RAILROADS: Unclean Hands

Like a mosquito at dusk, Manhattan Financial Consultant Randolph Phillips, 47, has driven many a big corporation to distraction with his stinging jabs at management control. His favorite target is railroads. Turning on his onetime associate, New York Central Railroad Chairman Robert R. Young, Phillips harried him so persistently through the courts that Young hardly dared go to Manhattan for months before his death because he feared Phillips' summonses. Last week Randy Phillips himself got swatted. He not only lost a court fight over his campaign to win a seat on the Pennsylvania Railroad's board but also took a tongue lashing from Federal Judge C. William Kraft Jr., who said that Phillips' "unclean hands bar the grant of any equitable relief."

Failing to win election (by 394,000 shares) at the May annual meeting, Phillips tried, by a series of serious charges, to bar the Pennsy's directors from taking their seats. He accused the Pennsy of violating Securities and Exchange Commission and state regulations by refusing to deliver stockholder lists to him, argued that President James M. Symes made "false and misleading statements" in two proxy letters which said that Phillips had "no experience or qualifications to serve as a director," and that he had assumed "self-conferred, high-sounding titles to describe his career."

In rejecting Phillips' charges, Judge Kraft found that he had not been denied stockholder lists to which he was entitled and that Symes also had a perfect right to describe him as he did. Actually, the Pennsy, not Phillips, was the injured party. It was Phillips, said Judge Kraft, who had "knowingly, maliciously and intentionally violated" SEC rules by secretly sending telegrams to two Swiss banks in an effort to have the banks withhold their proxies. Only slightly taken aback, Phillips announced that he would appeal—to demand that Pennsy's directors be required to pay from their own pockets the cost of fighting his attempt to get on the board.