mr. McGinnis will have to do more for the railroad than I have done if he is to succeed. Let's take a look at the situation a year from now."

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