apprised of the actions of the other defendants pursuant to the consent decree, and to coordinate industry action with respect to the ICC in programs desired by Service Pipe Line for its purposes under the consent decree.

(a) Multiple Reports to the Attorney General

An outstanding feature of Service Pipe Line's activities under the oil pipeline consent decree is the number of reports it has made to the Attorney General. For each of the years 1942 through 1948, Service Pipe Line has submitted to the Attorney General three separate and different reports. For the year 1949 Service Pipe Line filed with the Attorney General four reports, each different from the other. For the years 1950, 1951, and 1952, Service Pipe Line has on file in the office of the Attorney General two different reports. The following table sets forth the status of some of the items in the reports submitted by Service Pipe Line to the Attorney General as of the date of the hearings. 15 It should be noted that in a number of instances Service Pipe Line's reports were amended after the lapse of many years.

Reports to the Attorney General by Service Pipe Line Co. compiled by Department of Justice

Reports to the Attorney General by Service Pipe Line Co. compiled by
Department of Justice-Continued

Reports to the Attorney General by Service Pipe Line Co., compiled by
Department of Justice-Continued

1 This total was paid purportedly toward 1952 and 1953 deficits. All paid on 1953 deficit.

At the hearings, representatives of the Department of Justice were interrogated as to which, if any, of the reports filed with the Attorney General accurately reflected Service Pipe Line's operations under the decree. The Department's representatives testified that they did not know which of the reports contained a correct statement of the facts, and that an audit would be required to ascertain such information. They acknowledged that the FBI previously had audited the accounts of Service Pipe Line. Notwithstanding these audits, however, the Department of Justice at the hearings still did not know which, if any, of Service Pipe Line's reports was an accurate reflection of its actual operations under the decree. 16

When interrogated as to the justification for such a confused status in reports to the Attorney General, representatives of the Department of Justice were unable to answer. The Antitrust Division representatives indicated, however, that this issue was one appropriate

16 Hearings, pp. 233-240.

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for submission to the court for determination. In this connection, Department of Justice representatives testified: 17

Mr. HARKINS. Mr. Kilgore, what would your answer be to the question of what justification is there for Service Pipe Line amending its 1942 report in 1951?

Mr. KILGORE. I don't know what they considered to be their justifications, sir. I would only have to guess at what it might be.

Mr. HARKINS. Would there be any justification for accepting in 1951 a correction of the 1942 report, other than to correct an arithmetical mistake?

Mr. HANSEN. Isn't that the matter that is probably going to be determined by the court?

Mr. HARKINS. What case would that be?

Mr. HANSEN. I don't know what you have in mind here. You asked for the justification of it. Have they properly computed it? That is one of the issues.

The CHAIRMAN. There is no case involving this matter.

Mr. HANSEN. It is certainly under investigation, and ultimately this issue is going to have to be determined by the

court.

The practice of Service Pipeline in changing its reports is not unique in enforcement of the oil pipe line consent decree. Assistant Attorney General Hansen at the hearings indicated that most of the pipeline companies had on file with the Attorney General more than one report for a particular year. As a result of this status in the reports to the Attorney General, the Department representatives acknowledged that it is virtually impossible to determine from the reports, whether or not the defendants have complied with the consent decree. In this connection the representatives of the Antitrust Division testified as follows: 18

Mr. HARKINS. The practice of Service Pipeline in changing the reports that it has submitted to the Attorney General for any particular year is not a unique practice with that company, is it?

Mr. HANSEN. You mean, is that the only company that has made different reports?

Mr. HARKINS. That is right.

Mr. HANSEN. No, others have, also.

Mr. HARKINS. In fact, it is true that most of the companies that are subject to this decree have more than one report for many of the years since entry of the decree, is that not true? Mr. HANSEN. Most of them.

Mr. HARKINS. Is it not true that the status of the reports that have been submitted to the Attorney General pursuant to this decree is such that it is virtually impossible to determine on the basis of the reports whether the decree has in fact been complied with?

Mr. HANSEN. There are some difficult problems, and that is one of the difficult ones, and that takes considerable time to solve.

Hearings, p. 235.
Hearings, p. 238.

Mr. HARKINS. These reports are submitted pursuant to an order from the courts; is that not right?

Mr. HANSEN. That is correct.

Mr. HARKINS. In the event a company subject to the decree desires to change a report it has submitted to the Department of Justice, why should not that change be approved by the court?

Mr. HANSEN. The decree does not provide for it. Certainly as I indicated to the chairman, I will give some consideration to it.

(b) 1947 Program

In 1947 officials of Service Pipe Line found themselves confronted with a difficult and unpleasant situation. Since entry of the decree Service Pipe Line had maintained what was essentially a dual system of accounts with respect to its reports to the Attorney General. In its original reports to the Attorney General, valuation of the pipeline's property was computed under a method which resulted in a "maximum" valuation. For the purpose of computing dividend payments, however, Service Pipe Line used a different method, which resulted in a "minimum" valuation. The difference between the payments to the shipper-owner allowable under the maximum valuation which was reported to the Attorney General, and the amounts which could be paid to the shipper-owner under the minimum valuation, was carried in surplus as "undeclared dividends." In 1947, the undeclared dividends account contained $4,555,657.19

Remedies available to Service Pipe Line for the dividend situation that confronted it, as a result of the use of "maximum" and "minimum" valuations, were analyzed by Mr. J. L. Burke in a memorandum dated February 4, 1947, to Mr. B. C. Clardy. Mr. Clardy at that time was president of the pipeline company.20 In his memorandum, Mr. Burke directed attention to method of computing valuations set forth in paragraph III (a) of the consent decree, described the pipeline's dual accounting procedures as follows: 21

Because of the uncertainty of the italicized clause, Stanolind Pipe Line Co.'s reports to the Department of Justice under the consent decree are made on the basis of a maximum valuation, and we carry in surplus account as undeclared dividends the amount in excess of 7 percent earnings computed on a minimum valuation. We understand from Mr. Shoemaker that this is the general practice followed by other pipelines governed by the consent decree, except the New Jersey companies, who report to the Department of Justice on a basis of minimum valuation and freeze excess earnings, and the Texas companies, who report and dispose of funds based on a maximum valuation.

To compute its "maximum" valuations, Service Pipe Line used the method employed by the Interstate Commerce Commission to determine pipe line valuations pursuant to section 19 (a) of the Interstate Commerce Act. Its "minimum" valuation, however, was computed by the method set forth in the consent decree. Throughout the period

19 Hearings, pp. 283, 286.

20 Hearings, p. 1169.

Hearings, p. 281.