Evening Star Newspaper, May 26, 1933, Page 4

MORGAN'S CONTROL OF UTILITES SHOWN Said to Have Been Acquired . Through Below-Market- : Sale of Stock. (Continued From First Page.) posed _publication of Morgan special client lists in an executive session a few days ago, ‘The Morgan party arrived in. the hearing reom shortly after the commit- tee went into executive session. The financier was dressed in a different suit for the fourth consecutive day, this one being gray of much lighter hue than the previous ones. fT dragged Members of Pecora's sta: in a trunkful of papers. Junius 8. Morgan, son of Morgan, took a seat by his father, both appar- ently in good humor. The elder com- mented to those nearby on the op- pressive heat of the day and the place. Extraordinary precautions once more were taken to handle the spectators in the expansive, marble room and to bar suspicious characters. Even the usual police guard for Senate inquiries was augmented. i i { i | | i { i | | { | | | | | One plainclothes man of the Metro- | politan police was assigned directly to| Morgan, and another was assigned to Pecora, 1 The -committee had difficulty in: reaching quick agreement on whether | to make public the disputed data, and | an hour had elapsed before members of the senatorial group entered the :g\lcus room to resume the examina- o Upon the committee’s, decislon to go.! over until next Wednesday at the end of today's session, the Morgan party said it would return to New York dur- ing that pericd. Pecora indicated the inquiry probably would be concluded next week. The committee will meet later to de- cide whether to publish the partner- ship agreement. Testimony of Morgan witnesses has shown several members of the firm are indebted to it. Shortly after 11 a.m. the inquiry was resumed, with Howard on the stand. Answers Eagerly. Sitting to the right front of the elder Mo:gan, Howard said he became presi- dent of the United Corporation on Feb- yuary 26, 1929. A middle-aged man, with gray, thin hair, he testified in a sharp, clear voice. Nearly all members of the committee | were seated around the table, leaning ; forward toward the witness. Senators viped their brows, as perspiration rolled. Morgan rose to take a seat near Chairman Fletcher at the head of the table on the other side from Pecora. The loud speaker system made it much casier for the big throng that crowded the other eud of the room to hear the testimony. Howard said that “about January 11, 192 his corporation acquired from Morgan & Co. 350,957 shares of com- mon stock in Mohawk, Hudson Power, 62,360 of preference stock and 124,440 in option warrants. In addition, United Corporation got 130,565 shares of common stock from Morgan in United Gas Improvement Co., about 59,000 shares in Public Service of New Jersey and also $700,- 000 in cash. In return, he $aid, the United Corpo- Pation gave 600,000 shares of its pre- ferred stock, 800,000 of its common and 714,200 1n option warrants, “What did you get this stock from Morgan at?”. Pecora asked. Howard replied that it was acquired at about “$12,000,000 less than its mar- ket value.” The witness answered Pecora’s ques- tions eagerly, as though he were anxious to explain the whole transaction, but he confined his answers entirely to the questions. “What was the market value of the stock you received?” * * “It ‘'wasn't worth the paper it was printed on in 1929,” interjected Glass. Howard gave the aggregate market { { sSitting side by side toaay at the (left), and his son, Junius S. Morgan. Senate imvestigation into the Morgan { banking house are the famous head of that financial institution, J. P. Morgan —A. P. Photo. ion in the management of these com- panies?” asked Senator Barkley. “Everything is harmonious.” Howard then divulged the informa- tion that companies in which the United has an -interest do 22 per cent of the Nation's gas and electric busi- ness, on an output basis. Pecora placed in the record statistics showing the companies served an area with more than 50,000,000 of population. “How large is your own office