“Mr. Ball Takes the Trains” and lends a hand …

 “I felt that anyone to whom such a situation was presented had a moral duty to try to do something to be of what help he could.” – George A. Ball

Chalk portrait of George Ball, created and acquired in Mexico, 1932
Minnetrista Heritage Collection

 No one can predict how things will turn out. That was certainly the case when George Ball dipped into his personal finances to purchase the holdings of the Van Sweringen brothers of Ohio. What was intended to be a financial investment – as well as a helping hand – unexpectedly led to George’s control of a large railroad “empire” and brought him into the national spotlight. 

 From a young age George Ball had an interest in entrepreneurial ventures. While he was known for his quiet nature, George was also fun loving and financially daring. He frequently jumped into investments; always willing to listen to someone who needed help. It was this calculated risk-taking and interest in speculation that led him to back both the Banner Furniture Company and the Interstate Automobile Company of Muncie, as well as many other ventures. Not surprisingly then, when George was approached in 1935 by a friend with a business proposition that would help out two fellow entrepreneurs he paused to listen.

In 1937 George Ball was highlighted in the Saturday Evening Post. “Mr. Ball Takes the Trains” even made the front cover.
Minnetrista Heritage Collection

O.P. and M.J. Van Sweringen were brothers and businessmen from Cleveland. Raised on a farm, the brothers eventually moved to the city, and after saving their hard earned money began investing their funds to realize the dream of creating a single transcontinental railroad. Buying railroad after railroad they pyramided their transactions into a financial empire during the 1920s. In addition to railroads, the Van Sweringen’s also had interests in steamship lines, trucking companies, coal mines, trolley lines, and a peach orchard in Texas. They owned Halle’s Department Stores and the Terminal Tower in Cleveland, along with the large Greenbrier resort hotel in Virginia. The financial set-ups for these companies were very complex, and the involvement of courts, creditors and receivers entangled the issues of ownership. In 1929 when the stock market crashed the Van Sweringen’s holdings took a big hit. Despite the sprawl of their companies, almost all of their investments were near bankruptcy by the early 1930s. When they were unable to refinance their $40 million loan from J. P. Morgan & Company, the bankers planned to auction the Van Sweringen’s collateral in the hopes of recouping funds to cover at least some of the loans.

 Desperate to find a way to save their holdings, the Van Sweringen’s approached George Tomlinson, a mutual acquaintance of theirs and George Ball. Tomlinson had been a long-time friend of George’s and was also related to the Ball family through marriage. While George did not know the Van Sweringen’s well, he was acquainted with them and had served at one time on one of their company’s board of directors. Upon receiving a request from Tomlinson to meet with the Van Sweringen’s to hear a business proposal, George saw no objections.

 On August 11, 1935 the Van Sweringen’s and Tomlinson arrived at George’s home in Muncie. During the meeting O.P. Van Sweringen pitched their case. The story of their hard work and brotherly relationship may have appealed to George, who likely recognized aspects of his own climb to success mirrored in their words. After the Van Sweringen’s left, George and Tomlinson discussed the situation. They agreed that they would try to find the money necessary to purchase the properties being auctioned off by J. P. Morgan & Company. If successful in securing the holdings, it was agreed that the Van Sweringen brothers would continue to manage their companies and hold the option of buying the majority of the stock back anytime within ten years of the purchase.

Ultimately, a third investor was not found. Instead, George and Tomlinson put up $2 million between the two of them, and an additional $1 million was borrowed from a bank.  They formed Mid-America Corporation as a holding company to purchase the properties at the auction. When the day of the auction arrived George was on hand in New York City. Although he was seated beside O.P. Van Sweringen, no one paid much attention to him. Several smaller lots of holdings that the Van Sweringens were willing to give up passed over the auction block. When the Alleghany Corporation came up for bid however, George was ready to act. This was the top holding company of the Van Sweringen’s financial pyramid and was the target that George was hoping to hit. When the auction hammer dropped, signaling the end of the bidding, George had successfully purchased the corporation for just over $3 million.

 For a mere fraction of its stock value George had been able to buy back a large portion of the Van Sweringen’s firm for the brothers. As they had agreed to prior the purchase, while George and Tomlinson now owned the holdings through Mid-America Corporation, the Van Sweringen brothers would continue to manage the companies and they could buy back a controlling portion of the stock within ten years if they chose.

Within a year of the auction, however, things began to play out much differently than planned. Soon after the auction, George bought out Tomlinson’s share of the company, making him the sole investor. Then unexpectedly both Van Sweringen brothers passed away within a few months of one another. Without warning George A. Ball found himself controlling and managing a railroad empire that he never intended to personally operate. This brought him into the national spotlight, and suddenly George Ball was a household name.

Between 1935 and 1938, Gertrude Barrett, George’s secretary, compiled this scrapbook for him. Inside are many newspaper and magazines articles documenting the Van Sweringen deal.
Minnetrista Heritage Collection

If finding the time to manage the Van Sweringen holdings on top of his regular work with Ball Brothers wasn’t enough stress, in 1936 the United States Senate’s Interstate Commerce Committee convened hearings to investigate how America’s railroads operated. The first target of the inquiry was to be the Van Sweringen railroad pyramid, and the first star witness was George Ball. Throughout the hearings, the press paid attention as George was questioned about how he was able to purchase the holdings at such a low price, and why J. P. Morgan & Company would be willing to let the properties be sold so far below their value. Throughout the stressful ordeal, George remained steadfast in his insistence that the deal was on the up and up, and that nothing corrupt had occurred.

George Ball in the family’s library at Oakhurst, their home in Muncie, 1920s
Minnetrista Heritage Collection

 In the end, George determined that managing the Van Sweringen holdings was not something he wanted to continue and began looking for potential buyers. In 1937 he announced the establishment of the George and Frances Ball Foundation for educational, religious and charitable purposes. A month later, George transferred all common stock of the Mid-America Corporation to the foundation, so it could be sold to profit the foundation. George’s entanglement with the companies continued for a bit longer, however. After the sale of the stock, George faced a multi-million dollar court suit from the Van Sweringen estate arguing that George had no right to sell or gift the stock holdings. What ensued were years of legal squabbles between various groups of investors. In the end an out-of-court settlement ended the case, but it was not until the mid-1940s that all the legal matters were completely resolved.

To say that George’s acquisition of the trains was not what he expected may be an understatement. While no one can be sure how a hand of cards will fall, you can usually count on a few curveballs. The purchase of the Van Sweringen holdings certainly came with many twists and turns that George Ball did not foresee. After the death of the Van Sweringen’s he had to find time to do his regular work as well as manage the railroad empire. His accidental thrust into the spotlight was not only taxing on him, but on his family as well, and they had to reply on each other’s support during the stressful times. In the end, after years of hearings and court suits George ended up with no financial gain from his adventure with the railroad. But, he was able to establish a foundation that continues to thrive and support the Muncie community more than six decades after his passing.