Question. At what rate?

Answer. Eight percent.

Question. On page 20 of your report you show the rates of return received by Chicago District Pipeline Co. on the capital employed by it?

Answer. Yes, sir.

Question. During each of the 6 months' periods ended June 30 and December 31, 1932, and June 30, 1933?

Answer. Yes, sir.

Question. What was the average capital employed by Chicago District Pipeline Co. in the 6 months' period ended June 30, 1932? Answer. $2,932,445.55.

Question. And what was the income received thereon before deducting Federal income taxes?

Answer. $136,366.55.

Question. And the rate of return on that was what?

Answer. 9.3 percent.

Question. What was the income after deducting Federal income taxes?

Answer. $133,477.75.

Question. And what was the rate on that income?

Answer. 9.1 percent.

Question. What was the average capital employed during the 6 months' period ended June 30, 1933?

Answer. $2,887,325.69.

Question. And the income received on that capital before the deduction of Federal income taxes was how much?

Answer. $142.242.47.

Question. And what was the rate of income before deducting Federal income taxes?

Answer. 9.85 percent.

Question. What was the income after the deduction of Federal income taxes?

Answer. $137,953.17.

Question. And what was the rate of return on that income? Answer. 9.56 percent.

Question. The income and the rates of return that you show here in this table on page 20 are computed on a yearly basis; are they not? Answer. Yes, sir.

Question. And the rate of return is computed on the capital employed as represented by the financial statements of the company; is that right?

Answer. Yes, sir.

Question. Does that furnish a different basis from that often used in public utility rate regulation proceedings?

Answer. Yes, sir; it does.

Mr. WALSH. Mr. Examiner, that is all the questions we have to ask Mr. Buckingham on this report and, unless the representatives of the company desire to make any further statements or examine the witness, we are through.

Mr. GARRETT. We have nothing, Mr. Walsh.

(The witness was excused.)

Examiner BENNETT. The hearing, then, is hereby adjourned, to reconvene on notice as prescribed in the resolution under which it is held.

(Whereupon, at 3:05 p.m., Jan. 25, 1934, the hearing in the aboveentitled matter was adjourned, subject to call of the presiding examiner.)

HEARING ROOM, FEDERAL TRADE COMMISSION,
Washington, D.C., Thursday, February 1, 1934.

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

Before Edward M. Averill, examiner.

Appearances: Hon. Robert E. Healy, counsel; Dr. Francis Walker, chief economist; Col. William T. Chantland, associate counsel; Col. William H. England, assistant chief economist; J. Butler Walsh, associate counsel; and C. F. Rhodes, associate counsel, on behalf of the Commission. Bernard F. Weadock, New York City, William J. Hagenah, Chicago, Ill., and Martin V. Callagy, New York City. Examiner AVERILL. You may proceed.

Mr. CHANTLAND. Mr. Examiner, this morning we take up in this investigation under Senate Resolution 83 the Central & South West Utilities group, which is a group of the Insull systems, which is located in the Southwest, chiefly in Oklahoma and Texas, but having properties along the western edge of Arkansas and in the northwest corner of Louisiana, with a few detached gas properties over on the Gulf coast of the State of Mississippi.

Before beginning I want to say, Your Honor, that there will be no personal appearance for this group at this time. We sent notices and copies of the report for checking for error to Mr. John E. Barber, the president of the company, at 20 North Wacker Drive, Chicago, Ill. He had a telephone conversation yesterday morning with our chief counsel, to which I listened, saying that they did not care to appear unless it was required, because since the receivership of the companies above, there has been so great a change in the personnel that they are not familiar enough with this to be of any service, and he promised to send a letter explaining his nonappearance. The letter is as follows [reading]:

MIDDLE WEST UTILITIES CO.,
Chicago, Ill., January 31, 1034.

(Edward N. Hurley and Charles A. McCulloch, receivers)

Hon. ROBERT E. HEALY,

Chief Counsel, Federal Trade Commission,

Washington, D.C.

DEAR SIRS: We beg to acknowledge receipt of your telegram of January 30, 1934, advising that a hearing is set for Thursday, February 1, on the report of the Central & South West Utilities Co.

A copy of this report was received by us on or around January 15, last, but none of the present officers of the company are sufficiently familiar with the facts covered by the report to make any adequate check of its accuracy.

In this connection you will appreciate that the report covers a period wholly prior to the control of the company by the receivers of the Middle West Utilities Co., who were appointed in April 1932. For the reason indicated, the company does not plan to be represented at this hearing.

Very truly yours,

CENTRAL & SOUTH WEST UTILITIES Co., By JOHN E. BARBER, President.

I want to call first this morning Mr. Horne to give a few more lines on the proposition of where this company is and its relation to the system. Mr. Horne has been sworn a number of times.

W. B. HORNE recalled as a witness for the Commission, being previously duly sworn, testified as follows:

Direct examination by Mr. CHANTLAND:

Question. Your qualifications and other matters have been stated when you have been on the witness stand before?

Answer. They have.

Question. You are attached to the Economic Division of the Federal Trade Commission?

Answer. Yes.

Question. In this utilities investigation you have given special attention to the questions of intercorporate relations, both through holdings and personnel?

Answer. I have.

Question. I call your attention first to exhibit 4979, printed at page 365 of part 38. I think that was prepared at your direction? Answer. It was.

Mr. CHANTLAND. This exhibit is dated November 21, 1931, and that suits our purpose because Mr. Depue's report really ends at the end

of 1931.

