Payola at Chrysler

For Chrysler employees and stockholders, it was the second bad shock in a month. Just three weeks ago, amid rumors of corporate skulduggery. William Charles Newberg, 49, left the corporation only nine weeks after he took over as president. Last week the full extent of his shady goings on was made public. Chrysler announced that Newberg had agreed to return "profits in excess of $450,000 made by him from interests in vendor companies." Corporate executives at Chrysler, including Chairman Lester Lum ("Tex") Colbert, normally a vocal fellow, were just as reluctant to talk about this startling news as they were about Newberg's sudden departure.

But Detroit insiders were able to put together the story. The overhaul in Chrysler purchasing policies started last fall when a tough young (38) engineer, W. C.

Cawthon, was appointed general purchasing agent, the key job in dealing with supplier companies. As an engineer, Cawthon knew what Chrysler was buying--and whether it was getting its money's worth. Shortly before making his old friend Newberg president, Tex Colbert summoned all his executives to an 11 a.m.

meeting, delivered an ultimatum. Some of them had interests in Chrysler suppliers, he said, and the practice had been going on for some time. His ultimatum: everyone must get rid of his interests by 5 p.m.

Profitless Prosperity. One of the chief offenders was Newberg, whom Colbert had groomed to succeed himself. Angry at the reports that Newberg had disregarded the ultimatum, Colbert put to work Chrysler's lawyers and auditors to make sure. When the evidence showed that Newberg was profiting from Chrysler's purchases from smaller suppliers, Colbert got the board of directors to fire him. The investigation has not stopped with Newberg, Colbert admitted last week. It could well be that Newberg is just the first and biggest offender to get caught.

Chrysler of late has been suffering from a profitless prosperity; first-quarter profits dropped 28% in 1960 under 1959, though sales were up 34%. Part of the problem is rising costs, but Colbert is determined that none of the slippage should result from supplier overcharging and executive rake-offs.

Stockholder Sol Dann, a Detroit lawyer and self-appointed watchdog for Chrysler's stockholders who has long been publicly charging "corruption" against Chrysler brass, announced that he would file suit on behalf of the stockholders against Chrysler's management to see if any more cash might be recovered.

The Country Boy. The man who was apparently least concerned by the mess was Newberg himself, who righteously announced that he had disposed "of the current differences of opinion in a way that would leave my record clean without any doubt as to my integrity." He did not seem distressed at losing a six-figure-salary job as head of the ninth largest U.S. corporation, or disturbed by the harm he had done to the reputation of Chrysler, where he had worked 27 years.

Was he afraid he might be prosecuted? No, said Newberg (Michigan's attorney general's office agreed, provided that he gives the money back), adding that he had got the approval of his lawyers before he had made any deals with vendor companies. Asked if the $450,000 resulted from the profits and dividends of the suppliers, he retorted: "That's the only way it would come to me, isn't it?" Chrysler gave no details of how or when Newberg will have to pay the money back. Could he possibly pay it back? Newberg, who is noted for parrying tough questions with a country-boy shrug of the shoulders, said: "Golly, I started out as a farmer, and I know how to scratch for a living. I'll get along all right."

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