Question. You think the word "value" there means amount rather than value, do you?

Answer. Yes, sir.

Question. And you have so stated on the next page?
Answer. Yes; I do.

Question. If there is any increase in value it must be in being relieved from something that is going to be everlastingly burden

some.

Answer. That is correct.

Question. But the lease in that sense was moved over to General Gas & Electric.

Answer. Moved over to the investment by Associated in General Gas & Electric Corporation common class B stock.

Question. On page 30 you have a summary of Associated General Electric Corporation's acquisitions of General Gas & Electric Co.'s stock?

Answer. That is correct, class B stock.

Question. Class B voting stock?

Answer. Yes, sir.

Question. Beginning on page 31 you show the acquisitions and disposals by the Associated General Electric Corporation of General Gas & Electric Co. class A stock?

Answer. I do.

Question. The class A is nonvoting?

Answer. That is correct.

Question. With what do you deal on page 34?

Answer. I deal with the acquisition by Associated General Electric Corporation of General Gas & Electric Corporation dividend participations.

Question. Tell me about that.

Answer. Dividend participations of General Gas & Electric Corporation represented certain rights inherited by the corporation from its predecessor company. Dividend participations were to receive, after regular dividends had been declared on all stocks, any additional amounts declared as dividends divided in such manner that each share of class A common stock, class B common stock, and each dividend participation should share equally in such additional dividend. In liquidation or dissolution the dividend participations were not entitled to share in any manner whatever in the assets of the corporation. The dividend participations were nonvoting and were called for redemption on November 1, 1929, at $30 each.

Question. They were issued in scrip form in that sense? There were certificates issued representing it?

Answer. Yes. They were regular certificates.

Question. It was not a bookkeeping entry?

Answer. No. There were certificates, just as common-stock certificates.

The company acquired a total of 375,942.805 dividend participations, of which 298,761 were acquired from Gas Securities Corporation under the contract of April 26, 1929, which has already been referred to.

On May 1, 1929, Associated Gas & Electric Co. made an offer to acquire dividend participations in exchange for certain obligations

of Associated Gas & Electric Co. and something over 10,000 dividend participations were received pursuant to that offer.

A number of other dividend participations were acquired by various companies within the system, and a grand total of 375,942.805 dividend participations were thus acquired.

The holdings of Associated General Electric Corporation in dividend participations of General Gas & Electric Corporation were exchanged in November and December 1929 for class A common stock of General Gas & Electric Corporation on the basis of $30 per dividend participation and $80 per share of class A stock.

Question. Will you pass now to Chapter 3, Balance Sheet Accounts. On page 40 you have comparative balance sheets for the end of the years 1927, 1928, and 1929. I want to call attention to the capital and corporate surpluses that you deal with on pages 44 and 46. Give me the story of the capital surplus.

Answer. There is shown on page 45 of this report a summary analysis of capital surplus of Associated General Electric Corporation. The surplus was built up beginning in the year 1929, and there were total credits thereto of $970,894.91, and debits thereto of $525,631.82, leaving a balance at December 31, 1929, of $445,263.09.

Question. But in the credit account there is a sum of $621,519.60 arising out of what, excess value?

Answer. Arising out of an excess value placed on 7,968.2 shares of class A common stock of General Gas & Electric Corporation received by Associated General Electric Corporation as dividends. Question. More than the balance?

Answer. Yes, sir.

Question. Next the corporate surplus. The corporate surplus arose out of what?

Answer. Principally the net income of the company from its earnings, less dividends paid. That entirely arose in the year 1929, and the balance at the end of 1929 in corporate surplus was $67,999.01. Question. That is based on what kind of figures?

Answer. That is based on unrevised figures.

Question. What do you mean by "unrevised figures "?

Answer. No corrections or no revisions have been made as to the net income of the company or the inclusion there of any items which may subsequently be in this report shown to be incorrectly included. Question. If the figures were revised what would be the result on the 3.52-percent earnings?

Answer. It would show no earnings.

Question. Is that what you do show on page 48?

Answer. Yes. I make a calculation on page 47 of the rate of return on capital invested-unrevised, and on page 48 I make a calculation of the rate of return on capital invested on the revised figures.

Question. Chapter 4 deals with what?

Answer. It deals with income and expenses of the company.

Question. Let us go to the Federal income taxes accrued by subsidiaries. Tell me what that is?

