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Mr. EGAN. Absolutely.
Senator BONE. But the value was not represented by investment?
Mr. Egan. It has been represented by investment since.

Senator Bone. Should not the public have to pay only on what at least represents a prudent investment?

Mr. Egan. That is all it was. The public would never have received the benefits out of that plant that it has been receiving for over 20 years unless that financing had been carried on the way it was. I had no hand in it whatever. I am the innocent purchaser that went along.

Senator BONE. I am merely discussing the fact.

Mr. Egan. I would have been proud to have done that job the way it was done. It was a grand feat. That is what it was.

Senator Minton. Now, your company has accumulated all of that stock that the Senator was talking about?

Mr. Egan. That is right.

Senator MINTON. And that stock was given out as a bonus to the people that furnished the money to originally build it?

Mr. Egan. Yes.

Senator MINTON. How did you go about accumulating all that stock?

Mr. Egan. We began over a period of years. I went to the North American Co. and suggested that it would be a fine thing if we could get that stock of the Mississippi River Power Co.; and the reason it was a fine thing was an operating reason.

It was not that we just wanted to own a plant out at Keokuk. About half of the output of the plant at Keokuk is sold in the St. Louis area.

The contract for sale is an enormous document. It covers the sale of current for a period of 99 years, and it covers all kinds of operating details. As long as those two companies were separate and not under common ownership there was a constant friction between the operating departments as to how the contract should be interpreted. Some of them were getting around it by the creation of what we call “ operating agreements. The contract itself was filed under the mortgage. It is a part of the property of that company. The bonds could not have been sold unless that contract had been filed under the mortgage.

Senator Minton. What I am interested in is how you accumulated all this stock.

Mr. Egan. I am coming to that. The result was that I wanted to have it; I wanted it badly; and we started in, and the North American had its 17,600 shares that you mentioned with a face value of $1,760,000. At the time the North American got them, they did not have the value of waste paper; they were not worth a thing. The stock was a drug on the market for years. As the company's business grew. they became more and more valuable. They started to buy what they could in the open market. I have forgotten the exact details of it, but when we finally consummated it their ownership had become so big that they were able to go to the people who were then in charge of the operations of the company and make a good trade with them for the stock they held. That is the way it was done. We did not get it all at that time. e were picking it up in driblets over the years.

Senator BONE. Will you advise us, if you can, what your company paid for that stock, for that block? Did you secure all of it?

Mr. Egan. We paid for the big block $12,000,000.
Senator BROWN. How much was that a share?
Mr. EGAN. $75, as I recall it.
Senator Brown. How much was it worth before you bought it?

Mr. Egan. I think that is a matter of opinion, Senator. It had not paid any dividends.

Senator Brown. For how long?

Mr. Egan. It had been outstanding since 1913 to 1926. For 13 years it took the excess earnings and used them in surplus to build up the company. There had been no dividends paid on it at all. Senator Brown. And you bought it at $75 a share?

Mr. EGAN. We paid $12,000,000 for it; and my recollection is it was about that rate.

Senator BONE. Do you have all of the common stock? Mr. Egan. All except about 400 or 500 shares that we cannot locate, which is lost, apparently.

Senator Minton. Then you did buy it for some other reason than simply to control operation?

Mr. Egan. Oh, yes. I knew we could operate it more efficiently and more satisfactorily to everybody concerned than anybody else could.

Senator MINTON. And could get some dividends on this common stock?

Mr. Egan. That is exactly right.

Senator MINTON. So it was not just to get control of it and get the operation in your hands, but you saw the possibility of controlling the company ard operating it and getting dividends on the common stock, which, when it first came out, was, as you say, purest wind and water?

Mr. Egan. That is right.

The CHAIRMAN. We have interrupted you a great deal here. Did you have something in mind that you wanted to go into at this time?

Senator WagNER: I wanted to ask one question, Mr. Chairman.

Did any of your outstanding bonds go over within the las for 5 vears? Mr. Egan. Yes. Senator WAGNER. How did you refund ? Mr. Egan. We sold new ones. Senator WAGNER. Were you able to sell them in the market? Mr. EGAN. Yes. Senator WAGNER. How long ago was that?

Mr. EGAN. I think it was 3 years ago. I can't give you that exactly; but it was about that.

