Francis I. duPont & Co. Genealogy: Part XVIII

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Walston & Co., Inc., Continued

DuPont Walston (1973)

Despite the positive prognosis of the firm's financials in 1964, the firm soon ran into difficult straits. In 1968, Glenn Miller had organized the common stock offering of Four Seasons Nursing Centers of America, "an Oklahoma-based corporation that built, leased and operated numerous nursing homes." When Four Seasons went bankrupt two years later, Miller and Gordon H. McCollum, another vice president and Four Seasons director, were indicted for fraud. They were charged in federal court for creating "fraudulently high earnings reports to dupe investors into paying artificially high stock prices for Four Seasons." The bankruptcy cost investors $200 million and was considered "One of the largest fraud cases ever uncovered." Miller and McCollum plead guilty in 1973.

Even though Walston & Co. was not named as a defendant in the fraud case, the Four Seasons debacle put the firm in a difficult position. Not only did it damage the firm's reputation, the firm's officers has also invested millions of dollars into Four Seasons stock through a special partnership. According to Alec Benn, who had been the head of Walston & Co.'s advertising agency, Benn & MacDonough, Inc., "The bankruptcy of Four Seasons immediately reduced Walston & Co.'s capital. Millions of dollars of Walston & Co.'s subordinated notes were backed by Four Seasons stock. These notes became worthless." Because Walston's officers has also bought Four Seasons stock on their own with borrowed money, they made further withdrawals to pay back the loans, also reducing the firm's capital. Combined with NYSE rules that tightened net capital rules in 1971, Walston & Co. turned to Ross Perot, the millionaire founder of Electronic Data Systems, a computer services corporation (founded 1972).

In 1973, in a fairly complicated legal arrangement, Perot merged Walston & Co. with duPont Glore Forgan and the firm became duPont Walston, "the nation's second largest network of stock-brokerage offices." Walter E. Auch (1921-2010), who had been executive vice president of duPont Glore Forgan, was made president and chief executive officer of DuPont Walston. Morton Meyerson (1938-), Perot's right-hand man, continued as chairman and chief executive officer of duPont Glor Forgan, which became a service organization whose primary purpose was to serve as DuPont Walston's back office operations.

As was the case with F.I. duPont, the remaining family members of the Walston firm left the firm. Vernon Walston's two sons, who had been executives in the firm, were fired. According to Carl Welles, this "had a catastrophic effect on the morale of the Walston salesmen," most of whom "had been intensely loyal to the Walston name." Hundreds of the firm's brokers left and hundreds more employees were fired. To add to DuPont Walston's troubles, Nella Walston, Vernon Walston's widow, filed a lawsuit against the firm in January 1974. According to the New York Times, "she maintained that the New York Stock Exchange and the Perot interests entered into a plan whereby, among other things, the Perot group 'misrepresented' the true status of duPont's net capital ratio...and charged that two Walston directors who favored the merger had a conflict of interest." Mrs. Walston believed that the merger "was designed to save duPont Glore Forgan from financial collapse at the expense of Walston" and that the NYSE and Perot had "coerced" Walston's directors to merge.

Many argued that Perot and Meyerson were in over their head and did not know what they were doing in the securities industry. Walter Auch later said, "Ross is not overly endowed with humility. He did not have a high regard for management on the Street, and was not reluctant to say so. He paid for that." The sentiment was that Perot has "been had," which was not a sentiment with which Perot later disagreed.

By the end of January 1974, Ross Perot decided "he had had enough. He had pumped money into the securities business, and he was getting out." Morton Meyerson said (in 1974), "If I knew then (ion 1971) what I do now, I would have recommended that we just dismantle the firm right away. I would have just said we can't do it, let's transfer out the accounts, help the staff get new jobs and close down." DuPont Walston was liquidated and its brokerage houses were sold off to other firms. DuPont Glore Forgan, Inc. transferred DuPont Walston's 300,000 customer accounts to other firms, and later it was also liquidated. With those closures, the duPont name of F.I. duPont & Co. was lost to history as were the names of Glore Forgan & Co., Wm. R. Staats, Inc., Hirsch & Co., and Walston & Co.


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