By David Albert
When General John Thompson founded the original Auto-Ordnance Corporation (AOC), he and others developed and marketed their weapons with hopes of achieving great commercial success. As unlikely as it seems today, they never realized their goal. Our current view of the Thompson submachine gun as one of the most successful designs, with possibly the richest history of any modern small arm, was never witnessed by General Thompson and his son Marcellus. They both died before the weapon achieved its worldwide distinction and profitability.
In order to produce the original 15,000 Colt manufactured Model of 1921 Thompson submachine guns, the principals of AOC mortgaged the future of the company by borrowing desperately needed capital. As a result, majority share of AOC was acquired by Thomas Fortune Ryan, an AOC founder, and wealthy financier of the time.
Model of 1921 Thompsons sold fairly well at first and AOC optimism was demonstrated in promotional literature of the period. “We want to sell Thompsons and make money!” beckoned one AOC dealer inquiry post card of the late 1920s. AOC began to develop secondary products such as the Thompson Autorifle, Thompson Military Model of 1923, and the B.S.A. Thompson submachine gun in hopes of expanding their product line, and gaining foreign market opportunities. Development of these additional products consumed resources and proved unsuccessful.
In 1928 and 1929, two events occurred that contributed to the fate of the original company. First, Thomas Fortune Ryan died, leaving control of the company to his estate. Secondly, the Great Depression hit. Company sales slowed, and interest on debt to the Ryan estate mounted. The Ryan estate heirs, less forgiving of the AOC deficit than their predecessor, sought to recover as much of their investment as possible and began looking to liquidate the company.
One potential buyer was named Jean U. Koree. Mr. Koree made two efforts to purchase AOC. Information regarding Koree’s acquisition attempts surfaced in estate documents acquired by the author in 2004. Koree was a Romanian industrial engineer who moved to New York City in 1919. After serving in various Romanian consulate positions, he left government service in the early 1920s, and developed a successful razor manufacturing business. Koree patented several inventions including razors and automotive parts during the late 1920s and early ’30s.
Koree had an interest in small arms and his business activities occurred in close proximity to AOC in New York City. Koree probably had opportunity to observe the AOC business operations in person. He became associated with Marcellus Thompson, son of John Thompson, and Vice President and General Manager of AOC in charge of administration and sales. Koree had very strong foreign sales connections, something that was shared by Marcellus Thompson, and they may have made a connection on this fact.
Jean Koree and Marcellus Thompson signed a cooperative agreement on October 10, 1932 to purchase all AOC assets, including “its patents, good-will, jigs, tools, fixtures and inventory or any part thereof.” In the 90-day agreement, Koree was to front the money, with profits divided equally between Koree and Thompson. Marcellus Thompson did not incur any responsibility for a potential loss on the deal. On the same day, Koree wrote a letter to attorney Stephen McTague on Wall St., authorizing him to ascertain from the Ryan estate whether an offer of $650,000 would be accepted. The offer stipulated the following conditions:
- $200,000 to be paid at contract signing
- the $450,000 balance to be paid over a period of 6 months
- the purchaser could receive guns at the rate of one for each $100 paid
- guns could be withdrawn in lots of 1,000 or multiples thereof
Mr. McTague arranged an appointment with Walter Ryan, son of the late Thomas Ryan, at his office at 11:00 a.m. on Oct. 21, 1932. No documentation exists of the details of this meeting, but we can assume the offer was not acceptable to the Ryan estate and the 90-day agreement between Koree and Thompson was allowed to expire.
Koree did not give up on potentially acquiring AOC and, as additional depression years passed, he decided to make a second, secretive purchase attempt. Koree, Marcellus Thompson, and another individual named Mathew J. Hall, who was a Ryan estate hired broker, cooperated to form an agreement concerning a potential buyout. Marcellus Thompson was not actively engaged in AOC business at this point, and he longed to gain control of the company. The agreement called for Koree to obtain capital to purchase AOC assets, and detailed a marketing plan for the future of the acquired company. It was made with all concerned mentioned by initials only (JK, MHT, and MJH). The company to be formed was referred to as “T.E. Co.,” which, in the opinion of the author, stands for either “Thompson Enterprises Corporation,” or “Triangle Enterprises Corporation.” (Koree later formed a company named “Triangle Ordnance Corporation,” which was associated with the Hyde Model 35 Submachine Gun. This subject was detailed in Small Arms Review Vol. 9, No. 8, May 2006.) AOC was referred to as “A-O” in the agreement.
