Mr. GIBSON. Was there not some court action at some time here in the District with respect to the Washington Rapid Transit Co. brought by some of the stockholders?

Mr. FLEHARTY. Yes. There was a suit brought by a concern which, as I understood it, had been employed by the North American Co. to buy up stock of the W. R. & E. Co. They had a contract with Mr. Leon Arnold to buy his stock at a certain figure.

Mr. GIBSON. At how much, 20?

Mr. FLEHARTY. I had those figures in mind at one time. My recollection is it was either 18 or 20; I have forgotten which. Mr. GIBSON. What was that?

Mr. FLEHARTY. That was approximately five or six years ago. Mr. GIBSON. Well, the entire stock of the Washington Rapid Transit Co. was acquired after that suit for $200,000, was it not? Mr. FLEHARTY. Í understood more than that.

Mr. GIBSON. How much?

Mr. FLEHARTY. It has been stated in the neighborhood of $500,000. I think Mr. Arnold gave me that information.

Mr. GIBSON. Gave you that information?

Mr. FLEHARTY. Yes, sir. I talked with Mr. Arnold with the idea of putting him on the stand but concluded not to do so.

Mr. Gibson. My information is—I may be wrong that this stock was acquired for around $200,000.

Mr. FLEHARTY. No, I think you will find it was in excess of that. Mr. GIBSON. More than that?

Mr. FLEHARTY. Yes, sir.

Mr. GIBSON. I wish you would look into that and see if you can get some information and let us have it.

Mr. CLAGETT. I might say that that was one block of stock.
Mr. GIBSON. Was that a controlling interest.

Mr. CLAGETT. We will give the complete figures. I do not remember. That was five or six years ago the transaction happened.

Mr. FLEHARTY. When I say I might be able to furnish those figures, we have no record at the Public Utilities Commission as to what the North American Co. paid for its stock. The only way that I got at it at all was by talking to Mr. Arnold.

Mr. GIBSON. Do you not think that is too much for this merger company to pay intending to become obligated to the extent of about a million dollars for a $500,000 property?

Mr. FLEHARTY. If it would have any effect on the rate base or rate or return, yes, sir. But it has not; so it is immaterial.

Mr. GIBSON. Immaterial how much goes in?

Mr. FLEHARTY. Yes, sir.

Mr. GIBSON. Does that same thing apply to the other companies, how much they go in at?

Mr. FLEHARTY. No, sir.

Mr. GIBSON. Why do you draw a different rule in respect to this than the other?

Mr. FLEHARTY. Because in the first place, the $596,000

Mr. GIBSON. That is cash?

Mr. FLEHARTY. Yes, that is cash.

Mr. GIBSON. That is cash, $596,000, to Mr.Wilson for a property you estimate to be worth $500,000. That is clear, is it not?

Mr. FLEHARTY. Yes, sir, but that does not in any way decrease the income or does not increase the rate base.

Mr. GIBSON. You took into consideration when you fixed this rate base of $50,000,000?

Mr. FLEHARTY. That was thrown in.

Mr. GIBSON. Oh, gave it to him?

Mr. FLEHARTY. It amounts to that.

Mr. GIBSON. You put the Washington Railway & Electric Co. upright enough so that you could take this in as a gift and not affect the rate base?

Mr. FLEHARTY. That is the practical affect. It does not affect the rate base.

Mr. GIBSON. That is the practical affect of it, is it not?

Mr. FLEHARTY. Yes, sir.

Mr. GIBSON. Some question has been asked you this morning, some controversy with Mr. Clayton, as to the actual rate base; was not that the point you covered?

Mr. FLEHARTY. I do not know what you have reference to.

Mr. GIBSON. I will ask you this: Is the unification cost included in the rate base or is that added to the $50,000,000?

Mr. FLEHARTY. Unification cost?

Mr. GIBSON. Yes.

Mr. FLEHARTY. The incidental expenses connected with unification? Mr. GIBSON. Yes.

Mr. FLEHARTY. It is provided the new company shall pay the unification costs, that is, the costs that may be reasonably allowed by the commission.

Mr. GIBSON. Does it provide that that shall be added to the $50,000,000?

Mr. FLEHARTY. No, but paid as operating expenses.

