DIAMOND ALKALI AND

THE FAIRPORT, PAINESVILLE & EASTERN

 

 

Ownership

 

            If you found 10 people in Lake County that have heard of the Fairport, Painesville & Eastern and asked them "Who owned it?", at least half of those people would say "The Diamond."  But in fact, all official documents—FP&E Annual Reports, State of Ohio corporate filings, and ICC dockets—show that the FP&E was an independent entity from the time it was established in 1910 until Penn Central and Norfolk & Western took control of it on August 15, 1968.  End of story, right?  Well, not exactly.  It turns out that though Diamond Alkali did not own the FP&E, they controlled it from the time of its creation until 1968.  Before I demonstrate how the Diamond controlled the railroad, there are two things I need to briefly explain: who the founders of Diamond Alkali were, and the role of stockholders in a corporate structure.

Diamond Alkali was founded by gentlemen from three glass manufacturers who wanted to have their own source of soda ash for their factories.  These gentlemen were T.R. Evans from Macbeth-Evans Glass in Pittsburgh, C.L. Flaccus from C.L. Flaccus Glass in Pittsburgh, and J.C. Brady from Hazel-Atlas Glass in Wheeling.  (For reasons that will become clear later, I should mention that before this formal business relationship was established between the Evans and Flaccus families there was already an informal relationship between them due to T.R. Evans being married to C.L. Flaccus' daughter.)  As for the role of stockholders in a corporate structure: for purposes of the discussion that follows the key thing to keep in mind is that a company's stockholders elect the Board of Directors—and since the Board of Directors chooses the Officers that run the company, then whoever controls a majority of the stock of a company can install "their people" on the Board and thereby control that company.

Taking the above information into account, when you look at the stockholders of the Fairport, Painesville and Eastern Railroad through the years you quickly discover the clever way that Diamond Alkali basically ran the railroad without owning it.  Let's start by looking at the primary stockholders of the FP&E in 1915:

 

Shareholder

Location

Shares

Notes

 Charles Louis Flaccus

 Pittsburgh, PA

134

 Diamond co-founder (CL Flaccus)

 Harry Darlington

 Pittsburgh, PA

100

 

 Hazel-Atlas Glass Co.

 Wheeling, WV

77

 Diamond corporate co-founder (& customer)

 Macbeth-Evans Glass Co.

 Pittsburgh, PA

76

 Diamond corporate co-founder (& customer)

 J.B. Ewaman

 Pittsburgh, PA

50

 

 Standard Plate Glass Co.

 Butler, PA

38

 Glass maker – Diamond customer

 Globe Soap Co.

 Cincinnati, OH

29

 Soap maker – Diamond customer(?)

 Fostoria Glass Co.

 Moundsville, WV

25

 Glass maker – Diamond customer(?)

 Highland Glass Co.

 Washington, PA

25

 Glass maker – Diamond customer

 Christoph Jacob Baumann

 Pittsburgh, PA

24

 FP&E Director and Officer

 Arch L. Metzner

 Wheeling, WV

23

 Hazel-Atlas Glass Co. management employee;

 also FP&E Director and Officer

 Thomas Raymond Evans

 Pittsburgh, PA

20

 Diamond co-founder (Macbeth-Evans)

 Joseph C. Brady

 Wheeling, WV

20

 Diamond co-founder (Hazel-Atlas)

 Rub No More Co.

 Ft. Wayne, IN

18

 Soap maker – Diamond customer(?)

 W.P. Hubbard

 Wheeling, WV

15

 

 Imperial Glass Co.

 Charleroi, PA

13

 Glass maker – Diamond customer(?)

