Mirandas to the Sidelines
The Brewster Aeronautical Corp. of Long Island City is among the most substantial U.S. production fizzles of World War II. Earlier in the war, Brewster made a fighter plane, the Buffalo, that got into action in the Far East before Java and Singapore fell. By 1942 it had converted to making the Buccaneer, a not-so-hot dive-bomber, and is about to start making the Vought Corsair, an excellent Navy fighter. But the biggest trouble is not with the quality of Brewster planes, but with the quantity, which is a very meager military secret. Thus far the Axis has had little to fear from Brewster.
Last week a Manhattan Supreme Court judge listened to a settlement designed to unravel Brewster's main financial tangle: a stockholders' suit claiming that the corporation had been milked by three supersalesmen who took enormous commissions on foreign war contracts that Brewster would have got anyway. The salesmen: the brothers Alfred J. and Ignacio J. Miranda, and their partner, Felix William Zelcer. The settlement: the trio got clear title to $2,800,000 in commissions already paid them, to $800,000 they were paid as brokers on accessory sales, and to $500,000 of the $2,300,000 still due them.
Miraculous Mirandas. Mexican-born (1897, 1898), U.S.-naturalized (1930) Alfred and Ignacio Miranda have had quite a career. When their father's New York City export business went broke (he backed the wrong general in Mexico's Madero revolution of 1910), they left school to learn the export business themselves. By 1921 they knew enough to form their own outfit, Miranda Bros. Inc., prospered by selling things below the Rio Grande. First it was automobiles. Then they became minor-league merchants of death, unloading leftover U.S. war supplies in Latin America and in the Balkans. The leftovers ran out. So the Mirandas formed their own manufacturing company, American Armament Corp., to make light artillery and ammunition.
On the side Miranda Bros. Inc. found plenty of other things to sell. In 1926 they tied up with Major Alexander P. de Seversky, sold transport planes for him in Europe and Asia. They hawked Captain Melvin Maynard Johnson's famed semi-automatic rifle, finally landed him a big Dutch order. Through Seversky they hooked up in 1938 with Felix William Zelcer, a Polish-born ex-speakeasy operator with a yen for aviation.
The Mirandas have had lots of bad luck. Most of their corporate clients (like Seversky) did not really get into the big time until after the Mirandas' contracts had run out. One of their Latin-American deals ended, in 1940, in a Federal sentence for violating the President's 1934 neutrality proclamation by selling bombs to Bolivia (via Chile) in the Gran Chaco War. The bombs went into Curtiss-Wright planes and Curtiss pleaded guilty to the same charges but the Mirandas were sent to Lewisburg Penitentiary while Curtiss got a $220,000 fine. This year their main American Armaments plant was requisitioned by the Government, turned over to Vultee.
Badgered Brewster. For the Mirandas, the Brewster deal was the saddest of all. In 1939, brother Ignacio decided that Brewster's export arrangements were 1) feeble, 2) expensive. Brewster paid a 3% ''finder's fee" commission on all business, plus 10% to the resident foreign agent, but had almost no foreign business.
Ignacio sold Brewster's president James Work on the Miranda Bros, at a 12½% maximum commission. (The purchaser paid for it in higher prices.) Miranda-sold orders poured in from Britain and Holland, both rearming.
Brewster's James Work slashed their commission to 4.6%, then to 4.1%. Needing capital, he sold 50,000 shares of stock to the brothers and Zelcer at $12 ($1.50 above the market and twice what it sells for now). The Mirandas invested $250,000 in Hayes Manufacturing Corp. at above-market prices, to help finance accessory sales to Brewster, and paid $700,000 more to clamoring ex-Brewster foreign agents.
Thus, even before their overhead began, the Mirandas sank $1,550,000 in their Brewster venture, bringing a $107,000,000 foreign backlog to the company.
Brewster's Buccaneer dive-bomber was full of mechanical bugs. The U.S. Navy took over, then moved out in a month and put in aviation oldtimer Charles A. Van Dusen. By this time the Miranda-Zelcer 10% stock interest was frozen in a voting trust, the commissions due them on new deliveries were frozen in stockholders' suits, and Brewster itself was solidly frozen in production and financial red tape. In came still another management this time Miracle Man Henry J. Kaiser himself.
To other stockholders, who had seen Brewster earn less than $300,000 while the Miranda threesome were due to earn $5,400,000 (and had already earned $2,800,000), all this looked somewhat fancy.
The Mirandas claimed that Brewster bad management was not their fault. To them, Brewster's low earnings had no connection with their own.
Everybody Happy? Last week's settlement, like most compromises, appeared to make everyone reasonably happy. Said the Mirandas' lawyer: "A complete vindication." (The brothers need it to bolster their plea for a Presidential pardon on their prison sentence.) The opposing lawyers pointed out that any "exoneration" of the Miranda group must wait until Justice J. Sidney Bernstein gives final court approval later this month. And some Buccaneers are finally in action. In any case, whatever earnings there are on its current backlog (around $257 million) will henceforth belong to Brewster.
But the Mirandas are too busy planning a bigger & better export business after the war to bemoan the fact that they are pretty much on the sidelines for the duration. Right now they are dreaming of air-conditioning Latin America.