HIGH FINANCE: How to Make a Buck

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At a luncheon in Washington, John Albert Broadus Broadwater, president of the Capital Transit Co., rose to state his business philosophy. "Capital Transit," he said, is not "a philanthropic organization whose trustees have dedicated its income to the public service," it is in business to make money. Most public-utility men, said Broadwater last week, are "scared somebody will accuse them of making a dollar. What in the hell goes on here in America? That's what we're here for, to make money."

Nobody has kept Broadwater, 56, a sharp-tongued South Carolinian, from making money. In his 2½ years with Capital Transit, profits have more than quadrupled, dividends have doubled. Recently Broadwater raised them again (by 40%). In fact, he and his friends have found an unsuspected gold mine under Capital Transit's tracks.

Unmined Riches. Actually, the gold was there all the time, but Broadwater was one of the few who had the eye to see it in Capital's balance sheet. He had made and lost a fortune in Florida real estate, spent many a lean year ("I saw the time when I couldn't pay my grocery bill") until World War II found him with an interest in the war-rich Tampa Shipbuilding Co. In it, he made a lasting alliance with Florida Industrialist Louis Wolfson, 40, who had made millions from a grab bag of enterprises, ranging from ships, bridges, movie theaters, and plumbing supplies to selling scrap iron.* For $2,000,000 in 1945, he scooped up a surplus shipyard which cost the Government $20 million, liquidated it and cleared more than $4,000,000.

In 1949, Broadwater and Wolfson saw their big chance to parlay their stakes. North American Co., the famed holding company pyramid built by Harrison Williams (TIME, Jan. 21), was under court order to sell its 45.6% controlling interest in Capital Transit, which runs all the streetcars and buses in Washington, D.C. The stock, which had paid only a 50¢ dividend in 1948, was selling for less than $20 a share. Broadwater & friends bought all 109,458 shares owned by North American at $20 apiece, with Wolfson putting up almost half of the $2,189,160 required. Broadwater and seven others raised the rest.

As far as Washington's rate-conscious Public Utilities Commission was concerned, the company wasn't worth very much. To keep the rates down, the commission had kept whittling away at Capital Transit's "official valuation," and had refused to recognize that inflation had increased its value. Nevertheless, the company was able to pile up some $7,000,000 in surplus. Broadwater, Wolfson & friends* used this money to start boosting the dividends.