Evening star., 1944-03-10
SEC Reference
Brings Clash at
Pepco Hearing
Compony's Counsel
Objects to Question
On Investigation
BY CAMBRIDGE CRIST.

DS oh1SDnlDJE CRlSI,
A clash over references to the re-
latlonship between the North Amer
lean Co. and the Potomac Electric
Power O., contained in report
prepared by the chief accountant of
the Federal Trade Commission
Ihlghlighted todays session of the
annual power rate hearings before
the Public Utilities Commission.
The clash started when Harry r,
Booth, special counsel for the
Treasury's Procurement Division,
asked Arthur E. Lundvall, chief ac-
countant of the Trade Commission,
whether North Americans holdings
in the Washington Railway & Elec-
trio Co-which owns all the COM
mon stock of Pepco-were ever
studied by the Securities and Ex-
change Commission.
Chairman James H. Flanagan sus-
tanned an objection of company at
torneys to the question, but Gregory
Hankin, PUG member, dissented
Mr.. Booth then asked if the PUG
had made up its mind to exclude
any further questions on North
American holdings in Wreco.
Harrison Objects.
Lloyd B. Harrison, assistant cor
poration counsel assigned to the
PUG, bitterly objected to MIR. Booths
question. He asked it be expunged
from the record and that Mr.. Booth
be cited for contempt If he con-
tinued to make insulting remarks. >
Mr.. Booth denied attacking the
PUG and accused Mr.. Harrison OF
having made his statement for the
benefit of the press.
Il object to the unwarranted at
tacks on me-" declared Mr.. Booth.
IF you didn't provoke them you
wouldn't get them" replied Mr.
Harrison.
Firms Relations Defended.
William K. Laws, attorney for
Pepco. told the commission there
had been no dealings between his
company and North American
which would have any effect on the
rates or financing costs of the local
utility.
Mr.. Laws also objected to oues-
tlonS by Mr.. Booth regarding a
transaction in 1912 in which Pepco
issued to Wreco 81 100000 common
stock for two-thirds interest in the
Great Falls power site,
CLAIMING fhof e,,oL o,,oe4;a
irrelevant to the determination of
rates, Mr.. Laws pointed out that this
81 100000 had been subtracted from
the rate base of Pepco and that no
attempt was being made to prove
that 1t was a useful part of its prop
critics.
Chairman Flanagan reserved his
ruling and permitted MIR. Booth to
continue his questions on Great
Falls.
Mr.. Lundvall's testimony was to
the effect that Pepco had issued
81 ,000, 900 in common stock for the
site and had not yet received title
or any income from the investment
He said, however, that Pepco had
paid a total of $8,528 300 in divi-
dends to Wreco since 1912 on the
stock.
Earnings Decline.
Mr.. Lundvall, who took part In
the Federal Trade Commission's
Nationwide study of utilities, testi-
fed "it is not known what the in
direct return to the North Ameri-
can Co. has been from the invest
ment by Washington Railway &
Electric Co. in the common stock
of Potomac Electric Power Co."
On the basis of the trade com.
missions study. however, he said
the earnings by North American on
its holdings in Wreco were BIS pei
cent in 1925; 1913 in 1926; 2O.3 pc,
cent in 1927, and 1871 in 1928 and
1863 in 1929.
Under cross examination by Mr.
Laws, Mr.. Lundvall agreed tha
Pepco had not paid any manage.
ment fees to North American MOI
had the local utility company re.
ceived loans from the holding com.
pany. Asked by Mr.. Laws whether
he remembered any conclusions o.
the trade commission regardins
North American, Mr.. Lundvall re.
piled:
Il only recall that my report
showed North American was very
conservative in its operations anc
financial relations with operatine
companies" the witness replied.
The hearings were recessed unit
10 am. Monday.
Mr.. Booth told Chairman Elan.
agan yesterday that the Supreme
Court had allowed consideration O.
relationship between holding anc
operating companies in such case.
as Smith VS.. Illinois Bell Telephone
Co. and Wabash Valley Electric Co
VS.. Young.
Backing Mr.. Booth, Thurman
Hill, general counsel of procure
ment, promised Chairman Flanagan
that the report would go from
Genesis to Revelations. He said
he had listened to the historical
testimony of Alfred G. Neal presi-
dent of Pepco with Interest" and
that he felt the background" of