Wednesday, August 24, 2011

Turning Plowshares into Swords--Cohn and Lionel

The Berkshire NY Eagle reported on Oct. 20, 1959 that Roy Cohn, "the young cigar-smoking lawyer," had recently headed a group which 
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"purchased most of the 200,000 Lionel shares from members of the founder's family at $15 a share, some $5 over the market value at the time. 'We didn't want a proxy fight,' he emphasized....The group is keeping many officials of the old management in the top operating posts. A president for the company has not yet been selected. 'We are considering several candidates and will make a decision shortly. He probably will be an outsider.' Cohn. 32, was a graduate lawyer at 20. His father was the late Justice Albert M. Cohn of the New York State Supreme Court's Appellate Division."
The founder (Joshua Lionel Cowen) was at that time still alive, as was his son, Lawrence Cowen, the company's president until Cohn came in. The founder was, in fact, Cohn's own mother's brother and Lawrence his first cousin. Lawrence was removed in October 1959 but not replaced until August 1960, when a full-fledged Army General was elected to the position, where he would serve almost three years.
General John B. Medaris holding a model of the Redstone rocket at a press conference at the Fairmont Hotel in San Francisco on May 17, 1957. (U.S. Army, courtesy of Medaris Collection, Florida Institute of Technology.)
August 8, 1960 - General Medaris Heads Toy Firm
NEW YORK (AP) — Maj. Gen. John B. Medaris, former head of the Army rocket and  guided missile program, today became president of a toy train manufacturing company. Lionel Corp. announced Medaris' new position. He also was elected a director. Lionel has been without a president since last October. Lionel has long been the nation's largest manufacturer of electric trains and accessories. It also makes other electric and mechanical toys, chemistry sets and sporting equipment. The company also manufactures an explosive switch with broad applications in bombs, missiles, rockets and mines. Medaris resigned from the Army in January. At that time he claimed the United States' "reluctant dragon" attitude toward space was leading to disaster.
There was a short-lived rise in the stock's value the year after Medaris took over, but then by 1963, as Time magazine described events, Lionel:

lost $2,500,000 in 1961, another $4,000,000 in 1962; Cohn shucked off several of the new subsidiaries and eased out General Medaris. Last week the word went out that Cohn was surrendering the controls at Lionel. First step: granting options for his 55,000 shares to a group headed by Manhattan Entrepreneur Victor Muscat [often referred to as the "toothpaste tube tycoon"]. The Lionel shares that he bought for $15 each closed last week at $6.50, which even at that represented a $1.25 rise for the week on news of Cohn's retreat.
The Worst-Kept Secret: Israel's Bargain with the Bomb The Muscat Family of Brooklyn founded United American Metals in 1889. Like Lionel, their factory was also converted into making armaments during World War II. After the death of the patriarch, Lazarus Muscat in 1944, "Victor Muscat, branched off into Victor Industries and became the largest produce of collapsible tubes in the country; producing Tin-base, Lead base and Aluminum tubes for the pharmaceutical, dental and general trades." 

There is definitely more here than meets the eye.

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