Montana labor news., 1944-05-11


600, making a total amount Of s2,219, 1913
which I believe to be the actual legiti-
mate cost in the transactions described.
The amount recorded by Montana in
the investment account which we have
stated as $685. OO, 600, taking from this
the S2,919,123 that I believe to be the
actual investment, gives a balance of
$22.O ,876.
I mentioned a moment ago that the
Montana Power Co. transferred $780,
600 Of the investment to the investment
in Great Falls Townsite Co. In doing
so it transferred, in my opinion, 81
600, 900 Of write-up. Deducting from the
$22, O80, 900 I mentioned a moment ago,
the amount Of $4,000, 600 leaves a balance
Of $l9, 4O 900 in round figures which I
said I believe represents a write-up in
the investment account.
Mr.. o'Neil has pointed out other adj
iustments of a few hundred thousand
dollars which pertain particularly ID the
consolidation of 1929 of the Great Falls
Power Co. the consolidation or merger
into the Montana Power Co, and 1 will
not touch upon these items.
Q. Did the $l9,4 400 900 write-up to
which you have referred get on to the
books Of the Montana Power Co..
A. Yes, that amount was on the books
of the Montana Power Co.
@. Mr.. Smith, I notice that in com
putting the cost to the Montana Power
Co. in respect to the acquisition of the
first half-interest in Great Falls Water
Power & Townsite Co., you have used
the market value of the securities issued
John D. Ryan, but when the second half
interest was transferred by Mr.. Ryan
you used the cost to Mr.. Ryan. VIII you
explain why you did that2
A.. AS 1 have stated, I consider the
first transaction an arms length pur-
chase and sale, and consequently used
the cash equivalent of $3.50, 600 as the
cost. I consider the second transaction,
that is the transaction whereby Montana
acquired the remaining one-half interest
in the Great Falls Water Power &
Townsite Co. from Mr.. Ryan, to be a
pooling of interests.
1t was not in my opinion, in fact and
in reality, a purchase and sale. Ryan
did not sell his interest, as I view the
situation. Rather he retained his inter
est. There was consolidated into one
entity the separate ownerships which
heretofore had prevailed, but the inter-
est continued.
There was, in effect, although not a
legal form, a partnership between Butte
and Ryan from 1909. In the transaction
whereby Ryan transferred his second
half interest and in the similar trans
action whereby he transferred the stock
of Thompson Falls Power Co., Ryan in
sisted upon having control Of Montana.
In getting that control of Montana, he
likewise controlled his previous interest
in Great Falls, so I say, in substance,
the transaction was not a purchase ard
sale. Ryan did not ALLEVIATE his inter
est. He retained his interest, and mas
much as he retained it there was not a
new investment. There was not an addi-
tional cost incurred, and consequently
in respect to this second transaction, ]
believe the amount recorded constituted
a write-up in the amount I have de-
scribed.
@. Were there any other attendant
circumstances which you think should
be considered in connection with your
determination that the amount of S19,-
4Oo,0 900 represents a write-up on the
books Of the Montana Power Co.?
A. Yes, there we're other ~considera-
tions, but I consider them subsidiary
and not controlling. masmuch as, how
ever, the Commission may attach greater
significance to these items than 1 do,
I would like to set them forth.
First Of all, Ryan was president Of
Anaconda, and in a sense he was his
own best customer when Anaconda en-
tered into contracts with the Great Falls
Power Co. Ryan was a member of the
board Of the Milwaukee Railway, and
that company likewise entered into con-
tracts to purchase substantial amounts
Of power from the Great Falls Power
Co., and also from the Thompson Fall,
Power Co. Ryan wa president Of Mon
tana at the time of the transaction ir
question. Ryan was the largest single
stakeholder of Montana at that time
Ryan was a director and a member Of
the executive committee of Butte Elec.
trio and Power Co. since 1909. Copper
and Powelson, in their report, which il
in evidence in this case, indicated thai
Ryan dominated the power field in Mon
tana, and from the fact I have hearC
from time TO time in this proceeding,
would come to the same conclusion. Tht
two properties were under common man.
nagement and were unified in thei
operation. Ryan insisted upon control O
Butte; control, and not the absolute
price in cash equivalent was the consid
Grafton. There was no Independent
dealing whereby one party was attempt
ing to get the most in actual dollar
than the other trying to pay less il
actual dollars in the transaction. Ryal
participated in the write-up when Butt
merged or consolidated into Montani
4.