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approximately $20,500,000. But the new balance sheet showed a funded indebtedness of a first mortgage of $27,500,000 and nearly $13,000,000 of notes. In other words, this company was saddled with more than enough debt to pay for its absorption by the New England Power Association group.

All this appears in exhibit 4834, Federal Trade Commission hearings, parts 31 and 32, pages 657-659.

5. BONDING AND OPERATING GROUP TO PROVIDE

UPSTREAM'

MONEY

The case of the Metropolitan Edison Co. of the associated group is what might be called the “limit of the reverse English " on holding-company assistance to operating companies. In that instance the Metropolitan Edison, being a prosperous operating group in the associated system, was caused to bond itself for $8,000,000, and the entire result of that bond issue was passed up to the holding-company group. Very truly yours,

(Signed) WM. T. CHANTLAND,

Attorney in Charge of Utilities Investigation. Senator HASTINGS. Mr. Chairman, I am interested to know what the figures show at the time that report was made to Congress. I wonder if that information is available! In other words, the writer of that letter goes on to say that this company had deceived the Congress by giving false information during the Sixty-ninth Congress, and then he proceeds immediately thereafter to show that that was false by bringing the whole record up to date. Now, in order that we may know how false this was, it is important, it seems to me, to find out what the figures were at the time that report was made.

The CHAIRMAN. I think they have the figures. While I read the letter hastily, and am frank to say to you that I had not read the letter prior to reading it here this morning, I think that gives the information.

Senator HASTINGS. In all fairness, I think that data should be included with the letter.

The CHAIRMAN. I thought it was included in the letter.

Senator HASTINGS. The complaint as made is that in the Sixtyninth Congress

The CHAIRMAN (interposing). I will read that paragraph of the letter to you again.

Senator HASTINGS. All right. The CHAIRMAN. It is as follows: 3. Profits from servicing fees. As some of the members of your committee may recall, the Commission was forced to go into Federal court and received two different decisions from Judge Knox, of New York City, before they were able to procure the operating expense ledgers of the Electric Bond & Share Co. It was necessary for the Commission to have these in order to know the profit which the company had made on its servicing fees. In the Commission's prior investigation, also conducted at the request of the Senate, to determine what the position of the General Electric Co. was in the electrical-utility industry, the Commission had conducted much of its investigation by questionnaire and some by personal interviews, but had not examined the books or records of companies as they have in this investigation. At that time, as a result of statements made by responsible representatives of the Electric Bond & Share Co., the Commission reported to the Senate, in Senate Document 213, Sixtyninth Congress, second session, relating to these services as follows:

“That the general service fee just about covers the cost of the service" and that the special fee for engineering " consists of the total of the costs ", and that the fees charged by its two subsidiary construction companies “just about cover the expenses of the construction companies."

Based on these three statements the Commission reported that

[graphic]

“ From the foregoing account it will be seen that the Electric Bond & Share Co. regards this service staff as an auxiliary organization that does not directly produce for the company more than a nominal profit."

When those statements are compared with the facts disclosed after the Commission obtained the operating expense ledgers we apparently find one compelling reason why the Bond & Share Co. resisted the Commission's exami. nation of those expense ledgers. Instead of making no or only a nominal profit the Commission discovered that over a term of years the Bond & Share Co. collected over $51,000,000 in various fees (Pt. 62, Federal Trade Commission Reports, Ex. 5602, beginning at p. 330).

Senator HASTINGS. But what I want to know is whether that $51,000,000 is up to the date of this investigation, or whether that $51,000,000 was at the time of the making of the report to the Sixtyninth Congress.

The CHAIRMAN. Well, I think it is clear from a reading of the whole letter that it took in the period mentioned previously, because it was in the Sixty-ninth Congress that they made this report they said upon those statements. But when they went into the books of the company they found that for a long period of time they had collected the $51,000,000, and the letter says:

Allocating the expenses as between that applicable to the company's investment holdings and to its service contracts, the Commission found and reported in chapter IX of its report to the Senate that for 1927, against a total servicing income of $9,373,172.07 the total servicing expense was $4,404,722.77.

