Evening star., 1934-09-05
LAWRENCE SCORES
DEFENSE OF 7. y. A.
Private Firm Forced Out
"VirtuaIIy at Point of
Gun," He Says.
BY the Associated Press.

thority and the Public Works Ad-
ministration yesterday of forcing a
private company out of business vir-
tually at the point of gun" in the
acquiring of properties Of the Ten
nessee Public Service Co. in and near
Knoxville, Tenn.
Lawrence replied to a statement
issued Monday night by T. V. A. in
taking issue with article In the United
states News. in which he contended
r. ". A. had dealt unfairly in acquir-
ing the properties.
"The principal difference between
the r. v. AS position and mine" ne
said. may be simply stated. The
Federal agencies imagined that to ac-
complish their own objects they had
a right to force the liquidation of a
going concern at Knoxville, Tenn.
which was neither in receivership nor
in financial difflculty at all, but which
was wholly solvent and paying regular
dividends throughout the depression.
I do not believe any governmental
agencies have such authority under
the Constitution of the United States.
"If we assume that the private COM
pany in question had no further right
to exist and also If we concede that
the T. v. A. can measure what Is or
is not fair value of the property
1t is buying, being the judge and jury
and plaintiff-all in one-then l ad-
init the stockholders of the private
company cannot complain, but must
be satisfied with whatever the Govern
ment sees fit to give them.
Unable to See Principles.
"But know of no principle of law
or morality which permits Govern
ment to threaten ruinous competition
to a private company, refuse to hold
a condemnation proceeding and then
force q company to sell at a lower
price than actual cost. Who could not
furnish service at lower rates if the
initial investment is cut in half at a
forced sale? Who cannot set lower
prices for goods than competitor If
he can step in and get property for
less then was paid for 1t by those who
built it up, thus obtaining the ad-
vantages of years of development and
GIL b1lC ddtdA4bdSEc Va COOAAOlliACo AAes0C
plus the goodwill and customer rela-
tionships developed over a period OF
years and good service?
The T. v. A. states that the COM
mon stockholders in this case had no
equity. Well, the records show that
the owning company invested at least
$1,000,000 in cash when the common
stock was issued and the Tennessee
Public Utilities Commission engineers
had agreed upon the same valuation
as was used by the company. But the
main controversy in this instance and
the one which I stressed in my article
was the treatment given the preferred
stockholders. Certainly nobody could
contend that the preferred stockhold-
ers who invested 500 share in cash
should have been ignored by the T.
". A. in its purchase OF the Knoxville
property.
"It Is no justification for the T. v.
A. to argue that because the private
company had upward Of 81 SOC, 600 in
cash left over from previous years
hence the preferred stockholders re-
tanned this amount which is equiva-
lent to only about IS cents out OF
every dollar they originally invested.
The inference given by the T. v. AS
latest statement is that somehow the
T. v. A. helped them retain it. The
r, ". A. had no more to do with that
s1,300,000 than would have with the
$1,000 a man might have in the bank
If offered to buy his house for $10,-
600 and If he told me he had paid
R>.- Iny
told him why of course, he could con-
of my purchase price.
Charges Nothing Left.
'I repeat the statement that the T.
v. A. in its purchase paid nothing to
the preferred stockholders who had
invested 100 cents for every dollar of
stock issued to them and the T. v. A.
had paid nothing to the common
stockholders who had as definite an
equity in the property as any Ameri-
can citizen has in going concern
from which he reasonably xp.cts to
earn profit.
"I do not believe the rates charged
in Tennessee have any justifiable re-
W IllC OOhl PoAoN~A ~
the T. " A. and P w. A. in forcing
the confscation of private property.
If the rates to the consumer were too
high, the Public Utilities Commission
of the State of Tennessee was the
proper body to correct them.
at is beside the point for the T.
v. A. to argue that the street rail-
way property in Knoxville left now
to the stockholders was an unwlse
investment. Who 80 years ago or
more knew that street railways would
depreciate? And since when does
Government agency have the right
to carve up a private company and
say that it will pay for the profitable
parts and ignore the rest and thus
deprive a private company Of the
opportunity of making up its losses
consistent, of course, with the rates
that the consumers will reasonably
pay? -"
"The T. w. AS reply to my article
shows clearly that it is the intention
of the Federal agencies to declare
without trial or judicial proceeding
the value of the utility properties
they acquire and that they intend to
confine compensation wholly to cur
rent value of physical property leav-
ing nothing to investors in preferred
or common stock to represent the 60
ing value of business, the customer
lists and the location of the electric
lines and other developments of many
years These it seems must be
awarded as a gift to the new owners
Favors Arbitration.
"It is idle to cry 'watered stock
for while there have been instances
of that kind and I hold no brief for
any such company and indeed have
never been an investor in or owner
of any public utility securities what
soever, the fact remains that if the
T. " A. really wanted to be fair about
it, there should be set up disinter-
ested tribunal subject to review by
the courts SO that the question OF
what is or is not a fair value may be
impartially determined.
Entirely apart from this sugges-