staff Pecora asked. “A gecretary, office boy and Mr. Fer- guson,” Howard replied. Pecora and Howard enumerated the corporations in which the United holds stocks and the shares held. Couzens aiso obtained the percentages of the total. “What do you mean by large influ- ence—I think you said you had large influence in many of these concerns as distinguished from complete legal con- trol?” Howard was asked. Howard answered that since the hold- ing company left the operations of its subsidiaries free in most cases and that it did not hold a controlling amount of stock, that it was evident it did not have complete control. He said, however, the holding com- any participated in discussions of pol- cy and that it “naturally” was “listened to. ur advice is usually followed?” Senator Costigan asked. n some cases.” any of the companies in which your corporation holds stock are known as Morgan companies, are they not?” | Couzens inquired. Yes” ‘Then followed & discussion about & 'map purporting to show sections in | which the United Corporation Power | affiliates operate. | Howard said he had never seen it, and | Whitney also added he failed to recog- | nize it. i Pecora sald it came from Morgan & Co. and was procured there by his in- vestigators. Members of the Committee slumped back in their chairs while Pecora ques- tioned Howard about details of the 5 1 Showing' the wmap of the Eastern | United States, with various areas of | the states colored, Pecora asked “what | rrc:ntln of the electrical output in | hese Eastern states do these United companies supply?” Howard _elaborated that companies | [ | | | | | panies held by Zimmerman were listed as in: | " Mohawk Hudson Power, Public Serv- foe of New Jersey, United Gas Im- provement Go., Co., United Engineers & Constructors |and Niagara Hudson Power. “In answer to Pecora, Howard said he held directorships in the following utllity concerns: |- New York United Corporation. United | " | Gas Improvement, Public Service of | New Jersey, Mohawk Hudson Power, | Niagara Hudson Power, Frontier Co., | 8t.” Lawrence Securities Co., | Bond & Share, New York Power & Light, Atlas Corporation, Common- | wealth & Southern, Electric and Central Hudson Gas & Electric. “How much cash did the United Cor- | poration receive in exchange for its | capital stock when it was formed? | Pecora asked. Howard said he had already told of $700,000 from Morgan & Co. Howard then tesified that on the op- tions granted Morgan for purchase of United stock the price set for the mil- lion units at a dollar apiece was to allow purchase of the stock (common) for 271;. 5 Less than & month later, Howard said, the stock sold for from 56, to 581,. Under the transaction January 11,1929, Morgan got the 1,000,000 options and 400,000 shares of “common stock for $10,000,000, allocating 22!, to the com- mon stock and $1 to the opticns. The stock opened January 23 at a price of $99, together with an option for each share. Committee Rows Again. Senator Glass again challenged the counsel of the inquiry, asking if any of the transactions were a violation of “No,” Howard replied. The Glass challenge brought an- other committee row, in which Senator Couzens asked for a ruling from Chair- man Fletcher. The chairman h¢ld Pecora was carry- | ing out instructiors of the Senate. As the controversy became warmer Glass insisted the committee should be told where the inquiry was ‘going. was at this point that the Virginia Sen- ator declared the committee minutes showed no record of Pecora’s emplog- ment. In leading up to the options deal, Howard had told Pecora of $700,000 Philadelphia Electric | Electric | Columbia Gas & | value at $55.566,644. “Is the United Corporation & holding company?” asked Pecora. “Yedl® “These securities . received by the United Corporation were those of pub- lic utility corporations?” in which United has a large interest supplied from 22 to 23 per cent of the “central station’s electrical energy in the country.” He said this did not in- clude the Electric Bond and Share Co. “On gas, it is about 22 per