Senator HASTINGS. That was after the report was made, wasn't it?

The CHAIRMAN. Mr. Chantland is here and perhaps he can answer you.

Colonel CHANTLAND. Yes, Senator Hastings. And we would be very glad to find what Senator Hastings wants.

Senator HASTINGS. Well, don't you know? You have stated in this letter that those representatives of the company deceived the Congress. Now, I should like to know to what extent they deceived the Congress. And it seems to me it is quite important to have the figures as of that date. So far as I know and so far as anything that appears in this letter would show, what they said there might have been true, except that you say it was not true. I should like to know to what extent it was true and to what extent it was not true.

Colonel CHANTLAND. That was going to be my proffer to you, that we find the things for the years prior to the time they made that representation, and put it in exactly for those years.

Senator HASTINGS. You have already stated it was a misrepresentation.

Colonel CHANTLAND. Oh, yes. And I feel that I am warranted in saying now that it was a misrepresentation, because the 51 million dollars collected was for a term of years, and the schedule of fees on which those profits were made were in effect in the matter of the larger sums further back. They have been greatly reduced over a term of years; as a matter of fact, at this particular time Electric Bond & Share charge very much less, and at this time they have almost got down to a cost basis.

Senator HASTINGS. Doesn't the Federal Trade Commission report show year by year that 51 million dollars?

Colonel CHANTLAND. Yes; it does show for what years the 51 million dollars was made up but it does not show it separately in a way we would need it in order for me to answer your question specifically. But I will get that data so that we may have it stated exactly for each year prior to the time of the report. That is what I am trying to show you. Senator HASTINGS. All right.

(Later on during the hearing the following proceedings were had, and the committee reporter was instructed to transcribe them at this place :)

The CHAIRMAN. Senator Hastings, Mr. Chantland has just called my attention to a letter from the chairman of the Federal Trade Commission found in Document 92, parts 23 and 24, filed with the Secretary of the Senate May 15 and June 15, 1930, giving the data that you suggested you wanted. I am going to ask that it be placed in the record.

Senator HASTINGS. Very well. Suppose you have it placed in the record preceding Mr. MacLane's statement. The CHAIRMAX. All right. The committee reporter will do that.

130251-35-19

[graphic]

Income, expense, and reconciliation of surplus for the period March 15, 1905, to March 13, 1929

$284, 358. 87 $48, 232. 46 $236, 126. 41 $87,500.00 Year endingJan. 31, 1907.

60, 888. 64 139, 037. 60 108, 611. 20 176, 032.74 $1,326.77 483, 243. 41 51, 419.60 431, 823.81 100,000.00 Jan. 31, 1908.

47, 052.02 151, 357. 41 73, 269. 97 43, 155. 88 14,038. 11 328, 873.39 85, 460.76 243, 412, 631 100,000.00 Jan. 31, 1909.

$29, 279. 10 72, 849. 11 140, 591.88 137, 632. 18 61,085.40 1, 443. 44 442, 881. 11 131, 029.43 311, 851. 68 100,000.00 11 months ending Dec. 31,

31, 089.41 70, 221.95 149, 923.76 167, 202.74 317,762. 24 1, 559. 22 737, 759.32 144, 039.60 593, 719.72 91,666.67 $80,000.00 Year endingDec. 31, 1910

63, 157. 59 114, 735, 24 159, 601. 21 159, 816. 54 191, 878.65 2, 215.08 691, 404. 31 183, 985.93 507, 418.38 100,000.00 160,000.00 Dec. 31, 1911, 138, 153. 64 319, 290.88 116, 375.68 169, 310.18 223, 126.98

966, 257.36 259, 045. 60 707, 211.76 103, 333.33 160,000.00 Dec. 31, 1912.

214, 785. 89 189, 991. 75 215, 522.42 334, 683.23 579, 966. 79 32, 028.78 1,566, 978. 86 340, 321.60 1, 226, 657.26 160, 932. 36 225, 333.33 Dec. 31, 1913.

