Evening star., 1938-11-29

Robert Young Quits
Chesapeake Board
After Dispute

Kirby Also Resigns;
50-Cent Dividend
Is Declared
BY the Associated Press.
NEW YORK, Nov. 29.-Robert r.
Young resigned today as a director
Of Chesapeake Corp, middle hold
ing company of the former Van
SWeringen rail system, following a
bitter dispute with w. c. Potter,
chairman of the Guaranty Trust
Co., one Of the three largest banks
in the United States.
Young's associate, Allen P. Kirby,
also resigned as director.
Their designations were sent by
messenger to directors meeting
of Chesapeake Corp, which they
did not attend, and were accepted,
effective Immediately. The meet
ing was held at the Wall Street
offices of j. & w. Seligman g. Co.,
bankers.
Dividend Is Ordered.
The directors declared cash divi-
dend Of so cents common share
payable January 3 to stock OF record
December 13. The directors then
filed a certified copy of the resolu-
ton adopted at stockholders
meeting yesterday in Baltimore or
dering dissolution of the company.
Directors also declared liquida-
ton dividend of six-tenths OF one
share of Chesapeake g. Ohio Rail-
way common stock to each common
share Of Chesapeake Corp. held as
of December 13, payable December
10.
Meanwhile, few blocks north of
the Chesapeake board meeting place
in Vesey street security auction
room, Chesapeake Corps holdings
Of Erie, amounting to $4,000 COM
mon shares were being sold under
the hammer. This was another step
in the plan of liquidation.
Only one bid was entered for the
entire block. Max Horowitz, not
Immediately identified as to his bus
mess connections, bid s46,50O. There
were individual bids for lOO-share
lots which reached an aggregate of
$46,336. The smoky auction room
was crowded with prospective bid
derS and "SiphtSeerS
Present at the meeting today
were the following directors:
Charles L. Bradley, John P. Muir
ply, John B. Hollister, John l..
Dickinson and Earle Bailie.
The meeting was held in tense
atmosphere growing out of recrimi-
nations previously exchanged be-
tween Young and Potter as a result
of yesterdays stockholders meeting
at Baltimore.
Vote Is Overwhelming.
There, by an overwhelming vote,
cast by Guaranty as trustee of
Chesapeake Corp, stock held as
collateral under indentures covering
three issues of bonds Of Allegheny
Corp, former top Van Sweringen
company, Chesapeake Corp, was
dissolved over the protest OF Young
chairman of Allegheny.
The resumption of hostilities be-
tween Young and some of the lead
ing bankers of Wall Street, after a
truce lasting for six months, came
with his charge that Guaranty
might refuse to use Chesapeake's
future income as available for in
terest on Allegheny bonds.
Potter called Youngs position
amazing" and the fight was on.
Policies Questioned
Cause of the fight was whether
proceeds of liquidating dividends
Chesapeake Corp. owns a substan-
tial amount of stock of Chesapeake
g. Ohio Railway-should be applied
primarily to capital or income
account.
If applied to capital. as Guaranty
was represented as desiring, its posi-
ton as trustee of Allegheny bonds
would presumably be strengthened
under the indentures, which provide
that when collateral falls below $50
per cent of the face value of the
bonds, the trustee can exercise what
amounts to virtual although not q
technical receiverShiD
(The indentures, drawn up by the
late o. and P. Van Sweringens, are
of an unusual nature)
Position at Stake.
If applied to income, proceeds
would greatly strengthen Young's
position. Although Young, through
nominal control of Allegheny theo-
retically is In control of a system
whose assets once totaled $2,000,-
100000, actually is at present in an
ineffective position because of the
indentures, and inability to provide
sufficient additional collateral to
free Allegheny from their stringent
terms. Additional revenue accru-
ing to Allegheny as income might
permit Allegheny to post more COL
lateral and possibly free itself from
the indenture terms.
Young charged the indentures
were drawn by the same counsel who
now interpret the terms for Guar
anty.