The Day the Trolleys Stopped
AT 45 MINUTES PAST MIDNIGHT ON JULY 1, 1955, a haggard Walter J. Bierwagen, president of the D.C. Transit Workers Union, left the negotiation room that recently had become his home away from home. For months, the 2,400 or so members of his union had been seeking a quarter-an-hour raise and a few other contract sweeteners from the Capital Transit Company, which operated most of the buses and all of the streetcars within the metropolitan Washington area. Management of the transit company had insisted that any wage increase must be tied to a hike in fares, neatly passing the buck to the District’s Public Utilities Commission. Bierwagen had made a last-ditch plea for arbitration of the dispute, but those on the other side of the table quickly slammed the door shut on that idea.
“We tried, we tried everything, but failed,” Bierwagen told reporters as he left the room. “The strike is on now.”
By just after dawn, the lines of traffic into Washington already were beginning to snarl. More than 400,000 streetcar and bus riders were forced to drive their own automobiles (if they were lucky enough to own one), join makeshift carpools, walk, or hitchhike into the city. At a quarter after eight, traffic was backed up more than two miles from the South Capitol Street Bridge. Some street corners were clogged with commuters holding homemade placards indicating their destinations. The Police Department had canceled all leaves and put officers on 12-hour shifts; at least one was posted at every downtown intersection, and some got assignments as far as three miles outside the center of town.
Cranes were stationed at Potomac River bridges to yank out any cars that broke down or stalled traffic. Automobiles inched along major arteries like the Rock Creek Parkway, including one limousine carrying the vice president of the United States, Richard Nixon, who sat reading a newspaper explaining why he — like hundreds of thousands of others — couldn’t get to work any faster.
It was, without question, one huge mess that Friday — the worst traffic jam in the capital’s history. And it didn’t look as if things would get any better. Many Washingtonians simply had stayed home for a longer-than-usual July Fourth weekend, but by the following Tuesday, everybody would be headed back to work — except, of course, the bus and trolley drivers. The three District Commissioners, along with the congressional committees then in charge of the city’s affairs, properly viewed the strike as a full-scale crisis — the entire government, after all, was being tied up in knots. And Washington’s business community figured it stood to lose more than $5 million a month, perhaps twice that.
So it was understandable why the powers that normally ruled Washington might want to put a few questions to Louis E. Wolfson, the chairman of the board of Capital Transit. Through his associates, however, Wolfson sent word from somewhere in California that he had other pressing business commitments to tend to, commitments that would keep him on the West Coast throughout the next week.
Over the next 52 days, as the strike stretched on and the city sweated its way through a searing summer heat wave, Louis Wolfson was to become the most hated man in Washington.
A Washington Post editorial called him “the man primarily responsible for this kick in the vitals of the Capital City.” House Majority Leader John W. McCormack said Wolfson displayed a “cold, reckless disregard for the welfare of the people in an exhibition of ruthless exploitation.” Democrat Wayne Morse of Oregon, a member of the Senate subcommittee overseeing the District’s affairs, called Wolfson an “economic carpetbagger” and accused him of “pickpocket activities” and “fugitive tactics.” Morse told his colleagues: “I’m for cutting Wolfson down to size.”
That prospect, however remote it might have seemed at the time, surely warmed the hearts of many Washingtonians. In a town that treasures tradition, Louis Wolfson was the ultimate outsider. After a string of spectacular successes in business — primarily in real estate, shipbuilding, and salvage — he and a small group of associates had in 1949 quietly acquired controlling interest in the Capital Transit Company. Wolfson was only 37 at the time. In little more than a decade he had risen from a helper in his family’s Florida junkyard business to the financial genius behind a $231 million industrial empire that stretched from coast to coast — writing, in the process, entire chapters of the textbook on business takeovers. In every corporate cloud, Wolfson found a silver lining; in the big leagues of business, he earned a starting spot on the all-star team. With his meteoric rise to millionairedom, Wolfson had every right to be arrogant. Though many thought his actions spoke louder than his words, he was shy, modest, even self-effacing, “I’m not a financier,” he once said. “I’m just a country boy who works harder than some others.”
