The last Auto-Train pulled in from Lorton 3 1/2 hours late Friday, ignominiously ending an era of American railroading.
Save for a Denver & Rio Grande Western train that hauls tourists from Colorado into New Mexico every summer, there isn't a privately owned interstate passenger train left in the United States.
Auto-Train was virtually sold out last week, filled not only with professional and amateur nostalgia seekers, but with regular, paying passengers.
The southbound run Friday and the sister Auto-Train that arrived in Virginia about the same time carried more than 900 passengers, showing that Auto-Train Corp. did not go broke because nobody wanted to ride, but because it became a textbook example of what's meant by "a hell of a way to run a railroad."
The Securities and Exchange Commission, the FBI and the U.S. bankruptcy trustee are investigating the circumstances under which Auto-Train Corp. went backrupt.
There are charges that company executives misappropriated $2 million that was withheld from employes' paychecks for taxes and retirement benefits and spent at least $1 million (and probably more) that belonged to passengers who canceled tickets, asked for refunds can never got their money back.
Some of the passengers may get some of their money back, but there is little liklihood that all of them will get all they're due.
Auto-Train stockholders are stuck with shares that are all but worthless. The SEC is investigating whether the public was told the true condition of the company's finances and is expected to bring charges soon against Auto-Train officials.
By the time Auto-Train Corp. filed for backruptcy last September, paint was peeling off its red and purple trains, windows were so grimy passengers couldn't see out, and the brakes were so bad the cars jerked like rocking horses.
Service on the train had been allowed to deteriorate to the point that the air conditioning didn't function in many cars, no towels were in the wash rooms and in some cars there were no restrooms at all -- at least none that was usable.
Often the train ran out of disinfectant for the chemical toilets, so crew members dumped frozen lemonade into the tanks to give the water a reassuring tint.
While the passengers suffered, the railroad's 500 employes suffered more. Their paychecks came two weeks late and then bounced. Their health insurance was canceled because the boss didn't pay the premium.
Yet as their railroad literally fell apart before their eyes, Auto-Train executives spent hundreds of thousands of dollars trying to start a new freight car-building subsidiary.They printed lavish posters for an Auto-Train from Los Angeles to Las Vegas for which they had neither cars nor cash. And like the little engine chanting, "I think I can, I think I can," they repeatedly assured their stockholders that profit was just around the corner.
Only two weeks before the bankruptcy, Auto-Train Chairman Eugene Kerik Garfield proclaimed the corner had been turned and reported the railroad had earned a $200,000 quarterly profit after three years of almost continuous losses.
That report became one of the chief targets of the Securities and Exchange Commission investigation, which should help explain why Auto-Train went broke.
More details could come from an FBI probe of how Auto-Train got involved in business deals with a Nevada casino that has long-standing ties to the Teamsters Union pension fund and two convicted con men who claimed to represent a "British Bancorporation" that was neither British nor a bank.
Past and present employes are now talking, including many who have kept silent until now, because Garfield demanded absolute fealty from his associates. Garfield himself is writing a book about the railroad, though he won't talk about the company now.
But the most complete account of the little train that couldn't is expected to be written by Murray Drabkin, the Washington lawyer who was appointed by the court to run the railroad after it filed its bankruptcy petition.
Usually a bankruptcy trustee is a part-time-job chairman of the board. But since September, trying to save Auto-Train has been a full-time assignment for Drabkin, a partner in the Washington law firm of Webster and Sheffield.
Drabkin's duties as trustee include telling the court and creditors what went wrong. Even now that the trains have stopped running, it will be weeks before Drabkin completes that assignment. But in an interview last week, he offered what he called "some preliminary observations."
Some of Auto-Train's problems go back to when the company was organized a decade ago. Garfield was working as a Department of Transportation lawyer when he learned about European trains that carry passengers and automobiles.
He talked up the idea to a group of Florida investors, including his inlaws, sold stock to the public and watched it soar to $60 a share. With 100,000 shares, almost 10 percent of the company, Garfield became a multimillionaire.
The original plan was to run a train from New York to Florida, catering to the "sunbirds" who commute north and south every year. When the railroad tunnels beneath Baltimore harbor proved too small for freight cars loaded with automobiles, Washington became the northern terminal.
Even Drabkin, who ousted Garfield almost immediately after he took over, gives Garfield credit for starting the first new passenger railroad organized in the United States in this century.
"The people who put this thing together should be commended for having a great idea and being able to put it together," the trustee said. "What happened after that is another matter . . . I must say the management would appear to have been neither wise nor lucky."
In those first boom years, Auto-Train failed to build a base for future growth, Drabkin believes. "This company has never had adequate capitalization; they never did develop sufficient capital. There were opportunities to do so, but they were not taken."
People who were around in the early days say Auto-Train had two or three chances to sell more stock but didn't do so.One of Wall Street's biggest investment bankers offered to sell stock privately and another firm proposed a secondary public offering. But selling additional stock would have diluted the ownership of the original investors, and none of the prospects was pursued.
Without that extra capital, Drabkin said, "the company never had enough money to weather any kind of adversity or to keep the equipment in top-flight condition or to advertise effectively."
That lack of money became obvious in the late 70s when derailments resulted in huge repair bills. Garfield insists the accidents were a blow of fate that knocked the company down; Drabkin argues that accidents are expected in some business, especially transportation.
Then a second Auto-Train from Louisville, Ky., to Flordia was started and soon failed, costing the company millions and leaving it with a Kentucky terminal and dozens of rail cars it didn't need.
The board was never given any marketing studies to justify the Louisville run, but was repeatedly assured the route could not fail, says Dr. Arthur Gilbert, a Washington consultant who was kicked off the board for challenging Garfield.
