• U.S.

Business: Disaster on Regardless

3 minute read

After a brief career as a bond salesman in Baltimore a smart young man named Wallace Groves went to Washington in the early 1930s, entered Georgetown University law school. He had a brother in the small-loan business in Baltimore and a sister with some money. Soon Wallace Groves had small-loan companies scattered about the District of Columbia, nearby Virginia and Maryland. In 1931, having merged his companies with a Chicago concern, he sold out, decided to try his hand in Wall Street.

Mr. Groves was not slow in making his presence felt. He acquired a handful of broken-down investment trusts, put them together as Equity Corp. and sold them to Rockefeller Son-in-Law David M. Milton at a profit of $750,000, according to SEC.

Next he turned up as chief owner of Phoenix Securities Corp., whose president, Philip De Ronde, became a crony. Half-a-dozen other investment trusts landed in his pocket, including General Investment Corp.; another crony, Ernest B. Warriner, became General’s president. Truster Groves used his associates to put over his deals, used one trust to buy another. The involved nature of these deals inspired one of his directors to write this spicy note: “We may seem (to you) unduly sensitive to public, or rather informed financial opinion. The reason is that those who disregarded this opinion seem, in the end, to be ‘unlucky.’ ”

While Wallace Groves’s luck held he was a big shot. He acquired working control of United Cigar-Whelan Stores Corp., Celotex Corp. and several other big industrial concerns. His private life was no less spectacular. He gave lavish parties, married Cinemactress Monaei Lindley, bought an island in the Bahamas, named his yacht the Regardless.

Disaster, when it came, came from all sides. His wife divorced him, sued a brunette and various others for slander. The Treasury listed him as a tax avoider. Stockholders sued him. SEC got after him, turned its findings over to a U. S. Attorney. Last week in New York a Federal grand jury indicted Wallace Groves, Brother George Groves and Cronies De Ronde and Warriner and five corporations* on 14 counts of mail fraud and one of conspiracy. Principal transaction named in the indictment was a neat little deal whereby Wallace Groves was said to have made $300,000 out of General Investment Corp. in 1936. A group headed by ex-President George Devendorf of General Investment wanted to sell the corporation 20,000 shares of its preferred stock at $87.50 a share but was told the company was not in the market. Wallace Groves said he would buy it personally, and did, but not before he had resold it to General Investment at $102 a share.

Truster Groves and friends faced a possible 72 years each in prison on the 15 counts of the indictment.

* Phoenix Securities not included.

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