THE NEW DEAL, BY FIRMLY ESTABLISHING THE CAPITAL as a company town, eased Washington out of the Great Depression before the rest of the nation. The influx of government workers was nothing short of massive, and the onset of World War II brought tens of thousands more streaming in. The economic “trickle-down” to Washington business and real estate was more like Niagara Falls: new housing developments sprouted up, entire shopping districts were built from scratch, and industries were created to cater to the growing federal bureaucracy and its employees.
The new Washingtonians, for the most part, relied on streetcars and buses for commuting to work and shopping downtown. Gasoline rationing had helped cement the public’s reliance on public transit, but even after the end of the war, automobiles still were beyond the means of most government workers. One of the biggest beneficiaries of the good graces of government was Capital Transit, formed the year Franklin Delano Roosevelt took office.
Even as the postwar slackening in ridership brought problems to public-transit firms in other major cities, Washington’s was doing quite well. It had modern equipment, first-rate service, cheap fares (10 cents a ride through 1948), and high public acceptance and approval. In 1949, its cash reserves — a surplus for difficult times ahead — were approaching $7 million, the hallmark of a conservatively managed company. Its stock, selling for only $18.50, was a genuine bargain: Each share represented more than $120 in assets.
In short, it was an ideal target — in Louis Wolfson’s eyes, at least — for a takeover attempt. When, in March 1949, the North American Holding Company started unloading large chunks of its stock in Capital Transit to a group of investors headed by Wolfson, no one familiar with the Florida financier’s modus operandi should have been surprised. But then again, no one in Washington had much reason to be familiar with Wolfson’s wheeling-and-dealing wizardry, and he caught the city napping — asleep, so to speak, at the switch.
Louis Elwood Wolfson was born in St. Louis on January 28, 1912, the son of a Russian immigrant who worked as an iceman, clothes presser, and fruit peddler. Fourteen months later, Morris Wolfson took his family to Jacksonville, Florida, to start a junkyard, which soon grew into a sizable and successful scrap business. After his graduation from high school in 1930, Louis went to the University of Georgia on a full football scholarship. He dreamed of making All-American, but shattered his shoulder as a sophomore substitute in the 1931 Yale Bowl, ending his athletic — and, as it turned out, his academic — career. He went home the next year to the family business.
Back in Jacksonville, Wolfson’s business career got off to an auspicious start. He borrowed $10,000 to start the Florida Pipe and Supply Company after discovering that when the original J.C. Penney built a home for retired clergymen 25 miles southwest of town, so much pipe was left over that it had to be stored in a warehouse. Wolfson bought it from Penney’s son for $275, and set about reselling it piece by piece; by the time he was done, the surplus pipe had brought in $100,000. He entered the real-estate business in 1936, and by 1942 was a millionaire.
After the end of World War II, Wolfson’s deals assumed much larger proportions, and he began to formulate what would become his philosophy of business — namely, that it is easier to make a million dollars than a hundred thousand. The Navy auctioned off its St. Johns River Shipyard at Jacksonville, which had cost the government $19 million to acquire during the war, and Wolfson’s winning bid of just under $2 million was only $292 more than its ostensibly secret appraisal. He promptly dismantled the yard and liquidated its heavy equipment for a profit of $2.2 million. Wolfson also acquired control of the Tampa Shipbuilding Company, operated it for just under two years, and then unloaded it for a profit of $3 million. Over the course of five years, two congressional subcommittees and a federal grand jury investigated the first transaction, but could prove no wrongdoing and cleared Wolfson’s name.
Throughout the late 1940s, Wolfson expanded his burgeoning business empire with variations on a simple formula: He would buy or acquire controlling interest in one company, and then use its funds — or his own stock in the firm — to add yet another link to the chain. In 1945, he used the technique to take over a string of movie theaters in the South. The following year, he bought control of Monogram Pictures for $400,000 and produced The Babe Ruth Story, which was moderately successful at the box office. (He later sold his stock in the company for $1.25 million, and came close to complaining the whole deal wasn’t worth the trouble.) In 1948, Wolfson moved into the vending-machine business, and early the next year consummated his biggest conquest by taking control of the New York-based Merritt-Chapman & Scott Corporation, one of the world’s largest marine construction and salvage firms.