424, 366. 79 408, 348.68 326, 668.55 5,899.03 354, 245.07 34, 875.51 1,554, 403. 63 425, 007.98 1, 129, 395. 65 277, 900.41 363, 000,00 Dec. 31, 1914. 599, 646. 40 395, 298. 15 396, 475, 23 51, 972.39| 115, 118.83

9.65 1, 558, 520.65 421, 478.96 1, 137, 041. 69 298, 391,67 400,000.00 Dec. 31, 1915.

591, 473. 04 322, 966.36 497, 624. 51 254, 359.41 147, 702.07 6, 211, 72 1, 820, 337. 11 419, 252.161, 401, 084.95 344, 646.77 433, 777.78 Dec. 31, 1916

612, 740. 49 480, 023. 02 446, 802. 59 396, 684. 56 215, 452. 24 19, 212. 22 2, 170, 915. 12 603, 982.68 1,566, 932, 44 375, 557.52 458, 222, 22 Dec. 31, 1917

793, 877.63 565, 562.97 905, 656.88 457, 505.09 168, 410. 19 249, 007. 61 3, 140, 020.37| 1,073, 630.56 2,066, 389.81 487, 710. 49 644, 888.89 Dec. 31, 1918

906, 795. 53 680, 554. 50 926, 691. 43 22, 897.50 61, 945. 05 790.01 2,599, 674.02 1, 149, 592.34 1,450, 081.68 511, 773.25 680, 545.85 Dec. 31, 1919.

1, 129, 276, 23 722, 789.21 951, 330. 46 39, 098.21 226, 611, 23 45, 766. 31 3, 114, 871.68 1,417, 399.81 1,697, 471.84 563, 524. 99 778, 730. 18 Dec. 31, 1920.

1, 372, 832.87 599, 590.82 1,248, 871. 59 12,878. 66 149, 530. 19 6,787.32 3,564, 734. 131 1, 437, 133.82 2, 127,600.31 588, 580.00 800,000.00 Dec. 31, 1921.

1,485, 448.77 621, 545. 32 1, 372, 821.21 110,286.28 372, 181.73 6, 689. 53 3,968, 972.84 1,591, 459.18 2, 377, 513.66 606, 666, 67 800,000.00 Dec. 31, 1922.

2, 158, 228. 26 952, 590.20 1,387, 910.63 494, 018. 82 876, 621. 18 272, 142.37 6, 141, 511. 46 2, 400, 042.10 3,741, 469.36 676, 666. 66 2 904, 357.78 Dec. 31, 1923

4, 159, 476.69 1,870, 926.67 2, 279, 683.78 289, 624. 69 1,312, 104.94 1, 498, 876.36 11, 410, 693.13 3,941, 334.87 7, 469, 358.26 1, 123, 191, 67 399, 609.47 Dec. 31, 1924.

5, 295, 988. 473, 456, 894,18 1, 489, 066.26 1,026, 677.19 1, 262, 586.93 21, 668. 24 12, 552, 881.27 4,097,000.428, 455, 790.85 1,353, 400.00 1,856, 576.64 Dec. 31, 1925.

5,905, 112.13 1,544, 542.07 2, 233, 478. 74 6,747, 336.00 1,178, 548. 40 11, 480.53 17, 620, 497.87 5, 318, 131. 74/12, 302, 366.13 1,500,000.00 2, 412, 819. 47 Dec. 31, 1926.

7, 791, 936.60 2,069, 477.85 2, 806, 040.89 4, 237,810.48 3,135, 549.68 16,879.44 20, 056, 694.94 5,987, 460.84 14,069,234. 10 1,500,000.00 2,000,000.00 Dec. 31, 1927.

