Evening star., 1952-06-30
Lands Charges
PUG Chairman
Is ',Comp|acent'
Former SEC Head
Answers Flanagan
On Transit Finances
By Colt HendIey

SOtt sbSuObSy
James H. Flanagan, chairman
of the District Public Utilities
Commission, today was accused of
"complacency'' toward the public
interest in the PUG handling of
Capital Transit Co. affairs.
The accusation was in another
statement issued by James M.
Lands. former chairman of the
Securities and Exchange Com
mission. Mr.. Lands was the au-
thor Of a recent report for the
House District Subcommittee in
vestigating transit affairs here.
1t was because of this COM
placency, Mr.. Lands said, that hel
recommended the Office of peo-
pies counsel to be reactivated. He
had recommended against use of
this Office in his original report.
Duplication Cited.
The peoples counsel, discon-
tinued last year. was designed to
represent the citizens in utilities
affairs before the PUG. The con-
tention was that the assistant
corporations counsel assigned to
the PUG did this job and the peo-
pies counsel was duplication of
jobs.
The original Lands repor tt
roundly criticized the PUG and the
Capital Transit Co. It charged
that company reports to the PUG
did not show large profits made
during the war years.
Mr.. Lands statement today was
in rebuttal to Mr.. Flanagan's de-
tense against charges in MIR.
Lands first report.
Reforms Proposed.
The House District Subcommit-
tee already has accepted the origi-
nal report and recommended that
the PUG institute reforms sug-
gested in the report. The sub
committee intends to check next
January to see what the PUG has
done.
And Mr.. Flanagan has been
confirmed for another term on
the PUG.
His confirmation by the Senate
was held up briefly when the
Lands report was made public.
The Senate District Committee
gave Mr.. Flanagan a thorough
going over in one session, then
listened to his explanations and
unanimously recommended his
confirmation. The Senate vote to
confirm him was also unanimous.
Mr.. Lands said Mr.. Flanagan's
reply to the report demonstrated
the complacency toward the pub
lie interest that has characterized
the PUG in recent years.
Tax Refund Discussed.
He declared:
"Mr. Flanagan still misunder-
stands or obscures the nature of
the $33 million tax refund re-
ceived by the company in 1946."
The refund in question was put
in the company's earned surplus
and later used to help write off
inflated property values on the
company's books. Mr.. Flanagan
said the PUG had no control over
the sum and the transit firm did
so only at his suggestion but could
have used it for dividends.
Mr.. Lands said:
This was not merely excess
earnings. It was a refund due to
accelerated amortization of emer-
gency facilities. The public,
in short, repaid the company for
the major portion of these ia
cilities. But they were not writ
ten out of the rate base.
Public Charged Twice.
Instead, the company was per-
mitted to continue to earn a re-
turn on them and to continue to
accrue depreciation against them.
The PUG is thus permitting the
company to charge the public
substantially twice for these as
sets. No wonder there is a melon
for the stockholders to split"
Mr.. Lands called attention to
Mr.. Flanagan's statement that it
is a well-eStabliShed principle of
rate making that past excessive
earnings cannot be considered as
q basis for currently allowing
other than fair rate OF return.
He commented:
eff this is the case the PUG
should revoke its order of May 8,
1947, and reafirmed October l,
1948, providing that all earnings
of the company in excess of rs
per cent should be set aside in
a reserve to be available in the
event that future years earnings
shall fall short of such fair re-
turn.
Says Point "Obscured."
my simple point, now obscured
by Mr.. Flanagan, was an express
sion Of regret that he did not
have the foresight to issue the
same order in 1912, 1943, 1914,
1945 or even 1916.
"By the time it was issued in
1947 the horse was stolen. He
might. at least, have mourned its
loss. instead of insisting that it
was never there"
Mr.. Lands said:
"Mr. Flanagan's complacency
with regard to the public interest
is matched by his willingness to
admit lack of power in the PUG
to deal with the matters brought
up in my report.
"His remarks lead me to
change one conclusion in my re-
port, namely that since there is
little likelihood for real aggres-
sive protagonist Of the public to-
be found in the PUG, the Office of
peoples counsel might well be
activatad