Fast Switching at Lionel

When Manhattan Lawyer Roy Cohn turned up as head of an investors' group that took control of the money-losing toy train company, Lionel Corp., last fall, Wall Streeters wondered how he had financed the deal. Last week a Lionel Corp. proxy statement revealed that Cohn, onetime chief counsel of the late Senator Joseph McCarthy's Subcommittee on Investigations, was no babe in the jungles of high finance.

Lightfooting it around the globe, Cohn juggled loans from U.S. and foreign moneylenders, borrowing from one to pay another. With his associates, Cohn last October borrowed $339,000 from the Mastan Corp. in Manhattan at a monthly interest rate of 1 1/2%, and $532,000 from a Hong Kong moneylender, Commercial Investment Co., Ltd. With the help of this money, the Cohn group bought the controlling interest in Lionel. A month later Cohn borrowed $400,000 from Atlantidi, S.A., a Panamanian moneylender, used it to pay off the Mastan Corp. loan. Last month Cohn borrowed an additional $365,000 from Manhattan's Austin Associates Inc., to buy more Lionel stock and pay off one-third of the Hong Kong loan. Last week Cohn borrowed another $147,000 from Austin Associates, used it to help pay off the remainder of the Hong Kong loan. Despite all this razzle-dazzle, the Cohn group still owes $912,000 on Lionel stock it purchased.

By using these U.S. and foreign moneylenders, Cohn neatly sidestepped Federal Reserve Board regulations that inhibit U.S. banks from lending money to finance stock purchases. The disclosure of Cohn's financial maneuvering came as a result of a special interpretation of a Securities and Exchange Commission rule that in the future would mean that a company's controlling stockholders must tell how they financed their holdings. Lionel's proxy statement also disclosed that Cohn had financed the purchase of 14,587 shares of Lionel stock for Paul M. Hughes and his wife. A year ago Hughes was named --but not indicted--as a co-conspirator in a stock-fraud indictment against Super-swindler Alexander Guterma. To make Lionel's trains run on time, Cohn has employed Hughes as an administrative assistant. His salary: $24,000.

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