WOLFSON WAS ON THE VERGE OF NATIONAL NOTORIETY, if he had not achieved it already, and companies vulnerable to takeover bids eyed him suspiciously. By the time he and a tightly knit group of associates moved to assume control of Capital Transit in 1949, there was a flurry of bitter, though somewhat feeble, opposition in Washington. The Wolfson group acquired Capital Transit for only $20 a share, and the total price of controlling interest — just under $2.2 million — was way below the company’s hefty cash reserves of some $7 million.
During rounds of hearings with the Securities and Exchange Commission and the Interstate Commerce Commission, the new owners, in seeking official approval for the deal, assured both agencies they were interested in the company only as investors, not as managers. In the course of one hearing, an ICC examiner asked Doran S. Weinstein, one of Wolfson’s right-hand men since 1940, whether the group proposed to actively participate in the transit company’s activities. “We have no plans to that effect, sir,” replied Weinstein. “Our only interest in that respect is to protect our investments.”
But after the deal was signed, sealed, and approved, Wolfson moved in quickly with a top-to-bottom housecleaning of the company’s old management (Weinstein, for example, was made executive vice president). Soon, the new board of directors, with Wolfson at the helm, began to pay eye-opening dividends: $3 a share in 1950, $4 in 1951, and $15.60 in 1952, when Capital Transit stock also split four-for-one. (Before the Wolfson regime, Capital Transit stockholders never earned more than $2 a share.)
One effect of the stock split was to obscure the startling dividend policies of the Wolfson regime, but high pay-outs continued ($4.80 in 1953 and $5.60 in 1954, when calculated from original shares). Salaries of the company’s top executives — all but one of them Wolfson intimates — more than doubled. President J.A.B. Broadwater, a former Tampa Shipbuilding executive and oldest member of the Wolfson inner circle, was voted a $10,000 annual pension, if and when he chose to retire. Wolfson also acquired the Glen Echo Amusement Park and, at different points in his career, tried to buy the Washington Senators, Washington Redskins, and Baltimore Colts.
Beyond these somewhat unconventional financial practices, the public had other, closer-to-home reasons to gripe about the new management of Capital Transit. During the first four Wolfson years, bus and streetcar mileage was cut by one-fifth as routes were sliced away. The company got rid of more than one-quarter of its trolleys and nearly one-tenth of its buses. From 1949 to 1954, public-transit ridership declined 44 percent. Over the same period, the company was granted fare increases on four separate occasions by the D.C. Public Utilities Commission, while its rank-and-file employees got a flat refusal when they asked for some liberalization of their pension plan.
Two developments in 1954 did little to soothe the doubts of many Washingtonians worried about the Wolfson regime’s management of Capital Transit. Wolfson seemed to adopt a defensive, sometimes combative, attitude about the public grumbling, and told a reporter for The Evening Star: “If necessary, I will even go so far as to liquidate the company. I’ll protect the stockholders within the limits of the law, in spite of anything — including Congress and the Public Utilities Commission.”
If Wolfson and his associates had not been Capital Transit’s principal stockholders, such a statement might not have irritated the public and transit employees so much. The company’s cash reserves had dwindled to a little more than $2.2 million, fueling speculation that the Wolfson forces had drained its assets to pay higher dividends. And in 1954, Wolfson began angling for his biggest target yet: the billion-dollar-a-year Montgomery Ward & Company.
With reserves in cash and securities of nearly $285 million and assets of more than $700 million, the mail-order colossus was a particularly tantalizing prospect for Wolfson. In 1954, he began unloading some of his Capital Transit Stock — including one parcel of 100,000 shares — and spent half a million dollars traveling through 40 major cities in quest of proxies for his upcoming battle with Montgomery Ward and its 80-year-old chairman of the board, Sewell Avery. Meanwhile, though, the situation in Washington wasn’t getting any better, and the D.C. Transit Workers Union understandably began looking toward Wolfson’s company to share some of its apparent — though rapidly diminishing — wealth. They asked for a raise in hourly wages from $1.90 to $2.15 plus a package of non-wage benefits, principally more liberal pension rules.
