The Washington times., 1916-01-08
RAILWAY PROFITED
THROUGH FALLSDEAL
Corporation Gave S425, 900 for
Shares, Then Sold Them for
Million.
tcOntInued from Tlrst paEel

CONTINUED from First Page.) I
modern trend. however. Is 70 employ
Meterpower. where waterpower iB avail
hDIe IN sufficient quantity to insure
economical productions.
,,a ana while there may be some ques.
the Great Falls waterpower site for
tnis purpose, certainly Il is per-
tnent to induire OF the company re-
karolng the circumstance Of It's present
Improbable two-thirds ownership OF
THIS site-unprofitable to the power
company, and hence 10 it's patrons, but
not as we shall show. to the Washing
Ton RAILWAY and Electric Company.
On November %, 1902, as brought out
~ an exhaustive report on the affairs
v u. tne railway company. submitted to
the House District Committee by for
mer District Commissioner Chester
Harding, the Washington Railway and
Electric Company acquired 3,S3l shares
OF stock In the Great Falls Power Com
pany, and thus obtained two-thlrds in
t.rest In all the rights OF the latter
concern. For these shares the rail-
way paid in cash Sl25.O0O, 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-
the railway. on May "a, 1919. the WASH
lngton Railway and Electric Company
entered into q contract with the Poto-
mac Electric Power Company whereby
the railway company pledged itself
within a 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 time Of the
execution OF the contract. was to give
to the railway company 10000 shares OF
Potomac Electric Power Company stock,
valued at $l,OOO.OO0 AS security for the
faithful performance OF the contract, II
was agreed that the 1894 shares Of
Great Falls stock should be deposited
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. 1919, the time OF the con.
tract was extended for year by mu-
tual agreement. At the hearing before
the commission ons November y. 1913.
the commission. after some trouble,
finally got from the railway company
an admission that the 1894 shares of
Great Falls stock. representing two
thirds ownership Of the site, had not
been conveyed to the Potomac Electric
"
perfecting title was then under way.
But the testimony also showed that
the 10000 shares OF Potomac Electric
Power Company stock had been deliv'
cred to the railway company. and that
since delivery was made the railway
company had actually collected divi-
dends on these 10000 shares to the ex-
tent OF $685. In other words, the
power company, receiving up to that
time nothing but an agreement on the
part OF the railway company to give il
1874 shares OF unproductive stock. for
which the railway company paid Si25 900
increased it's own outstanding capital
stock from 3, 0O0, 900 to $1,000 900 and paid
to the railway company $685. 900 In divi-
dends because OF such increase in CAPT.
tai. The nature OF such n transaction
would seem TO be eXplainable only from
the fact that the Potomac Electric
Power Company Is owned outright by
the Washington Railway and Electric
whose directors and officers
are Identical with its own.
As for the reasons Dcrsuading the
mower company TO pay 81 10000 for this
interest in the water-power site that
cost the railway company hut S425. 900,
and was so valued on the railway COM
pany's books. there Is nothing to show
that the power company Is planning to
build a 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:
1.-THE onlv immediate and apparent eff
feet Is that the dividends of the power
ditional 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-