cent,” he said. “Yes.” Morgan Had Control. “What stock was the United 'Cor- poration authorized to issue?” “A total capital stock of 13,000,000 shares consisting of 1,000,000 first pre- ferred, 2.000,000 preference shares and 10.000,000 common.” Howard said no first preferred had been issued. He said 600,000 of the $3 preference stock had been issued, and also 800,000 shares of common, all be- ing taken by Morgan & Co. The firm also received 714,000 option warrants entitling it to buy that num- ber of common stock shares at $27.50 a share. “Each share had one vote,” Howard said “Who had control?” Pecora asked. J. P. Morgan & Co.” Howard sajd. “Where are the books of your firm kept?” Pecora asked. “In the office of tI said Howard. “Have they been kept there since United Corporation’s organization?” yes” “Who signs the checks?” “Since the last annual meeting—in Pebruary of this year—they have been signed by myself and Mr. Ferguson as treasurer,” Howard said. He commented that the books were under the supervision of Leonard Keyes, office manager for Morgan & Co., and said that prior to the February meeting Keyes signed the checks for the United Corporation In answer to the earlier question, he said that the executive officers of the corporation at the time of its formation | were George Roberts, president; a Mr. Ewing, vice president, and Keyes, treas- urer. he Morgan Co.” Office in Wilmington. “Where is your office?” “In Wilmington, Del.” Howard re- plied, adding there also was an office ni 80 Park place, Newark, N. J. “In whose office is the business of the corporation done?” asked Pecora. “All the meetings are held at 80 Park place. Newark ] “How much staff do you have there?” | Benator Couzens asked. | “An assistant secretary.” “He does all the business?” “Of course, we have discussions in | New York, but the business is done at| the directors’ meetings in Newark,” | said Howard In whose office would these discus- gions be held,” Pecora wanted to know. office, perhaps in Mr. T ey's.” “You mean in Mr. (George) Whitney's office in J. P. Morgan & Co.?" TROUSERS 55,272,000 Served. He was unable to give the population | served, but Pecora presented a photo- stat from Morgan and Co., dated Sep- tember 20, 1929, and putting the pop- ulation served at 55.272,000 distributed in New York, New Jersey, Connecticut, | Pennsylvania, Delaware, Ohio, Michi- | gan. Ilinois, Tennessee, Mississippi, Alabama and Georgia. “Have you had a survey made since?" | Pecora asked. “At some time I asked some one in | Bonbright & Co. to make a tabulation, but I don't know where it is,” Howard said “Was no one in the United Corpora- tion competent to make such a survey.” “Really, there is not. We have no engineers.” | Pecora brought out that of the| United's 11 directors, three—Harold Stanley, George Whitney and Edward | Hopkinson—were Morgan partners, and | two were members of Bonbright & Co. “How many are & quorum of di- rectors?” “Four ” “How many stockholders?” “Twenty-five per cent.” It had been a majority, the witness said, but the by-laws were changed “to make it easier to get a quorum.” “Is J. E. Zimmerman on the board of directors of United Corporation?” Howard nodded and said other di- rectorship and offices in utilities com- EISEMAN’S SEVENTH & F STS. Spring and Summer Weight To Match Odd Coats “Where is your office?” I “At 15 Broad street.” “It adjoins J. P. Morgan & Co.?" ard testified Keyes kept the rited Corporation books and that he did not _know “who made entries” in those. He said he now was out of “the legal business.” “Is the Niagara-Hudson Power Co. & subsidiary of United?” Pecora asked. “I would say rather that the United has a large investment in Niagara,” Howard said. majorit; “No."” “Do you ccntrol Niagara?” don't think we control these com- panies " vou call control a majority owner- ship?” “That is legal control. You might say we have a great influence.” “You recognize oot minority may exercise a control! & of the United is that ‘Wwe do not want to control.” 