Airlines: On Howard Hughes’ Account

For the past seven years, elusive Industrialist Howard Hughes and Trans World Airlines have been tangled in a complex legal battle. The conflict dates back to late 1960, when Hughes, in return for $165 million in loans to pay for TWA’s first jets, had to surrender his 78.2% ownership of the airline to a voting trust controlled by the lending banks and insurance companies.

When Hughes objected to the way the new trustee-appointed management was running the company, TWA’s new president, Charles Tillinghast Jr. (TIME cover, July 22, 1966), engaged in a bit of preemptive warfare. TWA hit Hughes with a suit that asked $115 million in damages (the amount was increased later), and demanded that Hughes be forced to divest himself of his holdings in the airline that he had built from a middling carrier in 1939 to a major airline. Hughes hit back with a countersuit charging that Tillinghast and the lenders were conspiring to dispossess him of his property.

Last week, after seemingly endless legal manuevers, the case finally reached a significant new stage. In a 3 23 -page report, former U.S. Attorney General Herbert Brownell, the “special master” appointed by a New York district court to assess the amount of the damages, accepted most of TWA’s claims that Hughes’ procrastination in securing jets for the airline had severely crippled its ability to compete in the early 1960s. Brownell set the sum that Hughes should pay TWA at $137.6 million. His report will now go to Federal Judge Charles Metzner, who is expected to in corporate its findings into a final judgment that will probably be handed down within the next two or three months.

Despite Hughes’ repeated setbacks in the courts, which stem in part from his refusal to take the stand in his own defense, his lawyers will probably appeal any adverse court judgment in hopes of getting a reduction or a dismissal of the damages. Until two years ago, a damage settlement would have hurt Hughes hardly at all. At that time, he still owned 78.2% of TWA and would, in effect, have been paying the assessments largely to himself. But, in a daring gamble that he would not have to pay damages, Hughes sold his TWA shares for $546.5 million in 1966. Thus, if he must now pay up, the money will come out of his millions with which he has lately been acquiring hotel casinos and real estate in Las Vegas.