The people's voice. [volume] (Helena, Mont.) 1939-1969, 1945-03-02
Plunderbund's Profiteering Methods
Exposed by F. P. C. Decision

Loriginal cost of the underlying prop
critics. The net amount of the excess,
relating to 33 acquisitions, was estab-
llished at $5,0S6,428.48 AS to this, the
commission said: 1.-THE amount we
are discussing has been in the ac-
counts considerable period of time,
some of it as long as AZ years, with
out any provision for amortization. In
general, we believe the amount rep
resents payments for elimination of
the threat of competition, the round
ing out of service areas, and payments
for prospective earnings, rather than
an excess of purchase cost over orig
inal cost of physical facilities. Ac-
cordingly, based upon the evidence in
this case, we conclude that the amount
of $5,0S6, 42S.4S does not represent
payments for tangible property now in
service"
Consistent with its action in similar
cases heretofore decided the commits
sion rejected the company's conten-
ton that certain of the amounts
should be kept in the accounts indef-
initely. 1t ordered its amortization
over a 15-year period, citing a similar
holding in the Pacific Power &c Light
Company case which was sustained
by the U. S. Circuit Court of Appeals
for the Ninth district.
Witnesses Not Persuasive
The opinion criticized company ex-
pert witnesses for taking the position
that transactions between corpora
tions, no matter how closely related
or controlled, must be treated as nor
NAL business dealings. These wit
nesses, the commission said, looked to
the form of what was done rather
than the substance. They insisted
that if the company organizes a sub
sidiary corporation and transfers as
sets to it which are recorded at in
creased amounts, the result is not a
write-up provided the assets have a
commercial value to support the con-
sideration. The commission states
that their theory that the mere for
NAL existence of a new corporate en-
tity regardless of identity of owner
ship, management and business, is
to support the contention
that a new cost has been incurred,
would enable utilities to convert cost
accounting to value accounting by the
simple expedient of forming a new
In a concurring opinion Chairman
Basil Manly and Vice Chairman Lee
land Odds criticized the company ac-
counting witnesses, declaring their
testimony was Sin the main, an at
tempt to support the claims of their
client rather than an expression of
sound accounting principles" 1t
clearly appeared from the testimony
Of the company witnesses that "as
long as some kind of formal document
contained the pertinent book figures,
he accountants inquiry would be
practically at an end" the concurring
opinion says, pointing out that "cross-
of the company witnesses
evealed that their view inevitably
eads them to the extremes of value
counting" which would be contrary
o the public interest for regulated
ublic utilities.
The concurring opinion warned of
he effect on investors of the falla-
ious theory that high earnings en-
tiles company to increase its CAPT
al, and in turn the increase in capital
entities 1t to increase its earnings.
t called this vicious circle" which
would leave the innocent investors in
Utility securities in serious jeopardy.
If their theory of accounting were
o be accepted" the concurring opin-
on said of company witnesses, reg
llatory bodies could accord such in
'estors little, if any, protection
gainst most sanguine promoters. AS
matter of fact, the tremendous
osses suffered by investors at the
nd of the holding company era pro-
ide an impressive example of the
liability of regulation to protect in
estors when such principles are ac-
epted."