Mr. GIBSON. And it becomes a liability against the company? Mr. FLEHARTY. Yes, sir.

We

Mr. GIBSON. And be a material item in the consideration of fares? Mr. FLEHARTY. We do not think it will be a very large item. have control over that, and if they try to make the item unreasonable we would eliminate it as we would any other operating expense. Mr. GIBSON. Well, the attorneys for Wilson, would the expense of them come in?

Mr. FLEHARTY. Mr. Wilson made the statement, and we have that as a matter of record, that he was paying those attorneys out of his own pocket.

Mr. GIBSON. And that would not be charged against it?
Mr. FLEHARTY. Would not be charged.

Mr. GIBSON. I assume that some of these other good-looking gentlemen appearing here, either as attorneys or lobbyists, some of their expenses and charges would come in against the company. Of course, we would be glad to see them at any time. They are good fellows, all of them. I am not saying anything against them.

Mr. FLEHARTY. That item is subject to supervision by the commission, Judge.

Mr. GIBSON. Have you made any estimate as to the cost of that item?

Mr. FLEHARTY. We have nothing submitted at all that would allow us to make an estimate; in other words, we would allow, just by way

of illustration, their costs of procuring the charter, their printing costs, and items of that kind.

Mr. GIBSON. How about attorneys' fees?

Mr. FLEHARTY. We would allow attoneys' fees, except incident to procuring the charter. Of course, that would be a reasonable charge.

Mr. GIBSON. Then the attorneys' fees under the holdings of the Public Utilities Commission would be limited to securing the charter? Mr. FLEHARTY. I would think so. Of course, we have not had anything to do with that-It has not come to us.

Mr. GIBSON. Not any expenses incident to pushing this legislation through?

Mr. FLEHARTY. I should say not.

Mr. GIBSON. We will be interested to see how that comes out? I would like to ask you about the Rapid Transit Co. This agreement provides for the turning in or acquirement of stock in the physical property of the Washington Rapid Transit Co.

Mr. FLEHARTY. That is right, sir.

Mr. GIBSON. That is, you get what is evidence of the physical property in the shape of stock issues turned over?

Mr. FLEHARTY. But the commission reserves the right at any time they see fit or deem it advisable to compel a liquidation of the bus company.

Mr. GILBERT. Did I understand that Mr. Reid made the suggestion that Mr. Wilson appear?

Mr. GIBSON. Yes, I understood so.

Mr. COMBS, Jr. Mr. Fleharty, the minority stockholders in the Washington Railway & Electric Co. will participate in any profits, of course, to the amount of their holdings, that the company may receive by virtue of its stock ownership in the merged company? Mr. FLEHARTY. Yes; and if they do not participate, they have the right of any other minority stockholder to go into court and compel participation.

Mr. LAMPERT (presiding). The committee stands adjourned until Monday morning at 10.30.

(Thereupon, at 11.58 o'clock, a. m., the committee adjourned to meet Monday, May 7, 1928, at 10.30 o'clock, a. m.)

HOUSE OF REPRESENTATIVES,

COMMITTEE ON THE DISTRICT OF COLUMBIA,

Monday, May 7, 1928.

The committee met at 10.30 o'clock a. m., Hon. Charles L. Underhill presiding.

Mr. UNDERHILL. The committee will come to order. Without objection, the reading of the minutes of the last meeting and the call of the roll will be dispensed with.

The matter under consideration is H. J. Res. 276, authorizing the merger of the street railway corporations operating in the District of Columbia, and other purposes.

I have not followed these hearings very closely, but I understand that the trade associations were scheduled for hearing to-day, and that no real program has been laid out as to the proponents or oppo

nents of the measure. Is there any one here from the trade bodies who wants to be heard this morning?

Is Mr. Wilson present?

Mr. CLAGETT. He is not present, Mr. Chairman. I can have him present in half an hour or so.

Mr. UNDERHILL. He was scheduled to go on.

Mr. CLAGETT. He had not been informed of that.

Mr. UNDERHILL. I understand that there are individuals representing the labor group who want to be heard.

Mr. NOONAN. I would like to be heard.

