Evening star., 1940-02-09


bankruptcy of
the much tan David Lawrence.
gled capital structure of the Asso-
ciated Gas g. Electric System.
Reports have reached here that
the Treasury Department wants the
s. E. G. appointed. This is a sur
prising development, for the Treas
ury has no interest in the problem
except to collect some back taxes,
and it is well known that taxes are
a first lien on assets. Certainly a
few millions In tax payments would
seem to be assured out of total assets
estimated at 81 100000.
Just why the S. E. c., which has
so many tasks to perform under two
major statutes, should seriously con-
slider becoming trustee in the Asso-
ciated Gas case is a mystery. One
is inclined to believe that the S. E. G.
will not accept such position be-
cause it will make the S. E. c. re-
sponsible in part for actual opera
tions of giant utility system. Like
wise, the commissioners themselves
would not have the time to give to
proper supervision and the work
might have to be turned over to a
dummy director or subordinate,
which would not be in keeping with
the well-expressed philosophy of
former Chairman William o. Doug
las, namely, that directors of busi-
neSSeS should direct and not pass
the buck to others.
Must Undergo Integration.
But the biggest complication arises
under the Public Utility Holding
Company Act. The Associated Gas
system is one of those which must
undergo the integration prescribed
by law. Since the S. E. c. is to act
In judicial capacity with respect
to all such integrations, it is hardly
plausible that the S. E. c. would
wish to assume responsibility even
in part for the management of the
business. Otherwise, the S. E. C. as
trustee would be offering a plan of
lntegration to S. E. c. sitting as a
judge of integration plans.
There is an additional reason why
the S. E. c, might find it embarrass-
Ing to act as trustee. It was the
action OF the S. E. C. in refusing to
permit an upstream loan to nav
dividends in the top holding com
pany OF the Associated Gas which
precipitated the bankruptcy pro-
ceedings into which the company
was plunged. In such circum-
stances, investors in the Associated
Gas Will naturally wish to be as
sured that such action was in no wav
related to the possible desire of the
S. E. c. to act as trustee and to
operate the utility system itself.
Most guesses hereabouts are that
the S. E. c. will not wish to serve
even If asked to do so by the Federal
Court, though it would, on the other
hand, be juicy plum from a pa
tronage standpoint and open up a
series OF jobs to the politicians-a
contingency which it is difficult to
visualize the S. E. c. as wishing 20
meet, especially since the New Deal
members of the commission lately
have denounced all suggestions that
they are being influenced by any
political considerations.
The Associated Gas operating
properties are believed to be in good
shape, but the problem of pyramided
holding companies is SO intricate
that even some utility experts say
1t will be difficult to unravel without
the whole-hearted cooperation of
II. G. Hopson, who is reported to
have been seriously i'll these last
Few months and unable to give time
to the affairs of the company.
Disinterested observers say that
the Associated Gas structure is SO
difficult to understand that the
5. E. G. found itself unable to do
anything but refuse the upstream
loan, and it is the view of the S. &c.
commissioners that no other course
was really open to them.
Refunding Seen as Warranted.
Persons familiar with the Associ-
ated Gas Co. affairs insist, on the
other hand, that after the company
had shown its good faith by settling
huge Jeopardy tax for $8,OOO,000
and submitted plan for reorgan-
1zation and integration, the S. E. C.
could easily have extended re-
funding obligation for 80 days, and
that since earnings were on the in
crease, the issue could have been
reflnanced. 1t is further asserted
that the loss to the public, which is
estimated to comprise 5000 stock
holders and to involve $25 ,00O,O of
market values, might have been
avoided If the S. E. G. had been dis
posed to be cooperative with the
company Now a legal reorganiza-
tion has been precipitated which will
doubtless take three or four years to
work out, and, before it is over, it is
not unlikely that the action of the
commission in allegedly causing
losses to investors may become the
subject Of suits against the Govern
ment in the Court of Claims, though
this route is admittedly long and
futile, as a rule, for claimants.
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