Evening star., 1944-03-23
PUG RuIinq
On Utility Firms
Holdings Here
North Americans
Control Of Wreco
Is Questioned
BY CAMBRIDGE CRIST.

The Public Utilities Commits
sion today asked the Attorney
General to determine If the
Anti-Merger A Act OF 1918 has been
violated by the North American
Co.'S control of Washington Rail-
way and Electric Co. and wheth-
er North Americans reorganiza-
ton plan to divest itself of con-
troll of local utilities conforms to
the law.
II the law has been violated, the
commission raised the question of
what action should be taken to
purge the North American Coz"
At present, North American has
34.5 per cent OF the voting stock of
Wreco, which, in turn, owns 100 per
cent of the common stock of the
Potomac Electric Power Co. and 50
per cent of the common stock Of
the Capital Transit Co.
Two Points to Determine.
The commission also asked that
these points be determined
"(A Whether or not the statute
in question would be satisfied by
the North American Co.'S divesting
itself Of holdings in and control of
the local utilities as contemplated
in the plan submitted (by North
American in August, 1943) and
"(B) Whether or not the La Fol.
lette Anti-Merger Act not only re-
quires the company offending its
provisions to divest itself of secur-
tiles, but whether under the act, If
the company violated the statute, it
held the stock so acquired as trus-
tees, with the result that all earn.
ings thereon Injured not to the bene-
fit of the North American Co. or its
stockholders, but to others. In other
words, was a constructive trust
created. and if SO for whose benefit?"
The letter, signed by Chairman
James H. Flanagan. pointed out
that since the questions involved
the Securities and Exchange Com
mission and the Holding Company
Act of 1885, the commission felt
lit would be best for the chief law
officer of the United States" to pass
upon them.
SEC Order Recalled.
The letter recalled that on April
IA, 1912, the SEC had ordered
North American to divest itself of
all its assets other than securities
OF one intergrated systematic
Union Electric Co. of Missouri
and that the holding company had
filed its plan with the SEC on
August 4, 1943.
"Insomuch as the plan filed by
the North American Co. involves
utilities operating within the Dis
trict of Columbia, it will become
the duty of the Public Utilities
Commission to function.
particularly with respect to changes
in the financial structure of certain
OF such utility companies" the PUG
letter said.
Control Acquired in 1928.
Control of Wreco was acquired by
the North American Co. through
stock ownership in 1928 and, by the
end OF 1929, the holding company
had 55.l per cent of the voting stock.
BY 1912 its per cent of voting stock
had been reduced to 34.55.
The SEC order, calling on North
American to divest itself of owner
ship and control of Wreco and all
other subholding companies and
their respective subsidiaries. was ap-
pealed to the Circuit Court of Ap-
peaS, which upheld the constitu.
tionality of the SEC order on jan
uarv 13, l943. The Supreme Court
has agreed to review the case.
Wreco also owns common stock In
Braddock Light g. Power Co. of Vir-
g1nia, the Washington & Rockville
Railway Co. of Montgomery County
and the Great Falls Power Co.
The PUG said 1T also takes tho
liberty of suggesting that the Secur-
tiles and Exchange Commission is
equally anxious that the questions
here submitted bo dofa