Answer. The amount in 1929 which is shown as income to Associated General Electric Corporation amounted to $136,166.08.

102777-35-PT 70—————3

Question. Under the deduction for income you show Federal income taxes $43,229.11. What is that?

Answer. That represents the accrual made by Associated General Electric Corporation as its income tax payable, and it is the amount which it passed on to its next holding company, namely, Associated Gas & Electric Co.

Question. Which of these accruals did Uncle Sam get?

Answer. From this company Uncle Sam got nothing directly. A consolidated return was filed for the entire system.

Mr. CHANTLAND. I think, considering the fact that many of these items are in other reports and will be more fully dealt with by the company to which this is sort of preliminary, the General Gas & Electric Corporation, we will not have any further testimony. Do you desire to ask any questions, Mr. Hill?

Mr. HILL. No, sir.

Mr. CHANTLAND. That is all.

(Witness excused.)

Examiner ALDEN. We will adjourn, subject to call.

(Whereupon, at 11:20 a. m., September 21, 1934, the hearing in the above-entitled matter was adjourned, subject to call.)

ROOM 2030-C, FEDERAL TRADE COMMISSION,
Washington, D. C., Friday, September 21, 1934.

Met, pursuant to notice, at 10 a. m.

Before Willard F. Hudson, examiner. Appearances: Col. William T. Chantland, counsel; Thomas J. Tingley, associate counsel; J. Butler Walsh, associate counsel; Walter B. Wooden, associate counsel; Dr. Francis Walker, chief economist; and Col. William H. England, associate chief economist, on behalf of the Commission. Bernard F. Weadock, New York City; William J. Hagenah, Chicago, Ill.; and Martin V. Callagy, New York City. Examiner HUDSON. You may proceed when you are ready, Mr. Wooden.

Mr. WOODEN. I will call Mr. Howell Wright.

Mr. WRIGHT. Mr. Commissioner, I desire the record to show that I appear here as my own counsel.

Examiner HUDSON. That will be shown.

HOWELL WRIGHT, called as a witness for the Commission, being first duly sworn, testified as follows:

Direct examination by Mr. WOODEN:

Question. Where do you live, Mr. Wright?

Answer. Mr. Commissioner, before I start to testify, I have prepared a statement which I desire to read with respect to my testimony here.

Mr. WOODEN. Is that with reference to the testimony itself, or is it

The WITNESS. I challenge your right to even question it. Mr. WOODEN. Such a statement, if it is to be received here, this is the proper time for it to be received.

The WITNESS. I desire to read it, if I may, Mr. Examiner.
Examiner HUDSON. You may read it into the record.

Federal General

amount sociated

ctly. A of these

by the Gas &

in the

934

as J

alter

mist

Cit

ats

The WITNESS (reading):

My appearance here is the result of a subpena from the Federal Trade Commission, dated September 10, 1934, signed by Commissioner Ewin L. Davis, and served upon me by registered mail.

*

Commissioner Davis' letter of September 15 states that the subject on which I am called to testify relates to “* authorship of a so-called 'survey' of the Cleveland municipal light plant under the auspices of the Utilities Publication Co. of Chicago." The subpena refers to authority conferred upon the Federal Trade Commission by virtue of Resolution No. 83 adopted by the United States Senate February 15, 1926, and Senate Joint Resolution adopted June 18, 1934.

I respectfully deny the right or authority of the Federal Trade Commission to compel me to testify under the terms of these resolutions, or under the provisions of the act creating the Commission and defining its powers and duties. A private citizen is protected, equally with others, by the constitutional guarantees of freedom of expression. The constitutional guarantee of freedomof speech protects me as a writer just exactly as it does any citizen who writes special articles for publication in periodicals, magazines, or newspapers.

66

As a citizen and writer I cannot be compelled to testify under the provisions of Senate Resolution No. 83 as demanded by Commissioner Davis' subpena and letter. I am not a "public utility corporation" or a "nonpublic utility corporation owned and controlled by a holding company." I am not engaged in 66 interstate or international business." Paragraph I of the resolution in no way applies to me. Within the fair meaning of paragraph II of said resolution I am not a corporation ", an officer" of a "corporation nor have I at any time "in behalf of " such a corporation", or as an officer of such a corporation", or "in behalf of any organization of which such a corporation may be a member, through the expenditure of money, or through the control of the avenues of publicity, made any effort to influence or control public opinion on account of municipal or public ownership", or "since 1923 to influence or control elections."

