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Three months ago, Eaton called off the contract for his Otis & Co. to underwrite $11.7 million of new stock for the Kaiser-Frazer Corp. (TIME, Feb. 23). His out was a suit filed by Stockholder James F. Masterson against K-F in connection with the new issue. (K-F's counsel called the suit a "phony.") When SEC began to investigate,Witness Eaton swore that he knew nothing about the Masterson suit until after it was filed...
...stock was simply thrown at us," said Kaiser. By day's end, K-F had been forced to buy 186,200 shares, using up $2.5 million of K-F's cash to do it. Kaiser said that Eaton hailed the performance as "another Kaiser miracle...
Next day, when Eaton and his underwriting syndicate started to float the issue, the stockmarket was falling and so was K-F stock. Eaton called off the sale. Witnesses before SEC said they heard him say: "We would be just damned fools to go through with this deal ... I would rather have a lawsuit on my hands than be dead broke." Eaton's own lawyer testified: Eaton had asked him if there was any escape clause in the underwriting contract with K-F. Eaton reportedly said he was going over it with a "fine-tooth comb" to look...
...This Way. This week SEC heard well-groomed, white-thatched Cy Eaton tell his side. Wearing a dark blue suit with a light blue tie to match his eyes, Eaton gave photographers a big grin and then proceeded to deny K-F's charges...
Eaton set forth, in an answer this week to K-F's suit (K-F is asking $7.8 million damages of Otis & Co.), what he thought was wrong. K-F directors had turned down Eaton's suggestion that they personally pay for the 186,200 shares the company had bought. Then, said Eaton, he discovered that the new financing was not really going to be used, as represented, to step up K-F production to 1,500 cars a day. It would merely restore the working capital K-F had used to pay off a bank loan which...