Evening star., 1932-09-16
RECEIVERS BARE
|NSULL METHOD
Earnings Reports Enhanced
by Stock Exchanging,
J, Says Third Report.
~ the Associated Press.

CHICAGO, September 16.-The re-
ceivers of Middlewest Utilities Co., once
a $4,000, 100000 holding company en-
bracine the vast insult utilities system,
reported in Federal Court today that
earnings reports had been enhanced by
"profits from sale of securities" although
in many cases these were merely ex-
changes on stock with subsidiaries.
The management also used stock divi-
dends to build up the earnings showing,
said Edward N. Hurley and Charles A.
McCulloch, receivers.
They approximated the Middle West
liabilities at $310.000.o00 and assets at
$2es, ,so5, ,041, the latter comprising
chiefly investments in subsidiaries and
other companies OF the liabilities,
capital stock and surplus totaled $780,
348,069.
Third Report Elaborate.
The audit and receivers report wss
the third of the insult investment or
ganizatiors placed in the hands of
Federal Judge Walter c. Lindley this
week. 1t comprised several hundred
pages OF financial statements and eX-
hibits. with comments by the receivers.
Notes and accounts payable totaled
S38, ,798,893.
Bank loans outstanding were $25, TO-
281, and of these the receivers said:
The bank loans are amply secured
with plenty of collateral" The holders
are the Bankers Trust Co. Of New York
and the Central Republic Bank g. Trust
Co., Continental Illinois Bank & Trust
Co. and First National Bank of Chi
cago."
Hurley and McCulloch said the fu-
ture of Middle West Utilities depended
entirely upon business conditions and
good management"
From January !, 1880, until the hold
ing company fell into receivership last
April IA, it operated at a loss. Funds
provided" during that period were
shown to have been $106, .730. while
expenditures were $110,355,27l.
The receivers made 1t clear the
audit was not a detailed statement of
cash and other transactions for the
purpose of disclosing Irregularities"
No estimate has been made Of the
value that can be realized from Securi-
ties held by the company.
An item Of $559, ,294 was shown as
advances to employees to secure their
stock investments.
In a statement to the public, Hurley
and McCulloch took cognizance of the
published rumors of loans from COM
pany assets to Marshall E. Sampsell,
former president of the Central Illinois
Public Service Co.
Individual Stock Loan.
"The records of Middle West Utilities
~ at u ct,N Nf
shares of common stock of Central and
Southwest Utilities Co., made to Mr..
Sampsel In September. 1921. Other
than this, Mr.. Sampsell has no accounts
owing the Middle West Utility Co., or
its receivers.
However, within day or two after
the appointment of the receivers OH
April is, 1882, it was ascertained that
Mr.. Sampsell, who was then president
of the Central Illinois Public Service
Co., a subsidiary of Middle West Utili-
ties Co.. in which he was director,
had taken from Central Illinois Public
Service Co. 1000 shares of Sc preferred
stock of that company, being reacquired
in return had deposited his trust re-
ceipts. The receivers demanded and
accepted the immediate resignation Of
Mr.. Sampsell and steps were taken for
the protection Of the Central Illinois
Public Service Co.
"Since that time 1000 shares Of this
preferred stock. which had been sub
stituted for other collateral held on
Joint notes of Mr. SampSell and MI.
Martin j. insult, were acquired by Gen.
tral Illinois Public Service Co. through
the purchase Of these notes. The re-
ceivers have also been in negotiation
with the holders Of the balance of 1000
shares which had been deposited by
Mr. Sampsell as collateral on bank loans.
Proper claim respecting this entire
transaction has been fled with the
bonding companies, the New Amsterdam
Casualty Co. and Lloyds OF LONDON,
England, with view of protecting the
Central Illinois Public Service Co."
Forty million dollars have evaporated
from the assets Of the Mississippi VAL
lev Utilities Investment Co. at current
prices the receiver estimated IN pre-
iiminary report yesterday to the United
States District Court.
The books showed SAC, ,595,732 assets
when Eugene v. R. Thayer became re-
ceiver upon the collapse Of the insult
investment concern last April. But he
said that probably SAC, ,000, 900 have been
wasted away in shrinkage OF securities
values.
Thayer's report was the second by
insult receivers this week.
The air has been burdened with ru-
mors OF loans to individuals from the
corporate funds of the insult invest
ment houses, and coincident with the
first disclosures Of these today, States
Attorney John A. Swanson announced
he would investigate possible violations
of the criminal laws. He appointed four
assistants to conduct the inquiry into
the fall Of the insult utility investment
companies, engaged a conference today
with United States District Judge Wal
Ter c. Lindley. who Is presiding over
the receiverships, and ordered one
prosecutor to study extradition laws and
treaties with France and Canada. He
did not explain the significance. but 1t