 Gustav A. Berghoff

 Ft. Wayne, IN

12

 Rub No More Co. executive

 T.F. Hank

 Muncie, IN

12

 

 William G. Gundelfinger

 Pittsburgh, PA

10

 

 J.J. Holloway

 Wheeling, WV

10

 

 

These are the top 20 stockholders for this particular year (out of a total of 44), and this list represents over 85% of FP&E's shares of stock.  As noted on the chart, a large portion of the stock (42%) is owned directly by Diamond Alkali-related companies and people, and another decent-sized portion (19%) is owned by what I believe are Diamond Alkali customers (two of which I'm fairly certain about)—and these figures could be higher if I could identify some of the other people on this list, or if I knew who the other 24 stockholders were.  Seeing this, it is easy to come to the conclusion that if the FP&E's stockholders were for the most part made up of Diamond founders and Diamond customers, and if they exercised their stockholder votes in a coordinated manner (which I think it is very reasonable to assume), then the members of the FP&E's Board of Directors—and the Officers of the railroad—would end up being whoever the Diamond wanted them to be (as it was, throughout the FP&E's history most of its Officers were in fact also Board members).  Hence, by having control of most of the FP&E's shares, the Diamond controlled the railroad.

Granted, due to the fact that the FP&E was primarily created to serve the new chemical firm, and due to the Diamond basically being the only customer the FP&E had for the first 20-something years of its existence, I suppose it would not be unusual to have so many Diamond-related stockholders during the railroad's early, foundational years.  However, the Diamond's control of the FP&E did not end after those early years:  When you look at the lists of stockholders over the next five decades, you continue to see a large number of "Diamond people" holding stocks.  For example, let's look at the primary stockholders of the FP&E in 1963 (which is about the same as the stockholder lists for the previous twenty years):

 

Shareholder

Location

Shares

Notes

 MAC & Co.

 Pittsburgh, PA

7587

 Mellon National Bank & Trust (Raymond Evans was a Director)

 Evelyn Fawell Evans

 Pittsburgh, PA

6841

 TR Evans niece

 Raymond Flaccus Evans

 Cleveland, OH

4874

 CL Flaccus grandson, TR Evans son; Diamond executive

 Margaret Evans Berdan

 Pittsburgh, PA

4867

 CL Flaccus granddaughter, TR Evans daughter

 William Howard Evans

 Cleveland, OH

4117

 CL Flaccus grandson, TR Evans son; Diamond executive

 Ida Virginia Evans

 Pittsburgh, PA

4117

 CL Flaccus granddaughter, TR Evans daughter

 Elizabeth May Evans Bascom

 Pittsburgh, PA

4117

 CL Flaccus granddaughter, TR Evans daughter

 Bertha G. Baumann

 Painesville, OH

3030

 Widow of former FP&E executive Christoph J. Baumann

 NOM & Co.

 Pittsburgh, PA

2550

 American Fletcher National Bank & Trust

 George J. Edwards Jr.

 Painesville, OH

2225

 FP&E executive

 John T. Richards

 Pittsburgh, PA

2145

 Former Diamond executive

 Laura Evans Ford

 Detroit, MI

1982

 TR Evans niece

 Charles Lewis Flaccus Jr.

 Pittsburgh, PA

1950

 CL Flaccus grandson

 ELM & Co.

 Pittsburgh, PA

1867

 Pittsburgh National Bank

 TNOM & Co.

 St. Louis, MO

1852

 St. Louis Union Trust

 A.A. Welsh & Co.

 Cleveland, OH

1325

 Cleveland Trust (Raymond Evans was a Director)

 John F. White

 Pittsburgh, PA

1315

 FP&E executive

 Emma E. Dixon

 Painesville, OH

1237

 Widow of former FP&E executive L.L. Dixon

 Carolyn Marsh Lancaster

 Pittsburgh, PA

1227

 Widow of former Diamond executive Frederic Lancaster

 Mary F. Richards

 Pittsburgh, PA

1170

 Wife of former Diamond executive John T. Richards

 John D. Evans Jr.

 Pittsburgh, PA

1037

 TR Evans son-in-law; FP&E executive

 Lillian M. Troutman

 Butler, PA

1012

 Sister-in-law of former Diamond Director John H. Troutman

 J.H. McNash

 Wheeling, WV

750

 Hazel-Atlas executive; FP&E executive

 Jane Louise Flaccus

 Pittsburgh, PA

570

 CL Flaccus granddaughter

 L.A. Hart

 Dallas, TX

525

 

 Gertrude T. Campbell

 Butler, PA

510

 Daughter of former Diamond Director John H. Troutman

 Margaret R. Noyes

 Cleveland, OH

500

 

 Fostoria Glass Co.

 Moundsville, WV

495

 Diamond customer?

 William M. Robinson Jr.

