By Tom Welsh | Special to the Metro Monthly
Despite the fact that his grandfather was involved in one of the Mahoning Valley’s most celebrated court battles, Alan Jenkins knew little about the case until he entered law school. One summer, while Jenkins was serving as a clerk at a local law firm, an uncle handed him a packet of old documents, with the recommendation that he “might find them of interest.”
This marked the beginning of Jenkins’ long fascination with Myron T. Wick Jr. vs. The Youngstown Sheet & Tube Company, the 1930 lawsuit that prompted a major court battle over the proposed merger of Youngstown Sheet & Tube and Bethlehem Steel. The more Jenkins researched the case, which involved some of the era’s most prominent business and finance leaders, the more convinced he became that it could serve as the basis of an engaging historical novel.
“Steel Dreams,” the novel that Jenkins wrote, owes remarkably little to family lore. Although Alan Jenkins’ grandfather, Judge David G. Jenkins, presided over Wick vs. Sheet & Tube, the case was hardly a topic of discussion within his extended family. “To his credit, I don’t recall my grandfather ever discussing his cases,” Jenkins said. “What went on in the courtroom stayed in the courtroom. Instead, he loved to tell us about his life in Wales, and he was a great storyteller.”
Jenkins observed that only one scrap of oral tradition found its way into the novel, which was recently released by Tate Publishing & Enterprises and is available at local bookstores. “Steel Dreams” includes a brief account of a conversation his grandfather recalled having with LeRoy Manchester, who served as general counsel of Sheet & Tube in 1930.
For Jenkins, the absence of family lore in the novel is significant. “Steel Dreams” represents a combination of solid storytelling and intense archival research, much of which was completed in Youngstown. “The good thing about having no preconceived notions of the case was that it allowed me to base the story on the contemporaneous accounts of the events themselves, rather than trying to reinterpret the events,” Jenkins said in an online interview.
At a glance, the case appears reasonably straightforward. In 1930, James “Old Jim” Campbell, an organizer of Sheet & Tube who was rounding out his long tenure as chairman, opened negotiations with Eugene Grace, president of Pennsylvania-based Bethlehem Steel, to explore the possibility of merging the two firms. Campbell, then 75, feared that Sheet & Tube would not remain competitive unless combined with another major steel maker. Grace, meanwhile, had been looking for opportunities to expand his steel operations into the Midwest.
Beyond their compatible interests, Campbell and Grace shared a personal affinity, which the authors suggest through imaginative reconstructions of business meetings and private conversations.
Campbell, a native of Ohltown (present-day Meander Reservoir), overcame childhood infirmities to become a college athlete and business leader. Throughout his career, Campbell took a hands-on approach to the management of his firm’s vast steel operations. In a well-known photograph, the aging industrialist poses casually with a group of rough-hewn steelworkers. His bearing betrays no hint of noblesse oblige. These rough-and-ready qualities appealed to Grace, a former college athlete who abandoned the prospect of a major league baseball career to climb the industrial ladder. Grace reportedly commented to friends that he sometimes felt as though he had made the wrong decision.
Although Campbell was 22 years older than Grace, both men were old school industrialists who made business deals over glasses of brandy. They resented the tactics of “pirates” like Cyrus Eaton, the Cleveland-based protégé of John D. Rockefeller, whose string of acquisitions was financed with funds drawn from lucrative holding companies. These holding companies, or “trusts,” were set up with modest initial investments, but they attracted legions of investors. When building his corporate empires, Eaton’s preferred strategy was to quietly secure a controlling interest in those firms he planned to acquire.
While Eaton owned considerably less than a controlling percentage of shares in Sheet & Tube in 1930, he wielded enough clout to rally shareholders who viewed the proposed merger as a “sellout” of Youngstown’s largest homegrown industry. The disgruntled stakeholders included Myron Wick, whose late uncle, George D. Wick, had helped organize Sheet & Tube in 1901.
After the plaintiffs filed their lawsuit, the proposed merger began to appear more complicated. The plaintiffs noted that, in the proposed merger, the valuation of shares for the two companies had been based on business figures from 1929, which bore scant resemblance to those recorded in 1930, the first year of the Depression. Critics also questioned whether Sheet & Tube’s shareholders—including members of its board of directors—were properly notified about the merger. Perhaps the most troubling aspect of the proposed merger, at least for opponents, was the presence of business executive Henry G. Dalton on the board of both companies, a situation that raised the prospect of fraud.
On Dec. 29, 1930, amid national media coverage, Judge David Jenkins issued an injunction against the merger. Among others, Judge Jenkins ruled that Sheet & Tube’s board of directors had failed to vote on the merger “as a fully informed unit.” He also determined that the merger was actively promoted by Dalton, a common director of both companies. According to the Youngstown Vindicator, the ruling found that Dalton’s role “was a breach of trust and against proper policy,” regardless of his intentions. At one point, Judge Jenkins quoted Matthew 6:24: “No man can serve two masters.”
Judge Jenkins also found that those negotiating the merger failed to take into consideration Bethlehem Steel’s controversial bonus system, which allocated $3.6 million to the firm’s executives in 1929. The judge went on to question a report compiled by accountants for the purposes of the merger, determining that it “had a misleading tendency, whether intentional or not.”
One day after the ruling, the Vindicator presented the outcome as a coup for Eaton, who was hailed as “the fourth financial independent of the century who had battled ‘Wall Street’… and had won.” The paper compared Eaton to business titans like Andrew Carnegie, Edward H. Harriman, and Henry Ford, who had successfully battled the country’s financial powerbrokers in the past. The Youngstown Vindicator apparently concurred with Eaton’s description of the ruling as a victory for the Mahoning Valley, one that ensured the “autonomy of the midwest’s [sic] growing steel trade.”
Months later, Campbell and Grace appealed Judge Jenkins’ ruling, but the pair watched grimly as the economy continued to unravel. Furthermore, it was hard to ignore that the U.S. public had been outraged at the prospect of two industrialists pursuing a $1 billion merger in the midst of a severe economic downturn. On Oct. 16, 1931, The New York Times reported that Eugene Grace had canceled the merger deal, “owing to changed conditions.”
Eaton, the court battle’s presumed victor, suffered his share of setbacks in the years that followed. Widely disseminated rumors that Bethlehem Steel would merge with Republic Steel, the steel company Eaton formed in 1930, came to nothing. Saddled with debt, Eaton was compelled to sell Continental Shares, his most lucrative holding company, along with his substantial interests in the utility, steel, and mining industries.
© 2010, The Metro Monthly. All rights reserved.
For more articles and features, visit http://www.metromonthly.net.