Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-22
Declare Holding Company
Was Formed to Avoid
Anti-Merger Act.
SUIT IS RECOMMENDED
TO TEST LEGAL STATUS
Effort Revealed to Secure Repeal
of La Toilette Measure
Barring Purchase.


financiers who recently bought large
majority of the stock Of the Washing
ton Gas Light Co., frankly admitted
that they set out to evade the La Fol-
lette anti-merger law in the method
Of handling the purchase, according to
a report by the Department of Justice
to the Public Utilities Commission, it
became known today. The report states
that the present method of holding the
stock through an investment trust is a
make shift" and that it will be eban-
doned as soon as legislation to secure
repeal of the anti-merger law can be
obtained. The report was the first in
timation of any move to repeal the
law
The stock was recently purchased by
New York interests and turned over TO
a trust" organized under the la~s Of
Massachusetts,, known as the Seaboard
Investment Trust, which in turn holds
the stock for the benefit of five large
financial groups. The commission, be-
lieving the sale in violation of the anti.
merger act, sought report on the
transaction by the Department of JUS
tice. The report was made on Septem-
publication hitherto, as the commission
was awaiting report from Corporation
Counsel william w. Bride as TO what
action to pursue should the purchase
have violated the law. This report was
made late yesterday and recommended
that the District Commissioners be re-
quested to institute suit in the District
Supreme Court to determine the legality
of the sale. The Utilities Commission
lev ra1A frV-rN n
and the District Commissioners will
probably consider it at their board
meeting tonight.
Statement Quoted.
Quoting F. S. Burroughs. a director
of Harris. Forbes & Co. of New York
and Chicago, dealers in investment and
public utilities securities, the Depart
ment of Justice states: Mr.. Burroughs
advised that the Seaboard Investment
Trust Is makeshift arrangement and
they will not hesitate to place this
stock in o holding company after they
can effect repeal Of the terms of the
anti-merger act, which is now appar-
emily directed solely against the WASH
ington Gas Light Co. Railroads and
other public utilities have been re-
moved from the operation of that
statute by special legislation. He has
stated that Harris, Forbes & Co. did
not contemplate taking any action with
the stock of the Washington Gas Light
Co. now held by the Seaboard Invest
ment Trust until the provisions of the
anti-merger act are changed, and he
seems confident a change of this law
can be effected so as to enable them
to operate this company through
holding corporation. He has admitted
that the group was formed for the dual
NJ Aypm HNn
clause of the anti-merger act and for
the further purpose of evading addi-
tional financial assistance. Mr.. Bur-
roughS has stated that he has had con-
siderable public utilities experience and
he further advised that Harris Forbes
& Co. proposed to continue to control
the acts Of the Seaboard Investment
Co"
The 20 per cent clause referred to Is
in the anti-merger act, which provides
that no foreign or local holding cor
poration shall acquire more than 20 per
cent Of the stock of any local public
utility. either directly or indirectly.
Speaking Of the reason for creating the
trust, the Department of Justice report
goes on:
Trustees Figureheads.
''Mr. Burroughs stated that in their
efforts to devise ways and means OF
getting around the provisions of the
anti-merger act the attorneys
(Piper, Carey & Hall of Baltimorel
decided upon, and drew up, a declara-
ton of trust under the Massachusetts,
laws. The trust was known as the Sea-
board Investment Trust, and, according
to Mr.. Burroughs, differed from the
usual trust. Three trustees were ap-
pointed to hold and control the stock.
they being Nathaniel F. Bryant, William
E. Howard and Henry B. Rising, all o.
Boston, Mass. According to Mr. Bur.
roughS these trustees we're mere figure~
heads, and will have no control of this
stock other than as exercised by Harris,
Forbes & Co., who will direct the des-
roughs."
Speaking of the way the deal to
purchase the stock was financed and
engineered, the report states:
"Mr. Burroughs has advised that
IS ,000, 900 was transferred to this trust.
A portion of this amount had pre-
viously been committed by Harris,
Forbes & Co. to the purchase OF some
Of the original 10000 shares which had
the formation of the trust. This sum
was used to purchase additional stock
Of the Washington Gas Light Co. In
the group of five transferred
to the Seaboard Investment Trust the
stock which had heretofore been pur-
chased. The Seaboard Investment
Trust. acting through the trustees and
Mr.. Burroughs. then proceeded to bor-
row sufficient funds to finance the re-
mainder of the purchase, which was
effected by collateralizing the loans
with stock Of the Washington Gas Light
Co., as acquired, and in the case Of
one loan, using the debenture certifi-
Gates issued by the Seaboard Invest
ment Trust same in turn being secured
by Washington Gas Light Co.'s stock"
Five Firms Involved.
The report describes the five firms for
whose beneficial interest the Eeaboard
Trust holds its shares of gas light stock
as follows:
Lee & Co.. subsidiary Of the Chase
Securities Co., with headquarters at
New York City, was organized in 1924
under the laws of Massachusetts,. In
formation Is at hand that they do a
oVer-the-counter trading
and are not known to be connected di-
rectly with any public utilities or in
duStrials.
Harris, Forbes & Co. Of New York
and Chicago deal mainly in investment
securities and public utilities and are
said to dominate the large Associated
Gas q Electric concern. They are also
Interested in the Cities Service Corpo.
ration, Central Public Service Corpora
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