 Taos, NM

375

 Son of former Diamond Director William M. Robinson Sr.

 

These are the top 30 stockholders for 1963 (out of a total of 114), and this list represents over 85% of FP&E's shares of stock.  As you can see, the list for this year is dominated by Flaccus and Evans descendants as well as current and former Diamond executives and/or their relatives; in addition, you might as well count any current and former FP&E executives and/or their relatives as "Diamond people" because an officer or manager at the FP&E would have only had a job at the railroad with the direct or indirect blessing of Diamond-related stockholders.  All told, in 1963 "Diamond people" held at least 65% of the FP&E's stock (and that's not including shares from the two banks where Raymond Evans—the Diamond's Chairman of the Board at the time—was a Director).  Once again, if all of the Diamond-related stockholders exercised their votes in a coordinated manner (which I believe is an especially safe assumption given the people on this list), then the result would be that Diamond Alkali controlled the Board of Directors and thereby controlled the FP&E.

            I think the best way to sum things up is to say this:  Diamond Alkali did not technically own the Fairport, Painesville & Eastern Railroad, they practically owned it.

 

 

Rate Conflict?

 

The only information that appears to contradict the above conclusion is a case brought before the Interstate Commerce Commission in 1918.  In Docket 10236, Diamond Alkali Company v. Fairport, Painesville & Eastern Railroad Company, Director General, et al., Diamond Alkali complained about the rates it was being charged for incoming and outgoing shipments by the FP&E and the trunk lines it connected to (which were the Baltimore & Ohio via Fairport and the New York Central via Painesville).  But if Diamond Alkali controlled the FP&E, then why would there be any conflict between the two?  Well, when you read through the ICC decision documents regarding this case (which are listed in the "Federal Documents" section on my FP&E Resources page) it becomes clear that though the title of the docket implies that the case is "Diamond Alkali versus the FP&E," a better description of the case would be "Diamond Alkali and the FP&E versus the Trunk Lines."

Diamond Alkali was being charged a "combination rate" for its shipments, which meant that for each shipment they were paying a line-haul rate to the trunk lines in addition to a local rate to the FP&E.  When the Diamond noticed that its competitors (who were in a similar transportation situation—they were served by terminal railroads that connected to trunk lines) were being charged using a different rate structure that was less expensive, Diamond Alkali cried "foul."  This different rate structure was a "through rate," which meant that for each shipment a single amount was paid to a trunk line that covered the entire haul, including any switching by a terminal railroad; if there was terminal switching involved, the trunk line would reimburse the terminal railroad a portion of the "through rate" for its part of the haul.  The FP&E supported the Diamond's position, but more importantly it wanted to make sure that its portion of the "through rate"—an amount which was determined by the trunk lines—was fair.

Before the case came before the ICC the trunk lines had already agreed with Diamond Alkali that their rates should have been and should be "through rates"—so what made it necessary for the ICC to get involved was actually a conflict between the trunk lines and the FP&E: in the "through rate" contracts the trunk lines proposed to the Diamond and the FP&E, the trunk lines were only willing to pay the FP&E about $1.75 per shipment because they viewed it as an "industrial railroad," whereas the FP&E believed it should get about $4.00 per shipment because it considered itself to be a "common carrier" ("common carriers" were allowed more money in rate divisions than "industrial railroads" because the latter were considered to be extensions of the companies that owned them, and so did not need to make a profit).  Ultimately, the ICC a) confirmed that the Diamond should have been and should be charged a "through rate" for its shipments and ordered reparations to be paid to Diamond Alkali by the parties involved for past overcharges, b) agreed that the FP&E was a common carrier, and, after a back-and-forth lasting three years, c) set the amount for the FP&E's portion of the "through rate" at $3.50—close to what the FP&E had asked for.

            So in the end, though on the surface the case looked like the Diamond was fighting with the FP&E over rates, what actually happened was that the Diamond and the FP&E teamed up to, on the one hand, make sure Diamond Alkali was charged with the most beneficial rate structure for its shipments by the trunk lines (and get some money refunded to them in the process), and on the other hand, make sure the Fairport, Painesville & Eastern received the proper portion of the "through rate" from the trunk lines.

 

 

 

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Created by Scott Nixon

October 2010