• U.S.

OIL: Trouble for McCarthy

3 minute read
TIME

Glenn McCarthy, who made and lost two fortunes in oil, last week was blocked by the SEC in his attempt to make a comeback with a new oil company. When McCarthy first filed a registration statement for 10,000,000 shares of stock he hoped to sell in his new Glenn McCarthy Inc., the SEC challenged him. Had McCarthy spelled out how risky his new venture might be? McCarthy apparently had not; he carefully amended his statement to make clear the “considerable amount of risk” for anyone who put money in his new company. Some of the risks:

¶ The company has no specific “existing plans” for buying property, and “no assurance can be given that [the proposed program of operation] will result in discovery … of oil.”

¶ McCarthy has defaulted on payments of a $29 million debt to the Equitable Life Assurance Society and has given up his stock interest in his other oil concerns. Metropolitan Life Insurance Co. may foreclose on a $15 million mortgage on the Texas Gas Corp., a petrochemical company which has not been a conspicuous success.

¶ McCarthy will have an option to buy 2,000,000 shares of the proposed company’s stock at 5% under the market price and thus may “profit … at the expense of other [stockholders] without assuming the risks of the business which such other stockholders have assumed.”

Last week, the day before the SEC okayed the registration and Houston’s B. V. Christie & Co. got ready to sell the stock, McCarthy ran into more trouble. Dallas’ Dresser Industries, Inc., which had installed $2,500,000 worth of equipment in the Texas Gas Corp. plant, sued McCarthy for a million. Charged the Dresser company: McCarthy had failed to pay a penny on $836,289 in promissory notes signed three years ago. At one time McCarthy had tried to settle the debt for $25,000, but while Dresser was dickering. McCarthy withdrew the offer.

As soon as the SEC heard about the suit, it hastily withdrew approval of the stock registration until it could see how the suit would affect McCarthy’s new company. Texas brokers, who have followed McCarthy’s career with great interest, guessed that the stock issue might be delayed for weeks or killed entirely.

It was a hard blow for McCarthy. All of his big holdings, including the Shamrock Hotel, are mortgaged to the hilt and currently out of his control. He still has a radio station, a chain of neighborhood newspapers and other odds & ends. Despite the pinch on his purse, McCarthy still lives like one of the Big Rich in his big house, still throws big parties and flits around the countryside in his private plane.

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