The management of Capital Transit, however, steadfastly insisted that the union’s demands would cost up to $7 million a year, and offered the view that if the workers wanted more money, it should come from yet another hike in fares approved by the Public Utilities Commission. The Wolfson group, with its laissez-faire style of running things, was uncomfortable with the notion of a utilities commission looking over its shoulder. When Republican Senator Clifford Case of New Jersey hinted that some other company might be able to do a better job of running Capital Transit, for example, president J.A.B. Broadwater shot back: “You take the Public Utilities Commission off my back and I’ll operate a system that will knock your eyes out.”
Even though the company admitted that its bus and trolley drivers deserved a raise (but not, of course, that much), it flatly rebuffed any suggestion of arbitration to end the dispute. At times, Capital Transit claimed not to be a real party in the whole matter, seeming almost to goad a strike on. (In fact, Wolfson’s attitude fueled speculation that he actually wanted the city to take over the company, now that he’d drained it of its assets.)
And as a strike loomed nearer, no quick fix was in sight. Finally, on July 1, 1955, Bierwagen and his troops, as promised, decided to wait no more. Their absentee adversary, Louis Wolfson, would not set foot in Washington for another 11 days.
AS MOST WASHINGTONIANS WERE SETTLING INTO WORK on July 12, the B & O Capital Limited pulled into Track 5 at Union Station, and out bounded a tanned and relaxed Louis Wolfson. At 43, Wolfson still carried the trim physique of an ex-football star: six-feet-two, 190 pounds, broad-shouldered. Dressed in a dark blue suit, white shirt, and light blue tie, he looked the part of a young corporate attorney — not the stereotype of a multimillionaire from whom they took orders. The wear and tear of endless 14-hour days did not show. He was ruggedly handsome, with dark curly hair and luminous blue-gray eyes. That combination could make him look serious, maybe even stern; more often, however, a slight squint of the eyes and hint of a broad smile in the making conveyed an easygoing, affable air.
By 10 o’clock, Wolfson was at the Mayflower Hotel, holed up with his seven closest associates, presumably to map out a strategy for an afternoon confrontation with Wayne Morse and the other members of the Senate subcommittee overseeing the District’s affairs.
For more than a week, Morse and Wolfson had been playing a cat-and-mouse game. Since the strike began, Morse had wanted Capital Transit’s chairman of the board in Washington, and pronto. After other executives of the company claimed they didn’t know exactly where Wolfson was, Morse slapped subpoenas out for him in Los Angeles, Washington, Miami Beach, and Jacksonville. But government process-servers couldn’t find him, and Morse became enraged. Wolfson seemed to be twitting the feisty senator in a return telegram that said, in part: “Have not heard from you directly but understand you want me in Washington in reference to bill dealing with cancellation of Capital Transit Co. franchise . . . subpoena not necessary. Willing to appear voluntarily.”
Wolfson’s eventual appearance caused a full-scale crush in the ornate Senate hearing room, as curious congressional staffers and other bystanders jockeyed for every available inch of standing room. There was even another crowd outside, peering in through the windows from the Senate porch. As Wolfson waited for the hearing to begin, surrounded by other Capital Transit executives, photographers created their own traffic jam around the committee table. And as he took his oath, the whirring of movie cameras and popping of flashbulbs was so great that a member of the committee banished all cameramen from the room.
Wolfson handed the committee a prepared statement, and in a polite but no-nonsense fashion, asked that he be questioned at once. But because they wanted to hear the statement before beginning they requested the committee’s counsel to read it.
In the statement, after calling the strike “distressing and deplorable,” Wolfson said, “It is my ardent wish that some speedy solution will be found.” Then, the statement got to his major point: “Apparently a scapegoat, on whom to vent the resentments of the community, has to be found. The victim of this great amount of hate and bitterness engendered by this strike appears to be Louis E. Wolfson.”
