Evening star., 1946-08-01
Erie Basin Company
Denies Making Profits
|15O Times lis Worth
BY the Associated Press

Erie Basin Metal Products, Inc,
major unit in tine Carson NUM-
tions combine, yesterday contested
the Governments claim that it
made excessive profits" amounting
in one year ito $50 times the COM
pany's tangible net worth"
The company, one of those organ
lied by Henry Carson and subject
Of an inquiry by the Senate War
Investigating Committee, asked the
United States Tax Court to bar
the Governments effort to get a re-
fund.
The War Departments War Con-
tracts Price Adjustment Board de-
clared the company made nearly
81 ,270,00o in excessive profits dur
ing its fiscal year ended November
80, 1943. After allowing 1884, ,125. 50
credit for taxes paid, it demanded
cash return of $685. 5,874.48.
Doesn't Reflect Investment.
Erie acknowledged that its tan
gible net worth" at the beginning of
the year in question was $11, 1882, but
insisted that such figures does not
properly reflect the funds invested
in and made available to petitioner
by its principal stockholders"
The Army boards findings, as
shown in an exhibit attached to
Erie's petition, noted that mo pri-
vate capital was invested" in the
company on its formation in Illinois
in 1912, placed the $11,832 valuation
on its assets as Of November 30, 1912,
and added:
"* Net profit ON renegotiable
business before renegotiation and
taxes amounted to $50 times the
company's tangible net worth at the
beginning of the fiscal period"
The Army's renegotiation branch
turned in its first report october II,
1945. The company was notified
of the determination January 4, and
entered a protest. The price ad-
justment board denied the protest
May l and set May 16 as the dead
line for payment without interest.
Claims Army Erred.
The company asked the court to
rule that the Army board erred in
disallowing the following claims of
the company:
For rental of factory space and
equipment from the Illinois Watch
Case Co. of Elgin, H., another Cars
son firm, $4,000.
For executive salaries, $4,000;
washington Office expenses" $10,-
900; maintenance expenses, $275,000;
write-off of Obsolete equipment" /"
$132, ,998.
Erie also contended the board
erred 'in failing to take
into consideration" such factors as
its efficiency" "the reasonableness"
of its costs and profits and its CON
tribution to the war effort, including
inventive and developmental contri-
buttons"
The company, which made mortar
shells and other weapons, said that
in the fiscal year in question it took
in $6,726 ,890.95 on contracts subject
to renegotiation, that its costs and
expenses totaled $5,627 ,088.82, and
that it's profits were: Net before
Federal income taxes, 1,099 ,802 .13,
or 1929 ,80213 after those taxes.
Used impossible Method"
| One of the methods it used in
making fuses, it said. was first held
to be impossible" by Army ord
nance, which later made it manda-
tory for all similar fuse-makers
when it found Erie was using it
successfully.
The company attacked the disal-
lowance of $3.50 for executive sal
aries as mot supported by the facts. u
It declared that its Outstanding
record warrants payment of execu-
tive salaries commensurate with the
accomplishment"
Army renegotiators declared that
even after the refund of $1,270, 900
the company would retain IAN op-
Grating profit, before Federal taxes,
Of $500, 900 or e.3 per cent on adjust
ed renegotiable sales of $5,457 900. u
Erie Basins executive and ad-
ministrative salaries on a unit-shell
basis were four times the average of
ot ho,. y,roT,1corc thcyy ror,ortod