2 “These & 20 abarp divisien, of epine ‘ | being obtained from Morgan as cash | {in exchange for United capital stock | | wheri the latter corporation was formed. He added: “An additional $10,000,000 | in cash came from the Morgan com- | | pany and $10,000,000 from Bonbright | | Electric Corporation. “What did they get in return for this 0,000,0002” Pecora had inquired. “Morgan & Co. got an additional 400,000 shares of common stock and 1,000,000 in option warrants,” Howare s “‘Bonbright got the same thing.” ‘These option warrants entitled them to purchase 1,000,000 shares of common stock at any time in the future at & price of $27.50 & share.” “Xes.” “Why were these .option warrant $24 GOOD e LLLLBRLPLZLVALNVVVRLLLRR 1 3 365 Put those odd coats to work. ..match them with a pair of Eiseman’s special! trousers. We are head- quarters for trousers in Washington, Hundreds of pairs...many from suits. Come in...we can find a pair to fill out those coats and vests. and the finest, freshest fruits ane You'll Agre FREE Delivery or Stop the Good Humor Man! Just phone us and we'll deliver your order to your home by the Good Humor -man. Every Good Humor car is well -stocked with these _delicious pint packages. Stop one tonite. SLLRNLVLVVVNNREIRNN Yy GOOD HUMOR gs&m&flgmmfimszu&m 3l WEEK-END SPECIAL HUMOR ICE CREAM VANILLA, CHOCOLATE, STRAWBERRY, HONEYMOON Good Humor Is Recognized as the Richest Ice Cream in W ashington Good Humor ice cream is made of pure, rich cream, cane sugar rights given? What advantage, if any, was it to United tion?" “Well,” Howard replied, “it was some sadvantage to have them—the option | warrants—in _the hands of _various | people—to pay that much additional cash into the capital structure if the company succeeded.” “If the company succeeded?” Pecora interposcd, “wouldn't the public buy?” “They might.” “And at the market value?’ Pecora asked. Howard nodded. | “Assume that United common reached $50 on the market.” Pecora | said. “Then the holders of the option warrants could demand the issuance of common stock at $27.50 a share to them. Was that to the advantage of | the corporation?” Glass Interrupts Probe. | “That would all depend, | said. “Suppose the real asset value | was_$27.50.” | ““well, an option holder wouldn't! | avail himself of that privilege if the| | market was below $27.502" uked‘\ | Pecora. | | e “But if the company needed cash,”| suggested Glass, it was materially to | the advantage of the company to have | buyers at " Howard agreed. | Continuing on the option warrants | Howard said that on the first trans action Morgan & Co. got 714,200 option warrants. On a later cash arrange- ment, Morgan & Co. got 1,000,000 mo option warrants and Bonbright Electri: | cal Co., 1,000,000. Pecora read a letter from Morgan & Co. to the United Corporation dated January 9, 1929, in which it offered to | buy 400.000 shares of common stock and 1,600,000 option warrants for $1 000.000 and noting a similar sales agree- ment with Bonbright Electrical Co. Howard said no other option rants were issued at that time. Glass threw the room into an up- roar by & demand to “know what this Is all about. FRIDAY, MAY .26. 1933. -| AMBASSADOR BOWERS k SEES FIRST BULL FIGHT s what Pecora expects to develop,’ Fletcher commented. ‘The rocm was very still. # Pecora leaned back in his chatr and waited quietly. Fletcher drummed on the table. Couzens arose. “I'll be glad to comply with the re. quest of the Scnator from Virginia, Pecora said. He then began to read the long Sen- ate resolution under which the inquiry | is beiltg made. He dwelt with particular emphasis on the pertion directing a “complete in- quiry” of banking practices. PANAMA GO VERNMENT ORDERS AID TO DEBTORS | By the Associated Press. . PANAMA CITY, May 26.