Senator WAGNER. In view of your method of financing. I wondered about that.

Senator SHIPSTEAD. You operate a plant and sell electricity from the Keokuk Dam in the St. Louis district !

Mr. Egan. It goes into our power pool, and that is one of the sources.

Senator SHIPSTEAD. Your sales had greatly increased and you could use this extra power!

Mr. Egan. Yes.

Senator SHIPSTEAD. And the fact that you had that output, and having practically a monopoly, it made that stock worth that much to you because you could collect rates back from the consumer?

Ńr. Egan. The output, Senator, from that plant is sold on the average for 5 mills a kilowatt-hour.

Senator BONE. What is its wheel capacity ?

Mr. Egan. It has 15 wheels of 9,000 each. The capacity of the plant is 135,000 kilowatts.

Senator Bons. About 170,000 horsepower?
Mr. Egan. Yes.
Senator WAGNER. Did you sell these refunding bonds at par?
Mr. Egan. Very close to it; yes, sir. Just a slight discount.
Senator BONE. Is the pool very far back of the dam?

Mr. Egan. The average operating head is about 34 feet. When the river flow is very low we get our highest head because then the water goes away from below the dam and increases that difference in elevation.

In a flooded condition, as it is now, the water backs up in the tailrace, and the result is that it limits the capacity of our plant.

Senator Brown. To get back to that tax question: Assuming that you paid a tax to the Government at one rate of depreciation and the report you filed with the commissions was at another, that means you keep two sets of books, does it not?

Mr. Egan. Well, I would say we keep two sets of books with respect to that item, sir. We keep our books the way the regulating commissions require them to be kept.

Senator Brown. Who requires you?
Mr. Egan. The regulating commission of the State of Missouri.

Senator Brown. Who requires you to pay on a higher depreciation than you show in your return to the State commission?

Mr. EGAN. If the Internal Revenue Department accepts, and you agree with them on the basis on which you file your return, then you pay on that basis.

Senator Brown. That would affect your surplus, and there are a number of items that it affects!

Mr. Egan. Yes, sir.
Senator Brown. So you keep two sets of books?
Mr. EGAN. Yes.
Senator Brown. What is the reason for that?

Mr. Egan. Because we are required to by the two regulating commissions.

Senator Brown. Do you mean to say that the Internal Revenue Department would not take it at a 3-percent depreciation ?

Mr. Egan. I don't know. I know they are very insistent on having done what they think ought to be done.

Senator Brown. When you have a low depreciation you have a high surplus, and that is good for the public to look at; but when you get to a matter of taxation you do not care so much about that!

Mr. Egan. There may be something in that.

Senator Brown. Do you know any line of business where they run two sets of books, except yours?

Mr. EGAN. I do not know anything about how other lines of business run their books, sir.

The CHAIRMAN. Have you about finished. Mr. Egan? Mr. Egan. I would like to look over what I have here. If you would like to recess, I could perhaps come back for a little while this afternoon. The CHAIRMAN. Is Mr. Gadsden here? Mr. GADSDEN. Yes, sir.

The CHAIRMAN. Have you another witness that you want to put on this afternoon?

Mr. GADSDEN. Mr. Justin Moore. The CHAIRMAN. What company does he represent? Mr. GADSDEN. He is going to represent our committee. His home is in Richmond, Va.

The CHAIRMAN. We will recess until 2:30, and we will meet over in the room in the Capitol.

(Whereupon, at 12:25 p. m. a recess was taken until 2:30 p. m. in the Interstate Commerce Committee room in the Capitol.)

AFTER RECESS

The committee resumed at 2:30 p. m. on the expiration of the recess, in the committee's hearing room in the Capitol.

The CHAIRMAN. The committee will please come to order.

Mr. Egan. Mr. Chairman, I am not going to appear any further in connection with this matter, in the interest of conserving time and in order to provide the opportunity for better talent. But I would be derelict if I left without expressing

The EXAMINER (interposing). Do you think they have any better talent?

Mr. EGAN. I am sure of it.
The CHAIRMAN. I doubt it.

Mr. Egan. As I started to say, I would be delelict if I left the committee table without expressing my appreciation to you and the other members of the committee for your courtesy. I thank you.

