Evening star., 1933-04-25
SAYS CITIES SERVICE
TRADED OWN STOCK
Charge Made as Federal
Trade Commission Opens
Probe.
BY the Associated Press.

oy INC hSsOCldleQ fTeSS-
Testimony that through q wholly
owned subsidiary. the Cities Service
Co.. Henry L. Doherty utility concern.
virtually traded in its own stock on
the New York curb market, was laid
before the Federal Trade Commission
today by one of its examiners.
This practice. said the examiner, DR..
Thomas W. Mitchell. Is disapproved Of
by the New York Stock Exchange.
A searching analysis of the market
operations Of the subsidiary, the Cities
Service Securities Co.. was presented to
the commission with the statement that
these were typical Of the modern cor
porate methods Of stock-market con-
troll. methods which when carried on
as in l927-l929, induce general orgy
OF speculation. in which stock prices
go to absurd heights from which they
must inevitably crash = "
V0luminous Report,
These statements were made BY
Mitchell, testifying in a new phase OF
the long g-stancing utility investigation.
His analysis Of voluminous report on
the Securities Co.'S operations said the
various forms Of trading in the parent
concerns securities were of major i'm
portance in modern finance because of
their volume and effects.
As the Trade Commission hearing
progressed agents Of the Securities CO.
distributed to the newsmen reporting
it. a statement taking issue with
Mitchells conclusions and asserting that
the company's market purchases were
not made for itself, but to fill orders
for customers, and that far from in
ducing speculation the purpose of the
concern was to raise new capital for
the Cities Service Co. and to place
securities more or less" permanently
Information From Records.
Responding to questions by Robert Z.
Healy, commission counsel, Mitchell said
he had obtained the information pre-
sented from the company's books and
records and believed 1t accurately re-
produced and reflected" the company's
operations.
Mitchells report said the securities
companys main function was raising ad-
ditional capital funds, and could be de-
scribed as facilitating marketing of
Cities Service Co. land its subsidiaries)
securities; supervising the market. or,
IN connection with syndicate operations,
handling the market for such securities
and providing ready resale market in
which owners Of securities of Cities
SeEvlCe 70. ana lLS SupStQlaTleS COuI0
readily dispose of their holdings at re-
tail when they desired to do SO.
THE security company's function may
be described as that of making the Sc
curity in question attractive to the pub
lie" the report said.
Method Described.
The method by which the company
performed its main function" was to
provide q ready resale market for in
vestors. to prevent the market price
from sagging under the influence Of
the addition to the supply and induce
investment confidence in the security in
question and also speculative cupidity."
These market purchases" tended
rapidly, 1t was added, to debate the Sc
curities compsny's cash funds, and It
could not long continue them If 1t did
not have . means Of replenishing It's
funds.
1.-THE securities company, through
Doherty as agent, functioned, to the ex-
tent Of It's market purchases, very much
like q broker who received from Gus
toners orders to purchase certain desig-
mated securities In specified quantities
and then purchased on the exchange or
over the counter the securities with
which to flll the orders"