—The gov- ernment yesterday ordered a suspension | in some- cases of judiclal auctions of properties attached for the payment of | debts and placed limitations on inter- est rates. It acted under extraordinary powers in fiscal matters granted during the last ession of the Assembly. The suspen- sion, effective for the remainder of this year, will be applicable in cases where the debtor is not more than one year in arrears in interest payments. In no case, however, will the courts permit the auctioning of properties for less than 50 per cent of the appraised value. ‘The Morris Plan Bank offers the INDIVIDUAL “This member is entitled to know some of the things dealt with in this amination,” he sald, his voice rising. don’t know what this is all about,” he snapped, looking at Pecora. Has there been any intimation of any violation of State or Federal lJaw?” he questicned looking about. 8 ‘Without this question being gone into it was_then that Glass brought up re- tention of the counsel. “This line of examination into the activities, operations and securities of the United Corporation,” Pecora said, “comes under that language of the Senate resolution which directs an in- vestigation into the ‘issuance offering and selling of securities.’ “It already is shown that this United Corporation issued hundreds of millions of securities to the investing public. ‘The public size and area of the opera- tions make it important enough to war- rant the attention of this Committee. It has been shown 1,000,000 option warrants entitling the holder to buy | common stock at $27.50 a share were sold to J. P. Morgan and Co. at $1 each. “Already it has been shown that a few days after this issue prices of the common stock on the Exchange were nearly double $27.50. These securities were issued at terms certainly against | the interests of the corporation to the benefit of a small group of investor: Crowd Applauds Pecora. “Couldn’t you have made this state- ment to the subcommittee,” Glass sald, “before this public investigation?” . to come to Washington every time’—— Pecora began. “As one member,” Glass interrupted, “I wanted to know so I wouldn't waste | the time listening to questions and answers of no importance to people of any intelligenee.” “I submitted & questionnaire to the | committee,” Pecora said. “Since then I have received no requests for inform: tion from any Senator or the commit- tee. Consequently, I spent my timie in New York. I did nct seek this assign- { ment. I appreciate the honor of being counsel for this committee. But Iwant to assure the Senator from Virginia that the compensation of $255 a month is no incentive to me to continue.” Here came the tremendous burst of applause from & room crowded with spectators, and. more after Chairman | Fletcher spoke in Pecora’s behalf. In leading up to the give-and-take, | there had been comment by Howard that the Federal Trade Commission had examined the United Corporation in its long utilities inquiry. “Did the Trade Commission find any violation of the Sherman anti-trust act?” Glass wanted to know. “No,” from Howard. “I'm still in the dark,” Glass almost shouted. He again said that the Trade Com- mission had “taken no action against this concern.” Senator Barkley commented that “the final report of the Trade Commission on its utilities investigation had not been made.” “A partial report, I think" Glass contributed. “I insist on knowing what this is all about. Am I going to find out or not?” he added. “I don't see how we can anticipate | | I l 19 g PINT PACKAGE d flavoring. If you've never eaten ‘Good Humor ice cream—get a pint tonite. e It's BEST! Orders Packed in Dry Ice a Few Pennies Extra ICE CREAM CO. Harry W. Brimer, Pres. 806 R. I. Ave. N.E. Decatur 3800 BANK with the added feature of offering a plan to make loans on a practical b n, which enable the borrower to liquidate his ob- ligation by means of weekl§, semi- monthly or monthlydeposits. It is not neces- sury to have had an account at this Bank in order to borrow. | | “Tremendously Impressed,” Says American, After Affair Honor of Beauty Queens. in By the Associated Press. MADRID, May 26—Claude Bowers, American Ambassador to Spain, wit- nessed yesterday his first bull fight at a special affair in honor of the beauty queens of Europe. “I was tremendously impressed with the spectacle.” Mr. Bowers said. “It evoked memories of spectacles in ancient Rome. I have never seen such color and tensity in a erowd. “The action of the matadors was a most thrilling combination of beauty of physical rhythm with the danger of death. “The placing of banderillos by special Portuguese horsemen was a beautiful exhibition.” WEDS D. C. WOMAN NAPLES, Italy, May 26 (#).