The Washington times., 1912-11-20

authorized capital stock from $4,000, 900
to f5O,0oO,00o. The parties controlling
this company also control the WASH
| ington Railway and Electric an the
| Potomac Electric Power Company: they
propose to issue bonds to the extent
OF Sl0D,OOO,O0 and to exchange these
| stocks and bonds for the controlling In
terest in the stocks OF the various pub
lie utilities which they control, and
thereby Illegally and unlawfully domi-
nate these utilities and receive their
income and profit through corpora
tion foreign to the Jurisdiction OF the
District government. to the injury OF
the public and also of many OF the
stockholders Of some Of these underly-
Inc companies.
This is understood to be another point
OF law which will be stressed by the
lawyers for the District government.
They believe that the courts will not
permit the public utilities Of the city
were granted to them as washington
corporations. to be controlled and opera
ted by. foreign corporation over
which the District authorities have no
control would be a menace to the in
terests OF the public and Of the local
government as well.
Long Argument Expected.
without doubt there will be q long
argument on this question. The Dis
trict's lawyers have carefully looked
UP the authorities and will make the
general contention that foreign corpo-
rations have only the authority given
to domestic corporations. II this be
true, and II the court finally shall so
hold, then a Virginia corporation will
be estopped from carrying out the e.
gantic merger plan which Is proposed,
because there Is no law In force In the
District of Columbia which would per-
init such a procedure, while on the
contrary, the antitrust law has been
repeatedly no construed as to prevent.
1t is believed. such q consolidation as is
proposed here.
In behalf of the District governments
contention. It is set forth that no au-
thoritative valuation OF the public utiii-
ties Of the District Of Columbia has ever
been made. While the street railways
in the District are required to make an
nual reports, these are alleged to be
useless for any purpose Of determining
the real value OF the property. 1t is,
therefore, not known and is impossible
to know, where their rates and charges
are are reasonable; though Il IL believed
overcharging the public. The issue OF
securities Of these corporations. and the
service rendered by them, Is declared
not to, be sufficiently regulated. and It
mnsq SSi has eobhess iii hss
power to impose all these regulations.
The Corporation Counsel charges
that one Of the objects OF the pro-
to evade the effect of that law by
completing the consolidation before It
can pass.
May Injure District.
1t is pointed out that II this con-
solidation Is permitted to be carried
nn hn atf-ir ~
government, will be injured because,
in the accounting processes OF the
holding corporation II will be possible
to transfer apparent earnings. and
therefore apparent values. outside Of
the District Of Columbia. SO that they
VIII be taken there instead OF in this
Jurisdiction.
For instance. II is pointed out that
some OF the Virginia railway and
brouEht into the merger are provid,
ed with their electric current by the
Potomac Electric Power Company. at
prices actually less than the cost Of
OF this. is that the earnings and
profits. and therefore the taxable valu-
alton OF the Potomac Electric would
apparently be reduced, while the
earnings and prohts Of the outside
creased by reason Of their ability to
get their power at less than cost.
Therefore the book showing would
indicate an artificialiy depressed val
Washington. for the benefit Of the
local government and artihcially in
creased value of the property taxable
outside Washington and from which
the Washington government can get
Messrs. King. Hibbs. and their as
sociates. 1t Is charged, propose.
through their control so. to operate
hn nrtn 20 alrs
them most profitable to the holding
corporation. 1t Is alleged that stock
holders who decline to exchange their
shares for the shares of the holding
OF the manipulation OF intercorpor-
ate relations, etc, SO as to divert the
profits into the Golfers Of the holding
corporation. 1t is expected that on
this point there will be a bitter con-
tention among the lawyers.
The Districts lawyers believe they
will be able to prove that through the
complexities of inter-corporate relation
dominating the holing corporation will
be able largely to aggregate their profits
In the treasurers OF those underlying
corporations in which the holding COM
while underlying corporations In which
the hol!ng company Is small proper
tionate, holder will suffer.
Redistribution of Stocks.
Individual stockholders OF the under
lying companies will lose all voice In the
conduct OF their business. and will draw
their dividends only from the holding
company.
1t is also pointe out that IL this merger
is once carried out and subsequently
held to be unlawful the various classes
of stock which 1t has gathered in will
have to be redistributed to the original
holders: but THIS redistribution. under
the rule laid down by the Northern Sc
curities dissolution decree, will not give
to each original holder the precise share
instead will give him his pro-rata share
of all the different issues and classes
of stocks which may have been gather
The effect Of this would be that a
stock. capable OF earning regular divi-
dends, would. following such a distribu-
ton, be compelled to take hodge-podge
of fractional shares OF all the COM
panies, both profitable and Improbable.
in which the holding company was In
terested
In general, the corporation counsel
concludes that the whole merger prop
ostion IL without authority OF law, and
is violation of the interests Of the pub
lie that patronizes the utilities, the Gov
crnment which taxes them. and the
stockholders whose interests are so
vitality involve. Wherefore the court Is
asked to enjon further proceedings by
way of carrying out the merger pro-