8, 084, 956.06 5, 407, 553. 21 3, 427, 015. 60 288, 080.46 1, 288, 216.01 17, 478.51 18,513, 299.856,613, 973.47|11, 899, 326.38 2,376,933, 343, 387,500.00 Dec. 31, 1928

7,891, 031.01 7,978, 561, 09 428, 141.64 428, 103.56 1,025, 496.41 379, 115.13 18, 130, 448.84 6,032, 288. 18/12,098, 160.66 3,000,000.00 4,533, 333.33 Jan. 1-Mar, 13, 1929

1, 217, 114.52 3,477, 410.45 132, 034. 69 374, 903.08 39, 802.36 18, 826.53 5,260, 091.63 1, 245, 793.36 4,014, 298. 27 604, 838.71 1,700,000.00 Total.

51,096, 767. 12 32, 607, 47. 43722, 462, 917.00 16, 401,772.86 13,555, 618. 94 2,655, 774, 85) 138, 680, 325.14 45, 418,587.4593, 261, 737.6917, 033, 214, 61 24, 178, 694.94 The CHAIRMAN. Mr. MacLane.

EXHIBIT No. 1

Interest
earned (see
Exhibit
No. 47)

Profit and
loss, stocks

and bonds
(see Exhibits
Nos. 50 to

53)

Supervision, engineering, | Dividends and con

received struction

(see Exhibits
fees (see
Exhibit

No. 39)
No. 2)
(2)

(3)

Commis-
sions (see
Exhibit
No. 22)

Miscella-
neous other
income (see Total earn-

Exhibits ings
Nos. 54 and

Expenses
(see Exhibits
Nos. 56 and

57)

Net earn.

ings

Period

55)

(1)

(4)

(5)

(8)

(9)

(10)

Mar. 15, 1905 to Jan. 31, 1906 $77, 810.03 $135, 192. 36 $38, 868.73 $32, 487.75

• Profit on services without allocation of any expenses to other business.

STATEMENT OF JOHN F. MacLANE, A MEMBER OF THE LAW FIRM OF SIMPSON, THACHER & BARTLETT, NEW YORK CITY, APPEARING ON BEHALF OF THE COMMITTEE OF PUBLICUTILITY EXECUTIVES

The CHAIRMAN. Mr. MacLane, I understand that you are general counsel of Electric Bond & Share Co.

Mr. MacLANE. Our firm has been counsel for Electric Bond & Share Co. for a great many years. The CHAIRMAN. I see. Mr. MacLANE. Mr. Chairman and gentlemen of the committee

The CHAIRMAN (interposing). One minute. Please give your full name for the benefit of the members of the committee. Mr. MacLANE. My name is John F. MacLane. The CHAIRMAN. And you are a practicing lawyer? Mr. MACLANE. Yes. The CHAIRMAN. Where do you live?

Mr. MACLANE. I live in New York, and am a member of the law firm of Simpson, Thacher & Bartlett, 120 Broadway, New York City. Our firm incorporated Electric Bond & Share Co. and incorporated the associated or sometimes called subsidiary corporations of the Electric Bond & Share group.

It has also been counsel for a number of other companies, which are not in the Electric Bond & Share group today. Some of them had some association with Electric Bond & Share at the time of their incorporation but are no longer associated.

I myself was in 1911 or 1912 a poor and comparatively honest lawyer (laughter] in Boise, Idaho. At that time I was counsel for some utility corporations which were struggling along with problems that confronted them, and after various matters I will refer to later, the owners of those properties went to the Electric Bond & Share Co. and asked to be extricated from their difficulties, and the companies came under the supervision of Electric Bond & Share, where they have been since. Since 1911 my personal practice, for something like 15 years after that, was in the West and the balance in New York, and has been very largely as counsel for utility operating companies and holding companies.

The CHAIRMAN. As I understand it, you as attorney for the Electric Bond & Share Co. have visited wherever there was a contest over rates and appeared for the operating companies in the various States to defend their rate structure.

Mr. MacLANE. Well, Mr. Chairman, I have tried a great_inany rate cases in different parts of the country, but to say that I have handled all the rate controversies that the associate companies had would be an exaggeration, although I have conducted several rate cases myself.

The CHAIRMAN. All right.

Mr. MacLANE. Now, I am appearing here today on behalf and at the request of the Committee of Public Utility Executives, which is canalizing their opposition to the passage of this bill in its present form through this voluntary committee which is brought together for

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