Evening star. [volume] (Washington, D.C.) 1854-1972, 1940-12-22
Hopson Pyromided 100000 Into Billion
Thorough Series of Holding Companies
Court Determining
If His Exploits
Were Legal
BY GLADWIN HILL,


gangsters do.
It's not hard. Anybody can do it.
Now take two quarters, and try
to keep them going, up and down.
1t takes much more dexterity.
Now try it with 3-4-5--6-60-
6O0-6, 100000 ,0O0-6, 900, 000--opps!
You dropped them all.
A nightmare. But 1t may give
you an idea of the scope of the ex-
ploits of baldish, pudgy, mysterious
little man named Howard G. HopSon.
He handled $1,000 000,000
He started with the nickels and
dimes he made as a newsboy in
Fort Atkinson, Wis, and worked
up until he was whirling the assets
of the gigantic Associated Gas &
Electric System in kaleidoscope
manner that has baff1ed exact anal
ysis by financiers, accountants and
lawyers right down to this moment.
The huge and intricate financial
scaffolding which Hopson built up
to enable him to perform his unpar-
alleled feat collapsed last January,
with loss to many investors.
So, as HopSon, now a shattered,
feeble 58-year- husk of a man,
sits there mute, the United States
District Court is trying to determine
whether his dazzling fiscal presti-
digitation of the last Is years crossed
the bounds of legality.
The Attorney General says it did
that Hopson's exploits involved
enough instances of mail fraud and
conspiracy to send him to prison
until he is $50 years old or dead.
Life Began at 40.
Life didn't really begin for Hopson
until he was 40.
Then it was that Hopson, an
obscure utilities financing consultant
in Wall Street, and partner, got
a controlling interest in the Associ-
ated Gas g. Electric System for
a reported 100000.
A. G.. & E. had started in 1906 as
small combination of utilities in
New York State and Ohio. In 1918
it aquired the Kentucky Public
Service Co. That was as much as
1t expanded until Hopson came.
In 10 years HopSon promoted it
from 100000 firm into billion
dollar organization controlling COM
panies that now supply gas, electric
ity, water, steam, ice and transpor-
tation to 100000 people in 5000
communities in 20 States. 1t is
concentrated in the East, but ex-
tends west to Missouri and the
Philippine Islands
His first acquisition, two years
after he took over, was the Staten
Island IN. " Edison Co. then
the Pennsylvania Public System .
and the Manila Electric Corp.
When the Van Sweringen utility
empire collapsed in the depression,
Hopson got big piece of that. City
by city all along the Atlantic Sea-
board, people became unwilling
customers of Hopson-Johnstown
and Erie, Pa; Alexandria and New
port News, Va; Columbia, S. c.: st.
Petersburg, Tallahassee and Orlando,
Fla; Salisbury, Md; Wilmington,
N. c.: Dover and Phillipsburg, N. j.;
Reading, Altoona and Oil City, Pa;
Ithaca, Binghamton, Rochester, Ell
mira, Auburn and Corning, N. Y. All
in all, he added $50 companies to the
system-all on an initial investment
of only 100000.
Used Holding Company.
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 can be controlled
by $40 interest, because the other
$50 are scattered among a lot of
unorganized holders.
In actual practice, lot of COM
panies are capitalized on some such
basis as $50 in bonds with no voting
power and only $40 in stock. If
So of this $40 is unorganized, a 50
shareholder can control the 500
firm.
A holding company is an incorpora-
ton of a controlling interest like
this, or several controlling inter-
ests in several companies.
The Associated Gas & Electric
Corp. itself sold no water, gas or
electricity. 1t was just a holding
company which held controlling IN
terests In companies that actually
provided the utilities, like the Staten
Island Co.
A holding company itself can be
controlled like any other corporation
for a fraction of its value-through
another holding company.
Instead of directly owning con-
trolling interest in the Associated
Gas g. Electric Corp, Hopson, to
make his money go further, set up
another holding company, the
Associated Gas & Electric Co,
through which he controlled the
A. G.. g. E. Corp. for a fraction OF
its value.
When a bottom company in the
pyramid made money and paid divl-
dends on it's securities, some OF those
dividends went into the share-hold-
ing 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.
Hopson Needed More Money.
But he needed more money to
finance that huge A. G.. & E. ex-
pansion.
One way of raising money is by
selling shares in a company. But
with shares usually go a part OF the
control. If you have stock in COM
pany, you want say about how 1t
is run.
Hopson introduced an ingenious
system of raising money without
parting with control.
He issued securities on the Asso-
ciated Gas g. Electric Co., the top
holding company, and SOLD them 10
the subsidiary companies. The top
holding company controlled all the
affairs of the subsidiary companies
anyway so Hopson, although selling