His statement also took two swipes at The Washington Post, first referring to it as “the so-called morning newspaper here that seems to be an expert on everything.” Then, he said “the morning paper here has got some young fellow as publisher who married the boss’s daughter, and it keeps hammering away about slicing melons and dividends.”
During three hours of questions and answers, Wolfson denied that he intended to dump the transit system on Washington, but in effect dared Congress to go ahead with the franchise transfer by predicting it would cost $40 million to start a new company. After finishing up on Capitol Hill, Wolfson checked out of the Mayflower and left town. The vice president of Capital Transit said he didn’t know where Wolfson had gone, but suggested he might have left for New York on other business.
So the strike dragged on, but Morse and other members of Congress brought new intensity to their efforts to lift the company’s franchise. Within days of Wolfson’s testimony, a public seizure — and perhaps permanent takeover — of the Capital Transit Company seemed only a matter of time. In rapid succession, though perhaps not rapid enough for commuters struggling through the prolonged strike, the nation’s legislators effected their own changing of the guard at Capital Transit.
On July 18, the D.C. Board of Commissioners asked Congress to oust the Wolfson interests from the management of the transit company, and two days later the Senate passed a bill authorizing them to seize and operate the company and cancel its franchise. “There is nothing in fiction or fact that equals the shakedown that has occurred under the present management,” thundered Democrat Matthew Neely of West Virginia, chairman of the Senate’s District of Columbia panel. “Midas, who turned everything he touched to gold, has nothing on Wolfson.” On August 3, Wolfson filed a libel lawsuit asking for $30 million in damages against The Washington Post and Times-Herald — $10 million apiece for each of three vitriolic editorials. (The case was settled three years later, when The Post published a mildly apologetic editorial and donated $25,000 to a Wolfson charity, a Jacksonville hospital.) On August 14, President Dwight D. Eisenhower signed legislation to take control of Capital Transit, and a week later, the D.C. Commissioners finally were able to announce a settlement.
The strike was over.
SOON, WOLFSON’S INVOLVEMENT IN CAPITAL TRANSIT would be over, too. He had earned the nickname “The Great Liquidator,” but in this case, at least, Wolfson had next to no choice in the matter. In a letter to Capital Transit stockholders, he laid blame at the doorstep of “political demagogues” and “socialistic thinkers” who, he said, created a situation in which the nation’s capital “seems doomed to a municipally operated system.” In 1956, with the approval of the D.C. commissioners, Wolfson and his associates sold Capital Transit to O. Roy Chalk for $13.5 million (on a down payment of $500,000), and formed the Universal Corporation to invest the eventual proceeds, including $9.6 million in cash.
In the meantime, Wolfson had failed to gain control of Montgomery Ward, so he set his sights on a slightly more manageable target: American Motors Corporation, in which he already owned 200,000 shares of stock. The auto company was deeply in debt, and Wolfson arranged a secret meeting for the evening of October 31, 1945, with its president, George Romney. “Before I leave this hotel room,” Wolfson reportedly told Romney, “I am going to decide whether to have Buddy Gerbert [Wolfson’s chief confidant and traveling companion] buy through A.M. Kidder & Company 1 million shares of American Motors stock at up to $8 a share.” Romney managed to talk Wolfson out of the takeover bid, however, and in the process turned him into an ardent grassroots promoter for the Rambler.
Wolfson eventually sold his AMC holdings for a reported $2 million profit, but the transaction would come back to haunt him in two ways. “[Wolfson’s] decision to sell was one of the most egregious errors of history,” wrote Romney’s biographer, Tom Mahoney. “If he had held on for a few months longer, he could have made one of the most fabulous profits in the history of Wall Street and would have enjoyed an unassailable position in the financial world. If he had held until 1959, he would have had a profit of more than $40 million.” And, in fact, had Wolfson given Gerbert the go-ahead on his original plan and held the AMC shares until early 1960, the deal would have represented a $70 million financial coup.
