The Wilmington morning star., 1940-12-22
Hopson S Manipulation OfAG&E
Affairs Probed By u. S. Court

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til he is $50 years old-or dead.
Life didn't really begin for Hopson
until he was 40.
Then it was that Hopson, an OBJ
scure utilities financing .%consultant
in Wall street, and a partner, got a
controlling interest in the Associat
ed Gas and Electric system for a
reported $500, 900.
A. G. & e. had started in 1905 as
a Small combination of utilities ir
New York state and Ohio. In 1915
it acquired the Kentucky Public
Service company. That was as much
as it expanded until Hopson came.
In 10 years Hopson promoted il
from a $1,000, 900 firm into a billion
dollar organization controlling com
panies that now supply gas, electrici'
ty, water, steam, ice and transpor.
tation to 1000, 900 people in 5000
communities in 20 states. 1t is con
centrated in the east, but extends
west to Missouri and the Philippine
Islands. g..
His first acquisition, two years
after he took over, was the State
Island, N. Y, Edison company
then the Pennsylvania Public sys
tenn and the Manila Electric
corporation.
When the Van Sweringen utility
empire collapsed in the depression
Hopson got a big piece of that. City
by city all along the Atlantic Sea
board, people became unwilling Gus.
toners of Howard C. Hopson-Johns
town and Erie, Pa; Alexandria ; c
Newport News, Va; Columbia, S. c.:
st. Petersburg, Tallahassee and Or
lando, Fla; Salisbury, Md; Will
mington. N. c.; Dover and Phillips,
burg, N. j.: Reading, Altoona and
Oil City, Pa: Ithaca, Ringhamton,
Rochester, Elmira, Auburn and Corn.
ing, N. Y. All in all, he added 552
companies to the system-all on an
initial investment of only $500, 900.
The remarkable device by which
he did this was the holding com,
pany.
The holding company is simply an
application of the fact that a 500
company often a be controlled by
a $40 interest, because the other $50
are scattered among a lot of unor-
gained holders.
In actual practice, a lot Of COM
panies are capitalized on some such
basis as $50 in bonds with no vot-
ing pQwer) and only $40 in stock.
If So of this $40 is unorganizeu, a
50 shareholder can control the 500
firm.
A holding company is an incorpor-
alton Of a controlling interest like
this, or several controlling interests
in several companies.
The Associated Gas and Electric
corporation itself sold no water, gas
o. electricity. 1t was just a holding
company which held controlling in
terests in companies that actually
provided the utilities, like the Staten
Island company.
A holding company itself can be
controlled like any other corporation
for a fraction of it's value-through
another holding company.
Instead of directly owning a con-
trolling interest in the Associated
Gas and Electric corporation. Hop
son, to make his money go further,
set up another holding company, the
Associated Gas and Electric COM
ANY, through which he controlled
the A. G.. and E. CORPORATION
TO: a fraction Of its value.
+ When a bottom company in the
pyramid made money and paid divi-
dends On it's securities, some Of those
dividends went into the share-holding
company above it, which would then
pay dividends in turn to the company
above it, and so on up to the top
holding company. And at the top
was Hopson.
But he needed more money to fl.
nance that huge A. G. & e. expan-
sion.
One wav Of raising money is nv
selling shares in a company. But
with shares usually go a part of tht
control. II you have stock in a COM
pany. you want a gay about how it u
run.
Hopson introduced an ingenious
system of raising money without
parting with control
He issued securities on the Assoc
ciated Gas and Electric company.
the top holding company, and sold
them to the subsidiary companie-
The top holding company controlled
all the affairs of the subsidiary COM
panies anyway, so Hopson, although
selling mountains Of stock and bonds
to the public. could retain the con-
troll he wanted.
Co. -.4- -