—Geoffrey | Landesman, Cleveland, Ohio, member of -the University of Pennsylvania Archeological Expedition at Minturno, Italy, today married Prances Jennings Casement of Washington, D. C. The ceremony took place in the presence of Coert du Bois, the American | consul general, and members of the | American colony. They will make a wedding journey to Rome. The BANK for the INDIVIDUAL Loans are pass- ed within a day or two after filing application— with few excep- tions, MORRIS PLAN notes are usually made for 1 year; though they may be given for any period of from 3 to 12 months. MORRIS PLAN BANK Under Supervision U. S. Treasury 1408 H Street N. W,; Washington, D. €. *Character and Earning Power Are the Basis of Credit” ! 'g. Use the Kaufman Budget Plan—Pay just ' little edch week! LT Coat tu -l :pj RIGHT, ius; ta, or grey - 88,35. Flwunel Trous- amh $435—Both fer 9108 ver week. 4150 per weck oN TEE LEFT, | Utilities Stocks Held by Morgan Listed at Probe Holding Company Is Shown at Inquiry. By the Associated Press. Here is an Insight into some utilities stock holdings by the United Corpora- tion, which the Senate committee was told today is dominated by the House of Morgan and which has interest in companies serving 22 per cent of the Nation's electric and gas output: The company, shares held and the With tomorrow there corner. In these three da: going into the new quarte: clearance is imperative—a No exchanges a Suits and Suits in year-around $40 to $55 Grades. Suits in yea: $25, $30 and $35 Grades. . Trench Rain Genuine Felt Indirect Control Through | before we move into the remodeled store on the ING OUT all remaining small lots—for they are not one of those famous Rummage Sales of ours—but All purchases must be for cash Lot of Fashion Park weaves and models. Lot of Glenbrook Suits and Top Coats round weight, and in Glenbrook special weave: shares are given, , 62,370, 2. ew ¢ Jersey, 988,- percertage of t Mohawk oha Publfe Servics_ of 271, 179. United Gas, 6,066,222, 26.1. Columbia Gas & Electric, 2,424,356, 1 209. wealthi & Bouthern, 1,798~ Common: 270, 5.2. Electric Bond & Sthre, 34,857, 0.67. Lehigh Coal & Navigation, 48,705, 25. ”?maoudnud Gas of Baltimore, 33,- ., 2.8. Consolidated Gas of New York, 203,- 900, 1.8. -~ Fire Prevention Aid Offered. NEW YORK, May 26 (#).—The Na- tional Board of Fire Underwriters yes- terday voted fo offer the services of its engineering staff to the United States Government to aid in working out a fire-protection and fire-prevention pro- gram for Government buildings to be built in the public works program. are only three more days ys we are literally PUSH- rs. Reductions sound like nd time is short. nd no alterations Top Coats weight—and exclusive 14~ Coats . . $12 Hats ... 12 Narrow band and light weight. ‘L3 Broadcloth Shirts. . 89¢ Plain shades, collar attached. White, neckband only. Separate collars, tab collar Ribbed and flat; pull-over The good-fitting model. Sizes 34 to 40 only. New styles, ete. New pattern. Imported; smart patterns. Sleeveless model ; ight wei Silk lined. $390 54 *2,%2.50,*3Fancy Shirts, *1-2 65c and *1 Neckwear. Mostly foulards and crepes. *15%and *2 Neckwear . 50: L1s1e 't};H;rShirts . 50c Fancy Shorts ... *1 Madras Union Suits. 122, %2, %25 Pajamas . 50c, 75¢ Fancy Hose . *3<and *5 Golf Hose . . *1:2 *2 and *2< Sweaters . . *12 50c, 75¢ Handkerchiefs, 12¢ Some colored initials; but not all letters. 25¢ Handkerchiefs, 6for 65¢ White, self-striped yand fancy. 3= Bath Robes.....%12 _Light weight checkered Cheviots, *12,*15Lounging Robes, 5 Whitehall Shoes The last days for these prices—famous make—Blackd und Tans. $5 and $5.50 $6 and $6.50 $7.50 and $8 : The Mode—F at Eleventh s, collar attached. 39¢ . 89%¢ .29 . 29¢ . 33c . 95¢ .23c . Handmade, model. ght. 90 $6%