66

It would seem to me that if the Federal Trade Commission seeks to compel a citizen of the United States who gives public expression to his views as a writer, to submit to questioning and examination as to the views expressed, it should ask Congress to confer upon it such authority. The wording of Senate Resolution No. 83 cannot be construed by any stretch of imagination to confer any such authority. It is doubtful if any such power can be so conferred in the face of the Bill of Rights.

This statement for the record is not made for the purpose of avoiding appearance or testimony here; it is entirely clear what the Federal Trade Commission is authorized to do. I have no desire to prevent that accomplishment. I am in sympathy with the purposes of the present national administration. In principle, I subscribe whole-heartedly to the public-utility policies of the present administration as expressed by President Roosevelt in his Portland speech in which he said:

"I do not hold with those who advocate Government ownership and Government operation of all utilities", and in which he sets forth the broad general rule that "development of utilities should remain, with certain exceptions, a ein function for private initiative and private capital." In the main, I subscribe to his utterances with respect to State and Federal regulation of utilities.

With respect to "propaganda" as referred to in newspaper statements concerning my appearance here and quoted from the Federal Trade Commission announcement, but which is not mentioned in Commissioner Davis' subpena or letter, I am quite familiar with the uses which have been made of it before or and since this investigation began. I believe that it ought to be investigated impartially to the fullest extent.

Under the circumstances I have no hesitancy in stating that I am the author of an article on the economics and politics of the Cleveland Municipal Electric Light Plant published in January 1931 by the Utilities Publication Co. of Chicago, Ill. I was invited by that company to write this article. I agreed to write it, provided it was published as I wrote it. I made no so-called vey." The article was written, was published as I wrote it, and I was paid for the service rendered. The article speaks for itself. Further than this I know nothing about the matter under investigation.

sur

The only comment it seems necessary for me to make with respect to the subject matter of the article is that it contains what I now consider certain

unfortunate phraseology with reference to the late Mayor Tom L. Johnson, of Cleveland, and my friend and associate, Mr. Newton D. Baker. These gentlemen were both sincere in their efforts in behalf of the Cleveland Municipal Light Plant and believed in 3-cent light. In this respect my article has been misunderstood. There was no conscious intention on my part to reflect upon the sincerity or motives of these two great leaders. I have sought on a number of occasions in public utterances to correct the erroneous impressions conveyed in this respect by my article, and I have explained the matter fully in person to Mr. Baker. If I were to rewrite the article, I would make this correction.

I have written a number of other articles on public-utility questions, which are critical, and copies of which I shall be glad to put into the record.

By Mr. WOODEN :

Question. I take it, Mr. Wright, from the statement you have just read, that you are not standing upon the position taken by refusing to testify but merely that you want your position clear?

Answer. I decline to comment further upon the matter than what I have said in the statement.

Question. Will you tell us where you live, Mr. Wright?

Answer. Cleveland, Ohio.

Question. I understand you are an attorney?

Answer. Yes.

Question. And have been for a good many years?

Answer. Since 1920.

Question. Are you at the present time vice chairman of a special .committee on public utilities of the Ohio Bar Association? Answer. Yes. That is all a matter of record. I am.

Question. How long has that status existed?

Answer. I do not know; sometime in the early part of this year. Question. Are you an engineer or accountant by training and experience?

Answer. I am not.

Question. You have stated that you prepared this so-called "Gondon survey, or pamphlet ", in 1931, relating to the Cleveland Municipal Plant?

Answer. I stated I wrote an article about the economics and politics of the Cleveland Municipal Plant.

Question. And it was published as you wrote it?

Answer. It was.

Question. Have you ever been employed by any private electric or gas interests?

Answer. On that, I say I have, but I question your right to ask who my clients are or what service I render them.

Question. Do you decline or refuse to state the identity of the electric or gas companies for whom you have appeared? Answer. I do not think I can be required to do so.

Question. My question is, Do you refuse or decline to?

Answer. I think in view of my constitutional rights I am not required to testify as to who my clients are or were.

Question. You neither affirm nor deny you had employment from private utilities?

Answer. I said I had.

Question. Since the severance of your connection with the Cleveland plant?

Answer. Yes.