[PRCo] Utilities Scam

[Fred Schneider]

Maybe this one needs a good spreadsheet to show where the money goes so we can understand what the reporter is trying to tell us...Ed...
http://news.google.com/newspapers?id=ZnEbAAAAIBAJ&sjid=kksEAAAAIBAJ&pg=1455%2C4891397
 

Pittsburgh Press, Feb. 5, 1935, page 3

 

PROBE REVEALS UTILITY FIRMS AVOIDED TAXES

 

U. S. Commission Discovers $1,436,334,892 in Write Ups in Inquiry

 

By Benton W. Stong

Scripps-Howard Staff Writer

   WASHINGTON, Feb. 5—The Federal Trade Commission, revealing discovery of $1,436,334,892 in write-ups in utility companies they have investigated, today reported to Congress that many of the inflations were for the purpose of avoiding Federal taxes.

   “The commission’s examiners found a number of instances of ‘re-organizations’ in which the principal purpose was to avoid the payment of Federal income tax,” their report said.

   “The United Gas and Electric Company was able to avoid the payment of Federal income tx on a profit of $9,307,540 in a single transaction.

Many Other Cases

   “In another case, the Associated Gas and Electric Company was able to avoid payment of Federal income tax on a profit of $37,000,000 realized by its subsidiary, General Gas & Electric Corporation.  Many other cases were cited.

   The commission reported that increased power rates for the public resulted.

   The commission said that holding companies frequently performed construction work for their operating units and then charged excessive and erroneous amounts,” which were credited to fixed assets.

   Illustrating how holding companies make inter-company profits through financial construction of operating plants, the commission cited building of the Keokuk Dam in the Mississippi river at Keokuk, Iowa.

   The examiners found the project cost $22,809,169 though the “ledger cost” charged against the operating company was $21,909,000 additional or 92 percent.

   Securities issued against this inflated capitalization, it was said, brought $16,102,500 profit to Stone & Webster and companies associated in the transaction.  

Pittsburgh Firm Names

   The commission said promoters of the sale in 1927 of LaClede Gas Light Co., in St. Louis, to Utilities Power Light Company obtained a $14,380,500 profit on an original investment of $5,650,000 in 1924.

   In February, 1924, Corporate Investment Company contracted with W. A. Harriman, Inc. to purchase 53,600 chares of common stock in LaClede Gas Light for $5,650,000.  Corporate Investment put up $1,200,000.000 and the balance was furnished by Guarantee Trust Company, New York, and Koppers Company, Pittsburgh.

   Then LaClede Gas & Electric Company was formed as a holding company for LaClede Gas Light.   Corporate Investment then transferred the LaClede Gas Light stock to the new company for $5,960,000 of stock in the new company.   Corporate Investment Company then sold to Charles Munroe, its owner, the preferred stock of LaClede Gas & Electric at par.  In May, 1927, Utilities Power & Light bought all outstanding common stock of LaClede Gas and Electric for $14,000,000.