The Louisville route "worked out very badly and was a very expensive decision," Drabkin said. "If you have adequate amounts of capital and you make a mistake like that, you can survive. You can't if you are stretched as thin as this company was."
Garfield himself acknowledged the perennial capital shortage at a stockholders' meeting last summer, but he never ran the railroad like it was short of cash.
Until The Washington Post disclosed the expenditures three years ago, Auto-Train provided a Mercedes and a Jaguar for Garfield and maintained a Flordia condominium for its top officers. Auto-Train executives communted back and forth to Flordia on a three-bedroom private railroad car that cost many thousands of dollars to buy and restore and was staffed by two stewards and a cook.
Nobody worried much about such excesses when the company was making money, Drabkin said, but when the red ink appeared they became symbols of management's inability to control costs.
Complicating the problem was what drabkin describes as "a penchant for going into ancillary enterprises," rather than tending to the train. The Louisville run, the LA-to-Vegas route, another from Chicago to Denver, extension of the northern terminal to New York and a Mexican Auto-Train took up thousands of dollars and preocuppied management for years.
The worst of these side shows -- "the epitome of unfortunate planning and bad luck," as Drabkin puts it -- was the decision to start a subsidiary to build freight cars known as Railway Services Inc.
"It was a classic prescription for disaster," Drabkin said, " an undercapitalized parent starting an undercapitalized subsidiary."
Worse yet, Auto-Train's timing was disastrous. The decision was made in 1979 when demand for freight cars was peaking; by the time the first cars were built, the market had collapsed because of a slowdown in the economy.
Another early indication of uncontrolled spending was settling up a plush headquarters in the building at 1801 K St. NW.
"This company could have been better served and managed much better if the corporte headquarters had been in Flordia," Drabkin said. The cost of doing business was much cheaper at the other end of the line in the little Seminole County town of Sanford.
The majority of Auto-Train's employees work in Sanford; the shops that maintain the train are there; most of the on-board crew lives in Flordia, where the young staff members can lie on the beach between the grueling 16-hours-each-way round-trips to Washington.
When the railroad began to have trouble, the resentment toward the Washington headquarters escalated into open confrontation, the crew members joined a union, Auto-Train's labor costs jumped, and morale deteriorated.
Drabkin lavishes praise on Auto-Train's employes and spent much of the past week in sometimes tearful fairwells to what he calls "a tremendous bunch of people who did a tremendous job under the most difficult of circumstances."
When food on the train ran short, or the towels were missing or the cars dirty, it was the kids on the train, not the executives on K Street, who heard about it.
Almost two years ago paychecks began coming late. Then they began to bounce.
Last summer the employes learned their health insurance had been cut off retroactive to April, because the company hadn't paid the premiums. Drabkin eventually sued the insurance company for not notifying the workers their coverage had lapsed and got the benefits restored.
Last Aug. 1, while Garfield was again reassuring stockholders at the company's annual meeting, the Internal Revenue Service slapped a $1.6 million lien on the company for failing to pass on to the government taxes that were withheld from employes' checks.
Company executives responsible for spending the government's money face potential civil and criminal penalties.
Bankruptcy court records show Auto-Train owes the federal government more than $2 million in taxes and owes additional money to virtually every government jurisdiction in which it does business.
The company's debts are estimated to total $24 million, and its assets are valued at $2 million to $4 million, said Barry Dichter, the Webster and Shetfield attorney who serves as the trustee's lawyer.
The land on which Auto-Train's terminals are located and all but a few pieces of its rolling stock are leased. The owners of the engines and cars are expected to repossess them in the near future. The company's principal assets are its furniture, equipment, tools and parts inventories and the leases it holds on some facilities.
Drabkin said he hopes to find a buyer for the railroad's Flordia shops who will take them over and establish a car-repair business serving other railroads or private car owners, thus preserving the jobs of the employes. The company also has a potentially valuable shop in Portsmouth, Va., for building freight cars.
Even after selling off what assets are left, there may not be enough money to pay the administrative expenses of the bankruptcy.
Drabkin has put in a claim for $83,500 for his time as trustee, and Webster and Sheffield has asked for another $600,000 in legal fees.
After employees get their final paychecks this week, the railroad will have virtually no cash, except for a $25,000 bank account set up to repay credit card customers who canceled their tickets and are due refunds.
Auto-Train owes more than $900,000 to customers who are due refunds from before the company filed for bankruptcy last September. Those passengers are in the pool with all the railroad's other creditors and probably will get a fraction of what they are owed.
Customers who bought tickets since September only to find Auto-Train had shut down before they could ride have a better chance of being paid in full, but Dichter said it's not known yet how much or when they will be paid.
Like many passenger carriers who sell reservations in advance, Auto-Train got the money up front and could spend it before the passenger got to ride.
That practice continued after the railroad filed for bankruptcy. Drabkin defended the use of advance payments saying, "otherwise we would have closed down the first day" after the bankruptcy.
"When we came in there was no money, literally no money," he said. "People didn't believe we could run this railroad, but we did; we ran it for seven months."
Drabkin kept the railroad alive for one more season, running the trains through the peak winter Flordia travel period, when the company has in the past operated profitably. This winter the train did not make enough money to pay its expenses, he said, even though the length of the train was increased from 30 cars to 43, producing a significant increase in revenue, and operating costs were slashed.
The trustee said he initially hoped to be able to reorganize the company and keep it running, but quickly discovered that could not be done without an infusion of new capital.
Drabkin's only hope for finding new investors vanished April 23, when a group headed by G. William Middendorf, chairman of Financial General Bankshares Inc. said it could not come up with the cash needed to save the train.