Catchings on Coster

Spectacular, bespectacled Waddill Catchings in 1928 co-authored (with William Trufant Foster) a book called The Road to Plenty showing how the U. S. boom could be made to pop higher & higher like a Roman candle. In 1928 and 1929 Waddill Catchings got conservative old Goldman, Sachs & Co. to light up such investment-trust skyrockets as Goldman Sachs Trading Corp. and Shenandoah Corp., which soared and sank magnificently. Last week, while fireworks were still popping out of the McKesson & Robbins box (including an SEC investigation of Price, Waterhouse auditing), who should step in, match-in-hand, but impish Waddill Catchings.

For three weeks officers and directors of the swindled drug firm had been telling New York's Assistant Attorney General Ambrose V. McCall that they had no reason to suspect the late F. (for Philip) Donald (for Musica) Coster. Not so, said Mr. Catchings.

In 1932, he said, Director Wilbur L. Cummings told him he thought McKesson & Robbins was being badly managed, asked him to look into it. Mr. Catchings was told by President Coster that the wholesale drug departments, which did the bulk of the company's business, had got their assets frozen. Coster proposed a stockholders' equity receivership to get rid of the wholesalers, but Mr. Catchings talked him out of that. Instead, Coster persuaded the directors to hire Mr. Catchings at $5,000 a month as chairman of an operations committee, with the understanding that he was to have nothing to do with operations. His job was to check up on the wholesalers.

The wholesale business was run by Executive Vice President Charles F. Michaels,* whose San Francisco drug house had been absorbed by McKesson & Robbins in 1928. Mr. Michaels convinced Mr. Catchings that everything was all right in the wholesale divisions, suggested he look into the manufacturing and crude-drug departments, which Coster ran at Bridgeport, Conn. Mr. Catchings spent three months trying "gently" to get some figures out of Coster, finally told him "it was about time" he produced the books.

Coster promptly proposed to Mr. Michaels that they fire Mr. Catchings and take joint control of the company. When Mr. Catchings heard about this he wrote to all the directors, urging them to come to Manhattan before the stockholders' meeting in April 1934, and support his recommendation that "there is no further place in the McKesson & Robbins organization for F. Donald Coster."

When Coster heard about this he opened campaign headquarters in Manhattan's Hotel Roosevelt, hired a lawyer, and began whispering in directors' ears, "setting one man against another." Everything was set for open battle when Mr. Catchings saw that a majority of directors sided with Coster, led by representatives of the banking interests that had helped him finance the company. Rather than start a public row to the detriment of the company's reputation, Mr. Catchings issued a report and resigned. Said he last week: "I told them, but they wouldn't accept it, that Mr. Coster's reports were tricked and misleading."

To the directors, particularly the bankers who were on the board ostensibly to protect investors, Mr. Catchings' testimony was embarrassing. First to make rebuttal was Smith, Barney & Co.'s John Wilson Cutler, who was a member of the board until 1937. Mr. Cutler said he thought that Mr. Catchings was trying to catch a job for himself "and the directors were not agreeable."

Suggested Inquisitor McCall: "You had a tough choice between him and Coster, didn't you?"

"Looking back--yes," said Mr. Cutler sourly.

* Elected president of McKesson & Robbins fortnight ago.

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