The people's voice. [volume] (Helena, Mont.) 1939-1969, 1945-03-02

change in operations, we conclude
that the Montana Power company was
merely a continuation of the same
business under a new name" and ac-
cordingly held that increase in plant
was "a purely fictitious and paper in
crement". The commission found that
three prior reorganizations of the
same general nature resulted in in
flating the plant accounts by $780,
600, which initiation was also carried
through the 1912 reorganization.
1918 Transactions
The 1913 transactions revolve around
exchanges of securities by the newly
created Montana Power Company and
the late John d. Ryan of Montana and
a small group controlled by him. The
commission referred to these securi-
ties and exchanges as a pooling of
interests" which did not result in an
Increase of the cost of the underlying
properties
Ryan was president of Montana
Power at the time of the exchanges.
He owned 500 of the stock of Great
Falls Water Power & Townsite Com
pany which through a 1000 owned
subsidiary Great Falls Power Com
pany owned hydro development and
certain power sites on the Missouri
river in the vicinity of Great Falls.
Montana Power Company owned the
other 500, its predecessor, Butte Elec-I
trio, having acquired 1t from Ryan in
1909 for a consideration consisting of
cash, bonds and stock in the aggre-
gate amount of $2,500,000. Ryan, in
turn, had acquired the entire stock in
1908 from the railroad magnate James
J. Hill, for a cost of approximately
one and one-half million dollars.
In 1913, Ryan exchanged the re-
naming one-half of common stock in
Great Falls Water Power & Townsite
Company, which had cost him approx.
imately $750000, for s5,000.000 per
value of Montana's preferred and ST.,
100000 of its deferred dividend" COM
mon. The dividends were payable on
common only upon the happening of
certain events upon which the stock
became dividend-bearing in install
ments over a 5-year period. The first
dividends on the stock were paid in
1917.
Ryan also acquired certain power
sites CHIEFLY Thompson Falls) from
the Chicago, Milwaukee & ST. Paul
Railroad of which he was a director.
he owned a 50% interest
in these sites which he had sold to
the railroad, and bought them back in
1913 at twice the cost to the railroad,
plus interest. The railroad gave Ryan
a power contract in connection with
the sale. These sites cost Ryan $685.
S8710. Two days after he acquired
them from the railroad he transferred
them to the newly formed Thompson
Falls Power Company in exchange
for all of its common stock, namely
s5,000,000 par value. On the same
day he exchanged the Thompson Falls
Power stock for an equivalent amount
of the common stock, also deferred as
to dividends, of the Montana Power
Company.
The opinion states that before the
1913 exchanges of stock, Ryan owned
indirectly one-half of the properties
Of the Great Falls companies and aft
srward, through his ownership of 52.6
per cent of the stock of Montana |
Power, he continued his control of the |
The commission quoted |
The company's statement that "The |
effect of this transaction was to give
Mr.. Ryan and his associates 51.S% |
(sic) of the common stock of the COM
Dany, enabling them to retain control |
If their water powers" The opinion
point sout that Ryan testified before
he Interstate Commerce that he did /
lot mkae any profit at all on the
Thompson Falls deal, thus demon
itrating that the 100000 per value
If stock issued to him was not the
he measure of the actual legitimate
original cost.
AS to the exchange of stock which
he commission held to be a pooling
If interest, the commission said: 1T
vas not a sale by which one party
disposed of an interest and another
acquired that interest. Just as clear
y actual legitimate cost cannot be in
creased by transaction which does
lot result of parting with property.
Accordingly, neither the par nor the
market value of securities issued to
Ryan in 1913, nor the so-called fair
'alue of the properties can be ac-
:epted as cost of the power sites to
Montana Power Instead we must
ook to the cost to Ryan, who COM
lined his interests with those who
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