By Mr. CHANTLAND:

Question. This exhibit 4979 shows the pyramid of Insull interests carried down through the various groups and interconnections until at the left lower corner we find the Middle West Utilities Co. Have you had prepared a chart, beginning at the Middle West Utilities Co., of exhibit 4979, and carrying it down into this Central & South West Utilities group?

Answer. Yes, sir.

Question. And this chart that you have had prepared shows, then, on one side, on the left, how the Middle West Utilities Co. descends into this group, the Central & South West Utilities Co.?

Answer. It does.

Question. And beneath that, the Central & South West Utilities Co., are shown its subsidiaries?

Answer. Yes; both direct and indirect.

Question. On the right of that is shown just in abbreviated form the other coincident or coequal properties in the system with the Central & South West Utilities Co.?

Answer. Yes.

Question. That one-page chart which the reporter has now identified as exhibit 5608, is the chart that you have had prepared as Just stated, as of the date of December 31, 1930?

Answer. Yes.

Mr. CHANTLAND. We offer this in evidence.

Examiner AVERILL. The paper in question will be received in evidence and marked "Commission's Exhibit 5608."

(The paper referred to was received in evidence and was marked "Commission's Exhibit No. 5608, Witness Horne.")

By Mr. CHANTLAND:

Question. Have you prepared, Mr. Horne, a report on the intercorporate relations of companies in the Central & South West Utilities subgroup of the Middle West Utilities group?

Answer. I have.

Question. This, I take it, is a showing of both personnel and stock? Answer. Yes.

Question. It is not merely with the Middle West Utilities, but with all other investment companies or holding or operating companies in which there may be such interrelation?

Answer. It is.

Question. From what sources did you make up this report?
Answer. From reports made by the companies.

Question. Are the facts as stated in your report an accurate reflection of the facts received from the sources that you have stated? A. They are.

Q. The Central & South West Utilities Co., the head of this subgroup that we are dealing with now, was organized in 1925. Who was elected chairman immediately after the formation?

Answer. Samuel Insull.

Question. Who was vice chairman?

Answer. Martin J. Insull was elected vice chairman on March 28, 1929. They did not have a vice chairman until that date.

Question. Both of them resigned following the receivership of the Middle West Utilities Co., and other of those top companies? Answer. They did; on July 27, 1932.

Question. Were any other members of the Insull family connected with this Central & South West group?

Answer. Samuel Insull, Jr., was a director from August 3, 1925, to December 7, 1932, and there is a Fred W. Insull, whose residence is down in Texas. I am not sure what his relationship is, if any. Question. He has been the directing force, as I understand it, representing the Insulls in this group?

Answer. That is my understanding.

Question. On page 4 of this report, exhibit 5609, you have a table showing the directors and the officers?

Answer. Yes, sir.

Question. According to that Mr. Martin J. Insull was president from August 1925 to March 28, 1929. Is that correct?

Answer. Yes; August 3, 1925.

Question. He was followed by Mr. James C. Kennedy?

Answer. Yes; who resigned on December 7, 1932.

Question. Since the receivership John E. Barber has become president?

Answer. Yes, sir.

Question. I find on this page 4 that Mr. Fred W. Insull was a vice president between August 3, 1925, and December 7, 1932; is that right?

Answer. Yes, sir.

Question. As of December 31, 1930, how many officers and directors of this Central & South West Utilities Co. were connected with two or more companies in this subgroup and others?

Answer. There were 38 of them.

Question. Where do you find that information set forth?
Answer. It is in table 4 in Commission's exhibit 5153.
Question. What volume is that?

Answer. Volume 44.

Question. On pages 662 and following, in part 44, being table 1 in exhibit 5153, prepared by you, is the information showing the officers and directors of the Central & South West Utilities Co. as they were officers and directors of other companies of the Middle West Utilities group?

Answer. Yes, sir.

Question. On page 7 of this report of yours being discussed at this time, exhibit 5609, you set forth what, Mr. Horne?

Answer. The names of the stockholders of the Central & South West Utilities Co., together with the number of shares of stock held by each, and the percentage for each stockholder holding as much as one-tenth of 1 percent as of December 31, 1930.

Question. According to this at that time was the voting stock control held by one company above this?

Answer. Yes, the Middle West Utilities Co.
Question. How much did it hold at that time?

Answer. It held 1,680,885 shares or 55.2 percent of the total.
Question. Of the voting stock?

Answer. Of the voting stock.

Question. Other companies or interests within the Insull or Middle West systems held enough to bring the total within the system up to what?

Answer. 87.6 percent.

Question. So that the outside interest amounted to only 12.4 percent?

Answer. Yes.

Question. You next take up beginning on page 8 the holdings of the top company of this subgroup in its various subsidiaries, do you?

Answer. I do.

Question. And is this tabulated on page 9?

Answer. It is.

Question. And the insets there indicate that the companies inside of a certain name are subsidiaries, again, of that sub of this sub? Answer. They are.

Question. For example, the first company on page 9, table 2, is the American Public Service Co., a holding company, and you have percent of voting stock, 99. That means what?

Answer. 99 percent held by Central & South West Utilities Co. Question. Then next you have inset from that Abilene Traction Co., Street Railway, 100 percent, meaning what?

Answer. That 100 percent of its voting stock is owned by the American Public Service Co., immediately preceding it.

Question. The next outside company that is set out to the left in the set-up at the top is the Central Power & Light Co., electric, 100 percent. What does that mean?

Answer One hundred percent of the voting stock of the Central Power & Light Co. is held by Central & South West Utilities Co.