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Re: John Bruce and other dips
Author: Clovis Man
Date: 12-08-2008 - 14:46
Wrong again! In the early 1980s, Harry Bruce convinced the IC Industries, Inc. (IC’s parent) Board of Directors he could make the IC more valuable by selling off large pieces of the railroad. Before he was done the Council Bluffs line was sold the Chicago Central and Pacific (CCP), much of the original GM&O/M&O was sold to Midsouth (not the entire IC), the Louisville, Henderson & St. Louis (Paducah) Line was sold to the Paducah and Louisville (PAL), most of the former Chicago & Alton Railroad was sold to the Chicago, Missouri and Western (CMNW), and a few smaller pieces (such as the Indianapolis line) were sold to others such as the Indiana Rail Road. Bruce was right in that he sold the various line segments for in excess of $750 million, which was about equal to the total book value of the entire IC before he started. There was and is no meaningful comparison between the CRI&P and IC prospects at any point in IC’s recent history
However, except for the PAL, all of the larger spin-offs either went bankrupt or into nonjudicial restructuring. The CMNW’s lawyers found a pattern of deceptive practices in IC’s behavior following each of the line sales that justified filing a RICO suit against the IC, IC Industries (renamed Whitman Industries by then), and select IC officers including Harry G. Bruce, personally. The CMNW went under because, regardless of express contract agreements protecting historic routing of interline forwarded traffic between the East St. Louis – Wood River complex and Chicago – Northwest Indiana markets, (principally high margin chemical and steel traffic) IC was out there telling customers that, if the customer routed any shipments by way of the CMNW, as required by the contracts, then IC would cut off car supply at each customer facilities served by the IC, regardless of where on the IC that facility might be. CMNW also had affidavits from IC clerks relating incidents where they had been instructed to use Snowpak to change customer shipping orders by removing the CMNW from customer routings. IC settled the CMNW lawsuit by returning $29 million of the CMNW purchase price in cash, plus making contract concessions amounting to another $3 million per year (equivalent to about two-thirds of the total purchase price), without ever filing a single motion for dismissal or making any counter-claim or other procedural demands. Regrettably, the rescue arrived too late to save the CMNW.
However, except for the PAL, all of the larger spin-offs either went bankrupt or into nonjudicial restructuring. The CMNW’s lawyers found a pattern of deceptive practices in IC’s behavior following each of the line sales that justified filing a RICO suit against the IC, IC Industries (renamed Whitman Industries by then), and select IC officers including Harry G. Bruce, personally. The CMNW went under because, regardless of express contract agreements protecting historic routing of interline forwarded traffic between the East St. Louis – Wood River complex and Chicago – Northwest Indiana markets, (principally high margin chemical and steel traffic) IC was out there telling customers that, if the customer routed any shipments by way of the CMNW, as required by the contracts, then IC would cut off car supply at each customer facilities served by the IC, regardless of where on the IC that facility might be. CMNW also had affidavits from IC clerks relating incidents where they had been instructed to use Snowpak to change customer shipping orders by removing the CMNW from customer routings. IC settled the CMNW lawsuit by returning $29 million of the CMNW purchase price in cash, plus making contract concessions amounting to another $3 million per year (equivalent to about two-thirds of the total purchase price), without ever filing a single motion for dismissal or making any counter-claim or other procedural demands. Regrettably, the rescue arrived too late to save the CMNW.