The CHAIRMAN. Mr. William T. Chantland, attorney in charge of utilities investigation of the Federal Trade Commission, sent me a letter this morning which I neglected to insert in the record. I will now read it:

FEDERAL TRADE COMMISSION,

Washington, April 22, 1935. Hon. BURTON K. WHEELER, Chairman Committee on Interstate Commerce,

United States Senate, Washington, D. C. Re: Judge MacLane's testimony on inflation in the Utah Power & Light Co.

group.

DEAR MR. CHAIRMAN: Judge MacLane was correct in saying that the figures he handed you referred only to the properties coming into the group which had been formerly owned by the Telluride Power Co. In exhibit 5164, printed in part 45 of the Federal Trade Commission's report to the Senate, at page 1663, it is shown that these former Telluride properties cost the Utah Securities Corporation, to whom they first came as a part of the Electric Bond & Share Co. system, the sum of $6,480,708.32, and that they appeared on the books of the Utah Power & Light Co. as a fixed capital charge in the sum of $22,100,000, or an excess of $15,619,291.68 over the original cost of $6,480,708.32.

However, in the same exhibit, at page 1686, shown the total inflations in the accounts of the Utah Power & Light Co. for the Utah and Colorado com

panies. Table 23 on that page shows the cost of the properties and securities in the Utah and Colorado groups to the Utah Securities Corporation to have been $15,511,227.34, which was charged to the Utah Power & Light Co. and set up on its books in the sum of $47,470,442.56, or an excess of par value of securities issued over the 1542 million cost to the Electric Bond & Share Co. group of $31,959,215.22. Besides this the text of the report shows there were certain other items which are not included in the table, because the final results could not detin.tely be determined, which would raise that excess to $34,330,246 (idem).

In exhibit 4920, printed in part 35 of the Federal Trade Commission's report to the Senate, at pages 233 to 235, the inflation in the Idaho group of properties is shown. In this instance several sets of figures are reported. According to one of these based on the company's claim plus the method of computation by an accountant, Hassan, the $22,792,393.99 which appeared on the books of the Idaho Power Co. was at least $9,692,314.99 in excess of the cost in 1916 to the Electric Bond & Share Co.'s owned electric investment company. This case is one of the rate cases which Judge MacLane referred to as having taken part in. The Idaho commission, as of December 31, 1922, found the value as set up on the company's books with the additions as made up to that time as $28,839,758.46, with an allowable cost as a rate base of $19,865,855.88 on an excess of book value at the end of 1922 over the commission's allowance of $8,973,902.58.

Adding the $8,973,902.58 to the proven $31,959,215.22 we have approved inflation in the Idaho, Utah, and Colorado groups that went to make up the Electric Bond & Share Co.'s Utah Power & Light Co. of $40,933,117.80 proven inflation with approximately 242 million more that probably belongs there (being commissions paid, discounts charged and a separate excess amount paid to an intermediary) on an original cost of about $35,377,000. Very truly yours,

WM. T. CHANTLAND,

Attorney in Charge of Utilities Investigation, The CHAIRMAN. Speaking of inflation, Senator Thomas of Oklahoma ought to have these figures.

Who is your next witness?
Mr. GADSDEN. Mr. Moore.
The CHAIRMAN. All right, Mr. Moore.

STATEMENT OF T. JUSTIN MOORE, A MEMBER OF THE LAW FIRM

OF HUNTON, WILLIAMS, ANDERSON, GAY & MOORE, OF RICHMOND, VA., APPEARING ON BEHALF OF THE COMMITTEE OF PUBLIC UTILITY EXECUTIVES

The CHAIRMAN. Your name is T. Justin Moore? Mr. MOORE. That is right. The CHAIRMAX. And you are vice president and general counsel of the Virginia Electric & Power Co.?

Mr. MOORE. That is correct, Mr. Chairman.

The CHAIRMAN. And are also a practicing lawyer in Richmond, Va.?

Mr. MOORE. That is right. I am a member of the firm of Hunton, Anderson, Williams, Gay & Moore. I have beer à member of the Richmond Bar for approximately 22 years. Immediately after graduation at law school I entered a law office in Richmond which was largely engaged in public utility legal work, the office representing the local power company at that place. And ever since that time, in one way or another, I have been very actively engaged in legal matters for various públic utility companies in the State of Virginia and northeastern North Carolina, being engaged more with

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