[PRCo] Re: Utilities Scam

[Edward H. Lybarger]

It also needs a conclusion so the reader would know if the taxes were
actually due.  The government then, as now, liked to convict in the press,
regardless of how the case worked out on its merits.
  _____  

From: Fred Schneider [mailto:fwschneider at comcast.net] 
Sent: Tuesday, September 14, 2010 2:41 PM
To: Pittsburgh-Railways at Dementia.Org; Ed Lybarger; Matthew R Barry
Subject: Utilities Scam


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
<http://news.google.com/newspapers?id=ZnEbAAAAIBAJ&sjid=kksEAAAAIBAJ&pg=1455
%2C4891397> &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.