The Washington times., 1916-01-08
RAIL WAY PROF|TED
THROUGH FALLS DEAL
Corporation Gave $425,0O0 for
Shares, Then Sold Them for
Million.
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modern trend. however. is to employ
waterpoWer, where waterpower Is avail
none non IN sufficient quantity to insure
econoinlcai productions.
Aio While there may be some ques-
tlon as to the availability of
the Great Falls waterpower site for
.nis purpose, certainly it is per-
tlhent to inauire of the company re-
gardine the circumstance Of its present
Improbable two-thirds ownership Of
TINS site-unprofitable to the power
company. and hence to its patrons, but
NOT. as we shall show. to the Washing
Ton RAILWAY and Electric Company.
oh November 26, 1902. as brought out
IN an exhaustive report on the affairs
or the railway company. submitted to
the House District Committee by for
mer District Commissioner Chester
Harding. the Washington Railway and
OF stock in the Great Falls Power Com
pany, and thus obtained two-thirds in
terest in all the rights Of the latter
concern. For these shares the rail-
way paid In cash $4,000. which price
stood on its books as the value OF the
property. For nearly ten years the rail-
way company held on to these shares,
although in the meantime no power
plant had been built by the Great Falls
company and the property was abso-
lutely unproductive Of any revenue to
the railway. on May q. 1912. the WASH
ington Railway and Electric Company
entered into a contract with the Poto-
mac Electric Power Company whereby
the railway company pledged itself
within year to turn over to the power
company its two-thirds interest in the
water-power site. In return for this
the power company. at the tune of the
execution of the contract, was to give
to the railway company 10000 shares Of
Potomac Electric Power Company stock.
valued at 81 100000 AS security for the
faithful performance Of the contract, 1t
was agreed that the 1894 shares OF
with the United States Mortgage and
Trust Company as trustee. Failure on
the part Of the railway to deliver the
Great Falls stock in the period specified
obligated a return of the respective
shares.
Contract Extended.
on May n, 1912, the time OF the con-
tract was extended for a year by mu-
tual agreement. At the hearing before
the commission ons November 12. 1873,
the commission. after some trouble,
finally got from the railway company
an admission that the 3.33i shares of
thirds ownership Of the site, had not
been conveyed to the Potomac Electric
Power Company. but that the process OF
perfecting title was then under way.
But the testimony also showed that
the 10000 shares OF Potomac Electric
Power Company stock had been deltv-
cred to the railway company. and that
since delivery was made the railway
had actually collected divi-
dends on these 10000 shares to the OK
tent OF $4,000 In other words. the
power company. receiving UP to that
I time nothing but an agreement on the
part of the railway company to give 1t
3 .334 shares OF unproductive stock. for
increased it's own outstanding capital
stock from $500. .000 to 5000, 600 and paid
to the railway company $105.0O in divi-
dends because OF such increase in capi-
tai. The nature of such a transac action
would seem TO be eXplainable only from
Power Company is owned outright by
the Washington Railway and Electric
whose directors and officers
are identical with its own.
As for the reasons pcrsuading the
mower company to pay 81 900, 900 for this
interest In the water-power site that
cost the railway company hut $425.ooo.
and was so valued on the railway COM
nanvs books. there Is nothing to show
that the power company Is planning to
build water-power, plant to take the
place OF its steam plant. on the other
hand. Commissioner Harding. search
ing in his report for a reason for this
observes:
"The onlv immediate and apparent ef-
feet Is that tho dividends of the power
companv are distributed over 10000 ad-
dtional shares with consequent re-
duction In the dividend rate"
That this result may have been actual
" the aim of the common directors OF
the Potomac Electric Power Company
and the Washington Railway and Elec-