A Ghost Walks

"The only reason the Harrison Williamses don't live like princes," observed a Manhattan wag during 1929's golden bull market, "is that princes can't afford to live like the Harrison Williamses."

Few Wall Streeters could match the Midas touch and power of Williams. An Ohio boy who ran a tricycle factory at 19, he brought his profits to Manhattan, multiplied them in the tire business, then got in on the ground floor of the great electric power boom. By 1924, with a total investment of $2,072,000, he had won 96% control of the great Central States Electric Corp. combine, and with it reared a pyramid of utilities topped by his fabulous North American holding company. The great expansion of the nation and the big bull market boomed his companies. Between 1924 and 1929, Central States stock was split 60-fold. Although North American's earnings had risen only from $3.86 a share to $4.82, the value of its outstanding stock had shot from $26 million to $480 million. Williams ruled one-sixth of all U.S. public utilities and his fortune had grown to $680 million. When someone asked why he didn't quit with that, Williams said: "I wanted to make it an even billion."

The Grand Manner. He lived magnificently. When Widower Williams married twice-divorced Mona Bush, a handsome Kentucky belle 24 years his junior, their honeymoon was spent on Williams' Warrior, then the world's largest yacht. He bought villas at Capri, Palm Beach, Long Island, Judge Gary's Fifth Avenue mansion and a Paris town house. Perennially, couturiers hailed Mona Williams as the best-dressed woman in the world.

The market crash set Williams' pyramid toppling. The New Deal's SEC, using the "death sentence" of the holding company act of 1935, began dispersing his empire. North. American was forced to sell most of it's utilities (e.g., Pacific Gas & Electric, Cleveland Electric Illuminating, Illinois Power), and Central States went into reorganization. But Harrison Williams, now 78, is still boss of North American, which has $110 million in assets, and is still a multimillionaire.

Last week, in Manhattan's federal court, Harrison Williams, whom neither crash nor Depression nor SEC could down, got one of the hardest blows of his career. In a 109-page opinion which set the ghosts of the 1929 market stalking through his courtroom, Judge Edward Weinfeld found that Williams had taken for his own uses $11.4 million which actually belonged to Central States. He ordered Williams to pay it back, plus interest all the way back to 1929. Williams planned to carry his appeal to the U.S. Supreme Court, but if the verdict stands, it will cost him an estimated $17 to $20 million, one of the biggest judgments against any individual in U.S. history.

The Big Deal. The case, which had dragged through the courts for seven years, involved a suit brought by the trustees reorganizing Central States. They sued Williams and others* who had joined with him in founding two of 1929's biggest, and most illfated, investment trusts: Shenandoah Corp. and Blue Ridge Corp. In September 1929, Blue Ridge Corp. bought 68,423 shares of North American stock, at $167 a share, from Williams' other holding company, Central States. Since Central States had carried the stock on its books at $11 a share, it made a $10.7 million book profit on the deal. But Central States never got the profit. Williams took 68,423 North American shares of his own, transferred them to Central States. Then he transferred Blue Ridge's payment to companies owned 100% by him and which, Judge Weinfeld ruled, were, in effect, "his pockets." Later, the court noted, Williams had all of his companies destroy every record of his personal transactions, added: "Williams violated his fiduciary obligations to the corporation."

In turning back history to 1929, Judge Weinfeld set off some 1929-style reactions. The preferred stocks of Central States, which had long since shrunk to a nubbin, came suddenly to life. Overnight, the $7 preferred shot up from 22 to 35 a share, the $6 preferred from 4 3/4 to 12 1/2, and even the common stock, deemed almost worthless, rose from 4-c- to 12-c-. In a backhand sort of way, the rise was a vote of confidence in Harrison Williams--that is, in his ability to pay the money, if he must.

* Other codefendants, cleared of any responsibility in damaging Central States, included such Wall Street notables as Lawyer John Foster Dulles, Sidney Weinberg, partner of Goldman, Sachs (TIME, June 11); Clarence Dillon, head of Dillon, Read & Co.; Waddill Catchings, former senior partner of Goldman, Sachs and co-author of The Road to Plenty, which helped inspire Herbert Hoover's 1929 theory of permanent prosperity.

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