In a memorandum dated January 22, 1935, Koree, Thompson, and Hall proposed an agreement, from which the following highlights are noted:
- Koree was to organize a European sales company, with all stock for his own account, and a salary paid to him.
- T.E. Co. was to prepare an exclusive territorial sales contract for execution by it and the European sales company. This would be a 10-year contract, with territories, commissions, services, products, limitations, and sales terms and conditions detailed.
- T.E. Co. would enter into employment contracts with Marcellus Thompson and Matthew Hall. Commissions on sales made by T.E. Co., and handled through the European sales company but originated by Thompson and Hall were detailed.
- Koree maintained a 1-year option on 1/4 of the proposed stock shares owned by Marcellus Thompson and Matthew Hall in the new company and details of stock price valuation and disposition of stock sales while Thompson and Hall were employed by T.E. Co. were stipulated. Thompson and Hall also agreed to give Koree 1/4 of their stock holdings if the deal went through, so that 50 % of the new company would be owned by Thompson, 25% by Hall, and 25% by Koree.
The agreement also detailed a procedure for carrying out the provisions of the agreement, should the purchase prove successful. These included formation of the European sales company, preparation of necessary legal agreements, and the immediate acquisition of 5,000 Thompson submachine guns by the European sales company. Marcellus Thompson was to arrange proper manufacturing arrangements for T.E. Co. for future production. (The author could not help but wonder whether Marcellus Thompson might have potentially convinced Colt to produce another run of Thompson SMGs. While unlikely, it is intriguing to ponder “Second Generation” Colt Thompsons.) The agreement went on to detail distribution of interest on sales through the European sales company, and T.E. Co. sales through the European Sales Company.
It is clear Koree planned to make his money through European sales should the deal prove successful. His stipulation that 5,000 Thompsons be reserved for the European sales company would probably have covered his investment, although the exact amount of this acquisition offer is unknown.
Koree made an official inquiry about AOC’s status at the same time the 3 potential buyers formulated the secretive agreement. The inquiry was answered by letter from Mathew J. Hall, in his official capacity as a broker for an AOC deal, working on behalf of the Ryan estate. (The same Hall who had entered into the secret agreement with Koree and Thompson.) Mr. Hall replied in a very detailed letter dated January 28, 1935, which provided the following key insights about the status of AOC:
- Volume for January through September, 1934 was $276,000, upon which a gross profit of $159,000 was realized. Estimates for the full year were $300,000 in sales, and gross profit of $170,000.
- The directorate of the company was detailed, which included the Ryan estate, the estate of Col. George Harvey, John Thompson, Marcellus Thompson, George Smith, (President of Royal Typewriter Co.), and Mr. H.H. Vreeland.
- The composition of the inventive, manufacturing, administrative and sales fields were summarized, as well as key inventive accomplishments of the company, and sales accomplishments such as adoption of the TSMG by many government departments and law enforcement agencies.
- It touted Marcellus Thompson’s strong sales connections to high ranking representatives of foreign governments indicating negotiations could easily be resumed.
- It affirmed the availability of the management team to work with the company, or any successor, when and if Marcellus Thompson again became actively engaged in the business.
History tells us the Koree-AOC deals were not successful. While disappointed, Koree persisted in his desire to become involved in the marketing of a submachine gun. Later in 1935, he associated with George Hyde, who looked to approach the market with a new submachine gun design. Koree then became uniquely involved with the Hyde Model 35 SMG, acquiring 1/4 of its patent rights and directing all attempts to market the weapon. While the Hyde venture failed, Koree enjoyed many other successful business ventures during his life. It is fascinating to think how NFA history might have changed had either of his AOC buyout attempts proved successful.
|This article first appeared in Small Arms Review V9N10 (July 2006)|
and was posted online on February 8, 2013