After the late 1950s, Wolfson dropped out of the nation’s headlines for nearly a decade. He began dismantling his mammoth corporate empire to focus on a new passion: converting his 478-acre Harbor View Farm near Ocala, Florida, into a first-rate racing stable. By 1964, it was thoroughbred racing’s No. 2 stable.
In late 1966, the Securities and Exchange Commission accused Wolfson of selling unregistered securities in connection with his American Motors transactions and, after two trials, he spent nine months in a federal prison in Florida. During his jail term, Wolfson’s name once again became front-page news when it was disclosed that his family foundation had been paying Supreme Court Justice Abe Fortas $20,000 a year for unspecified assistance; after admitting he had concealed the financial relationship, Fortas resigned from the bench in 1969.
That unpleasant episode in Wolfson’s life forced him to take a two-year sabbatical from horse-racing. He re-entered the business in 1972, and the next year married Patrice Jacobs (his first wife, Florence, had died in 1968), the only daughter of the legendary Hirsch Jacobs, the winningest trainer in racing history. The two became a familiar fixture at the nation’s leading stops on the thoroughbred racing circuit. They sold Harbor View in 1978, but retained the name, 250 or so horses, and the stable’s impressive record.
“Aside from having good health,” Patrice told a Time magazine reporter in early 1978, “my husband and I want only to win the Triple Crown.” With Affirmed, two-time Horse of the Year and winner of five Eclipse Awards, the Wolfsons, in 1978, did just that. Affirmed was the first thoroughbred in history to earn $1 million in a single year, and after his final victory in the Jockey Club Gold Cup at Belmont Park on October 6, 1979 — the seventh victory in a row — he was retired to stud at Spendthrift Farm Lexington, Kentucky.
Affirmed’s syndication rights were valued at more than $14 million. Thirty-seven years after his first million, Louis Wolfson, “The Great Liquidator,” had engineered the big score once again.
Louis Wolfson went to the Saratoga Yearling Sales on the evening of Friday, August 8, 1980, with a single-minded purpose: to buy a one-year-old colt by Exclusive Native (who also had sired Affirmed) out of La Jalouse. The colt had been brought to the backyard of the nation’s most elegant and tradition-bound race track, in fact, because its owner, Leslie Combs, knew Wolfson would be attending the sale in person. Combs expected the colt might bring half a million dollars.
The bidding opened at $50,000, quickly climbed to $500,000, and kept heading skyward in hundred-thousand-dollar increments. Wolfson was battling it out — in racing’s most genteel setting — with Aaron U. Jones, a wealthy Oregon lumberman. (Thomas Mellon Evans, the only other bidder, already had dropped out.) Auctioneer Laddie Dance was preparing to let the gavel fall at $1.2 million, but Combs blurted out, “Take your time.” When the hammer finally was lowered at $1.6 million, Wolfson had just purchased the second-most-expensive thoroughbred yearling in history.
It was Wolfson’s last big splash on the nation’s sports pages, and enduring evidence of his “speak-softly” philosophy borrowed from Teddy Roosevelt. For the past dozen years, his words have appeared only rarely in the public print. Wolfson, friends have said, is affable, confident, and outgoing, but he shuns the uncomfortable glare of publicity at all costs, and understandably so. At age 70, he continues to treasure the privacy not afforded him in earlier stages of his career, except for appearances attendant to his role as a leading denizen of the nation’s racing establishment. When they are not traveling on the racing circuit, the Wolfsons spend most of their time at homes in Bal Harbour, Florida, and Long Island, and at their Clermont Farm near Saratoga Springs.
And in that milieu, Louis Wolfson seems entirely comfortable, an eminently respected figure in the sporting world’s uppermost drawer. In his previous career, and as Washingtonians came to know him during six stormy years at the helm of the city’s transit system, he was always the enigmatic outsider — the multimillionaire with no interest in, nor taste for, the Capital establishment or the corporate club.
Today, more than 25 later, Louis Wolfson probably is exactly where he wanted to be all along: not at the top . . . just on the inside.
This article originally appeared in the April/May 1982 issue of Regardie’s.
Bill Hogan