The ability of a railroad to satisfactorily provide
transportation services and to adequately rehabilitate
its plant and equipment can be affected by its corporate
structure. Those in a position to control a railroad's
actions can divert the carrier's income, property, and
other assets for non-rail purposes. This opportunity
exists to a significant degree when a parent holding
company controls the railroad.

B.N. will not be in a position to form a holding company
for many years due to bond indenture restrictions.
Therefore, the opportunity for a diversion of assets
to other sources does not presently exist. Also, the
current management of B. N. appears to be fully
dedicated to railroad operations.

360 ICC at 992-993.

The Commission was not above articulating a non sequitur.

In discussing the expenditures for the locomotive fleet, it pointed out that that fleet had remained stable since 1970. Since 1972, 36 locomotives have been leased. In 1977, the Frisco reduced its own fleet by four locomotives. The ICC then made this observation: "Reduction in the locomotive fleet could be a result of the carrier's efforts to concentrate on saving fuel more accurately by calculating the amount of horsepower required." 360 ICC at 1015. The more logical point is that the Frisco just did not make the investment. The Commission on the following page pointed out that the Frisco had consistently had a maintenance of equipment ratio investment below the industry average. The locomotive bad orders was rather high as of 1977, a decline which began in 1976. However, productivity had increased steadily from 1970 to 1976, a total increase of 21.9 percent. Ibid at 1016.

The ICC pointed out that the budgeted maintenance for roadways may be curtailed. It then added this comment :

Nevertheless, the operation of freight cars over a
right-of-way contributes to the deterioriation of
the roadbed and track structure, necessitating
periodic expenditures to restore these basic items
to a useable condition. A permanent loss of the
diverted cars, including related empty car movement,
contributes to a deceleration of the deterioriation,
thus, saving funds otherwise required for roadway

The fair inference, of course, is that Pokep pekatalarkopen þor

are owned up to 50 percent by the 8.N are not violpergoly, virDMA AT with the railroad. Along that line, the teply atared plura

Railroad also has interests, rancing Trom 30 pukyuth
to 1.16 percent, and numerous othet

to the jurisdiction of the Commission

clear that control may be found in blocks constituting
less than 10 percent of the voting securities where
there are no other large blocks, control can only
be found where there is power or authority to manage,
direct, superintend, restrict, regulate, govern,
administer or oversee. ***

In the case of those carriers in which railroad has
a 50 percent interest, the other 50 percent is owned
by one other, unaffiliated carrier. In the case of
carriers in which railroad has a less than 50 percent
interest, the other interests are owned by several
other carriers. In some cases, railroad may own
a larger interest in such carriers than do the other
owners as a result of its acquisition of the interests
of the former Frisco. But in no case does railroad
have the power to control such carriers. Clearly,
if the railroad were to attempt to impose policies
on such carriers which were detrimental to the interests
of the other owners, such other owners together would
have the power to defeat such attempted control.
Railroad submits that as only a single owner, it does
not control those carriers in which it owns a 50
percent or less interest. It follows that if railroad
does not control such carriers, acquisition of railroad
by a Holding Company will not result in the acquisition
of indirect control of such other carriers by Holding
Company.

(

This last paragraph should have given the ICC some very serious problems. First of all, if the B. N. owns 50 percent of an unaffiliated carrier, as it concedes, it certainly has equal control; and the significant factor is that the statutes do not state exclusive control.

Section 11343 of the Act provides Commission jurisdiction over a company not a carrier if it acquires control of at least two carriers. A 50 percent interest in a carrier must give at least equal control, and the B.N. in its reply to our petition stated that it does have 50 percent interest in companies owned by other, unaffiliated carriers. While it concedes, in the reply on page 9, that control may be found with just 10 percent of the voting interest, so long as other carriers do not exceed that percentage, it contends that its ownership of a minority interest greater than any other does not give the power to control. Reply, p. 10.

More serious than the railroad's contention is the ignoring of this issue by the Commission.

The ICC tells the Congress that it has the power to exercise jurisdiction over a company owning two or more carriers, irrespective of whether they are an integrated system, and then consistently refuses to exercise that power. The enormous railroad investment by the B.N., coupled with the extensive trackage throughout the nation under the influence or, as we submit, the control of the B. N. makes the centralized control by an unregulated corporation a very serious national concern. If the assets be transferred from the. railroad, without compensation, to a holding company and its other subsidiaries which are not subject to the Interstate Commerce Act and therefore need not be invested in a manner consistent with the railroad operation, we may have here a large and historically important railroad system severely jeopardized in the next decade by economic privation. This should create a deep congressional concern which would be expressed in a determination as to whether the ICC is actually performing its legislative duty.

CONCLUSION

But

We realize that there are many arguments for holding companies and we acknowledge the management must have its right to manage. we do believe very deeply that the national commitment through land grants was to the railroad transportation system, not to banks, not to financiers, and not to separate profit centers dissociated from the railroad industry. The Penn Central at one time was the leading railroad land owner in the United States, with its holdings reaching $1 billion. Yet, it went cash broke. It was a railroad severed thereafter from the financial institution, and the railway transportation has deterioriated ever since. Yet, the other assets are a phenomenal investment in a very healthy corporation." It was a railroad that

owned 100 percent of the Buckeye Pipeline, which distributed oil products 2 over a 7,600 mile system. It had an executive aircraft system, as

well as other investments.

Yet, it went cash broke.

The Chicago Milwaukee has been substantially destroyed. Its parent corporation continues to sell off the land, and the stock of the company has been doing very well for the last two years. In 1981, the Milwaukee sold 93,000 acres of timber land in Idaho for $134.8 million. A second land sale t $45 million in Washington was closed. A third land sale of $100 million was planned. Richard B. Ogilvie, trustee for this bankrupt railroad, was quoted in the Wall Street Journal of April 14, 1981 that "we're the hottest game in town."

All that may be well and good for the Milwaukee shareholders, but it is a tragic commentary on national railway transportation syster The Norfolk & Western Railway Company recently gave to the

University of Virginia its Erie Lackawanna Railway Division, for

1The Interstate Commerce Omission, p. 406

The Interstate Commerce Omission, p. 408