Evening star., 1940-12-23
Allegheny Operations
Cited in Plea for
Rail Reforms
Wheeler Report
Points to Holding
Compony's History
BY the Associated Press.

| BY the Associated Press.
Financial history of the Allegheny
Corp, largest railroad holding COM
pany, was described today by Sen
ators Wheeler, Democrat, of Mon
tana and Truman, Democrat, OF
Missouri as prime example "of the
failure of financial self-reform."
In report from their Senate
Interstate Commerce Subcommittee
the two Senators said that the at
tempt of Robert R. Young and a
group of associates to reform
the Allegheny Corp. by reorganiza-
ton and merger with "the Chesa-
peake Corp" was proof that the
process of -purifcation by a
financial reform group" must fail.
Mr.. Young, an investment bank
er, was said to have gained ef-
fective control of the $4,000, 100000
Allegheny corporate empire on a
personal investment of S255 ,000' in
1887 and to have told the Senate
Investigating Committee that he
and associates would beat" Con-
gress at removing ABUSES" by the
former management of the holding
corporation.
Blocked by Court.
The Senators said Mr.. Young
headed a group of wall Street re-
formers" whose reorganization plan
finally was blocked by court at
Baltimore.
Instead Of eliminating major
abuses which had occurred" they
declared the proposed reorganiza-
tion would have merely changed
the holding company's name"
Under the old management, rail-
roads had been milked, books had
been falsified, money from railroad
treasures had been wasted in stock
market speculation, money had been
syphoned from operating companies
into holding companies" the re-
port said
THE reformers proposed, at the
time of their reorganization plan,
to leave day-to-day control of the
Allegheny system in the hands of
essentially the same men who had
managed it during the period of
these abuses"
The Senate committee charged
that many classes of security
holders" would have been adversely
affected" by the reorganization pro-
postal because adequate information
was not given them and confusing
terminology was used.
Tax Laws Used as Club.
"The plan was so set up that
Federal tax laws were used as a
club to gain approval from security
holders" the report continued.
1t charged that the reorganiza-
ton proposal by the reform group"
failed to disclose that "non-com-
parable balance sheets" gave the
reorganized company an apparent
advantage of 100000 in the value
of securities and that "by a book
keeping method, S66,OOO 900 liza
bility was written down by 80 per
cent, as result of which a SAL ,50O,-
900 deficit was made to look like a
18,500,000 surplus"
Failure of the reorganization pro-
posals, the committee added, could
not be attributed to ill will on the
part of the leader of the reform
group, nor to ineptness in the draft
ing of the reform plan, nor to lack
of guidance from the most respec-
table sections of the financial COM
munity."
The report concluded that "it is
too much to expect, as the Allegheny
reform plan vividly illustrates, that
a group in control of an enterprise
shall commit financial suicide, and
that abuses common to holding
company structures in railroad and
similar spheres lie so deep that basic
self-reform can rarely, if at all, be
instituted by measures short of
financial suicide"
AS a result of this report and
others to follow, the subcommittee
said Legislative and administrative
intervention is necessary for the
surgical removal of the abuses in
herent in our holding company
structures"