Evening star., 1933-07-06
Cities Service Subsidiary Did
$6,659,405 Worth of Work
on $4,000, Witness Says.
TRADE COMMISSION TOLD
OF CONSTRUCTION UNIT
Andrew W. Wilcox, Examiner, Says
$4,484,671 Plant Was Sold
for $40, ,s44 ,5S3.
BY the Associated Press

By the Associated Press.
The Federal Trade Commission was
told today by one of its examiners that
the Lakeside Construction Co. had done
S6,659, ,405 worth of work for subsidiaries
OF its parent company, Cities Service,
on capitalization of $4,000
The hearing before the commission,
part Of a general inquiry into the capt.
tai structure and method of rate max
ing by utility companies, centered on
a construction job by the Lakeside con-
Germ for the Public Service Co. of Colo
rado, one of the Cities Service subsi-
diaries.
Andrew w. Wilcox, the examiner and
accountant for the commission. testi-
fed that this project. known as the VAL
mont Plant-near Boulder, Colo.-cost
the Lakeside Construction Co. s4,484,-
671, but that the cost to the Public
Service Co. of Colorado was s10,844,5 ,583.
The officers and directors of the
Lakeside Construction Co." Wilcox tes-
titled, "are employees of Henry L.
Doherty." dominant in Cities Service
All of the expenses, including or
ganization and qualification in various
States, taxes and directors fees. Will
cox said, ARE capitalized in the
turnover Of completed construction
work,
Control Capital Stock.
"The amount of profit realized and
the fees collected accrued to the credit
Of the Cities Service Co. By virtue of
its control of the construction COM
pany through ownership Of $4,000
caDital stock
The total amount of cash profit
realized by the Cities Service Co.
through the Lakeside Construction Co.
was s2,2l3,20l, and it also received
S2,500,000 par value Of common stock
Of the Public Service Co. of Colorado,
a wholly-owned SUBSIDIARY"
The agreement between the Lakeside
and the Colorado companies for the
Valmont project, Wilcox said, resulted
in a write-up of the fixed capital ac-
counts Of the Public Service Co. of
Colorado amounting to s5.62s,oo5."
This figure" Wilcox continued,
represents the difference between S10.-
l25,000, recorded in its colorado COM
purchase price of the completed plant.
and s4.485, ,944 as the final recorded
cost of the construction"
OOuuSel Denies FRONT.
A formal statement handed to news
paper men by Robert Burns. counsel
for the Lakeshire Construction Co., said:
mo profit was reflected on the books
Of Cities Service Co. as a result Of this
transaction.
Whatever claimed write-up resulted
from the construction Of the Valmont
plant was more than offset by write
downs and other similar items which
occurred in property, taken as whole.
"A large part of the so-called profit
consisted of common stock issued by the
Public Service Co. of Colorado which
did not represent any cash cost to the
Colorado company nor profit to Cities
Service Co., since the latter already
owned 100 per cent of the common
stock of the Colorado company"
The Lakeside Co.. Wilcox said, was
organized in Delaware in 1928 and IL
censed to operate in Colorado, New
York. New Jersey and Tennessee.
Among the construction projects done
for Doherty afiliates in States other
than Colorado, Wilcox testified, were q
$398, ,309 project for the Republic Light.
Heat & Power Co. and $137, ,939
project for the Niagara Falls Gas &
Electric Co., both in New York State,
and a $759912 construction job for
the Crew Levick Co. in New Jersey.