Mr. HANNA. Mr. Chairman, Mr. Ham, president of the Washington Railway & Electric Co., and myself both notified the chairman last week that we were at his disposal at any time. Neither of us has been heard in this matter. I only want to state that we are both here if the committee desires to hear us and we would be glad to go on at this time.

Mr. NOONAN. Mr. Chairman, I am a minority stockholder. I represent probably 53 per cent of the stock, and I have had one hearing lasting perhaps two hours in three weeks. I would like to clarify some statements that were made at that time.

Mr. UNDERHILL. How much time would you want?

Mr. NOONAN. Forty or forty-five minutes.

Mr. GILBERT. Mr. Chairman, this witness has been heard at considerable length, comparatively, in a hearing of this kind. Mr. Reid of Illinois made the request that Mr. Wilson be present for examination to-day.

Mr. UNDERHILL. I just called Mr. Wilson, but he did not respond. Mr. GILBERT. And I wanted to ask him some questions also. If there are any other interests that want to be heard, they ought to be heard before these other witnesses and then we can sum up. The presidents of these two companies ought to be heard.

Mr. UNDERHILL. Is Mr. Wilson present?

Mr. CLAGETT. I said, Mr. Chairman, he did not know he was to be here, but we can have him here within a half hour.

Mr. UNDERHILL. You can have him here right after lunch. We are going to continue the hearing all day.

Mr. GILBERT. Mr. Chairman, I have some very important matters on the floor to-day, and it would be quite an accommodation to me not to have Mr. Wilson before the committee to-day. I am really gratified that he is not present at this time.

Mr. UNDERHILL. If we can have him here at 11.30, would that be convenient for you?

Mr. GILBERT. No. His examination would take longer than I have the time to give it.

Mr. COMBS. Would you rather have him here to-morrow?

Mr. GILBERT. That would suit me.

Mr. CLAGETT. Any time that the committee desires Mr. Wilson to be here, we can have him here.

Mr. UNDERHILL. You had better notify him to be here to-morrow, then.

Mr. Hanna, if you care to be heard, you may proceed now.

STATEMENT OF JOHN H. HANNA, PRESIDENT OF THE CAPITAL TRACTION CO.

(The witness was duly sworn by Mr. Combs.)

Mr. HANNA. Mr. Chairman and gentlemen, I want to say in the beginning that the Capital Traction Co. that I represent is one of the three parties to this agreement, and in the course of these hearings there have been statements made, or indications, that it was believed that this merger agreement was one that was entirely the product of Mr. Wilson, of the North American Co.

I think, therefore, it is well to put into the record the fact that the Capital Traction Co. is a separate organization, that it is not controlled by the North American Co., or any other company.

It has about 2,300 stockholders. The stock is very widely scattered.

The North American Co., I understand, owns indirectly possibly 2 or 3 per cent of the stock, but they in no way exercise any measure of control over the company.

This agreement, which is presented for consideration and approved by the Public Utilities Commission, is the result of a series of conferences between the Washington Railway & Electric Co., its representatives, Mr. Wilson, who is the owner of some 98 per cent of the stock of the Washington Rapid Transit Co., and representatives of the Capital Traction Co.

Those conferences were held following a letter received by the different companies from the Public Utilities Commission suggesting that an effort be made to arrive at a method of unification of these properties.

The agreement as presented to the commission in February was an agreement of the three parties. It was not any particular plan that had been advertised before or had been suggested before, but was actually the result of conference of those three parties.

As the record states, that agreement was submitted to the Public Utilities Commission. Certain changes were asked by them and were accepted by the three parties to the agreement.

The agreement has been approved by over two-thirds vote of the stockholders of the Capital Traction Co., as is required by the terms of the agreement itself.

I make that statement to put the Capital Traction Co. definitely on record in this position.

The principal questions which have been brought up during the course of this hearing have been, first, what benefits the public will receive from this merger; second, the question of valuation, or rate base, and the questions of paving and police relief, and the power contract.

The main objection to the merger plan as presented here by the Public Utilities Commission with their approval, I think was expressed in a reply made by Mr. Clayton to a question which was asked him, as to what his principal objection to the plan was. He said it was a company plan.

In other words, he seemed to object to it because it was a proposal of the companies and not something which somebody else had forced down the companies' throat.