[254] Investments of Central & South West Utilities Co.-Continued ! Combined investments in Southwestern Light & Power Co. and Southwestern Securities Co. Income to Central & South West Utilities Co. from such services.-The annual reports of the Central & South West Utilities Co. contained earnings statements in which are shown income termed "Fees for engineering and other services to subsidiary companies." A total of such income thus reported for the respective years was as follows: Such income in these amounts was derived from four different types of services, charges for which may be explained briefly as follows: 1. Charges to American Public Service Co. at the rate of 11⁄2 percent of the earnings of its subsidiaries, based upon supervision contract dated April 1, 1926. These charges continued from April 1, 1926, to December 31, 1928. 2. Charges to American Public Service Co. in the form of a percentage of the unallocated expenses of Central & South West Utilities Co. for the years 1929 and 1930. The amount of this charge for 1930 was not included in the total income above mentioned, but was treated as an offset and reduction of expenses. [258] 3. Services rendered the operating subsidiaries of Central & South West Utilities Co. by its employees, charges for which were made on the basis of 150 percent of salaries of those employees for the time they were actually engaged in rendering such services. 4. Services of the employees of the legal department of Central & South West Utilities Co. to its subsidiaries, charges for which were made in accordance with what was claimed to represent reasonable fees such as outside counsel might have been expected to charge. Hereinafter will be found a more detailed description of each of the four types of services and charges mentioned. Also set forth in the subsequent pages hereof is a detailed statement of various expenses incurred in behalf of or pertaining to the business of the operating subsidiaries, payments for which were made by the Middle West Utilities Co., Central & South West Utilities Co., or American Public Service Co. and rebilled by them to the operating companies concerned. Supervision and management services rendered to American Public Service Co. The following excerpts from minutes and certain contracts specifically set forth the terms and conditions pertaining to management, supervision, and engineering fees charged the American Public Service Co. The first refers to a contract with the Schofield Engineering Co., which covered engineering and supervision services performed by it prior to 1917 when the Insull interests acquired control of the American Public Service Co. The second pertains to a similar contract with the American Public Service Co. of Illinois which was [259] terminated in 1926. The third pertains to an engineering and construction contract entered into with the American Public Service Co. of Illinois in 1919, and the last pertains to a supervision and management contract with the Central & South West Utilities Co. executed in 1926 and canceled in 1929. Attention is called to the fact that the operating company involved in these contracts is the American Public Service Co. that was organized under the laws of Delaware, whereas the American Public Service Co. of Illinois was another Insull company said to have been organized for the purpose of supervising the operation and management of public-utility companies. The minutes of the meeting of the board of directors of the American Public Service Co. (Delaware), held March 20, 1913, contained the following statement with respect to a proposed contract with the Schofield Engineering Co.: "The question of entering into engineering and operating contracts with Schofield Engineering Co. was brought up but no action was taken with regard thereto." No copy was found of such a contract with the Schofield Engineering Co., but the minutes of a meeting of the board of directors of the American Public Service Co. (Delaware), held March 16, 1914, contained the following references thereto : [260] "The chairman announced to the board that the various controversies and differences which have existed between this company and Scofield Engineering Co., with respect to the agreement and understanding existing between them, the value of the services rendered, and expenses incurred by Scofield Engineering Co. in connection with the operation of the plants of the company and other matters connected therewith have been settled and adjusted on the basis of the payment by this company to Scofield Engineering Co. in the sum of $15,000 in full settlement of all claims and demands of Scofield Engineering Co.; this company also to take up its $4,000 note, dated June 1, 1913, bearing interest at 6 percent from date, now held by Scofield Engineering Co. "The chairman announced that the basis of this settlement had been arrived at after a conference between the attorneys for the parties and that Messrs. Byrne and Cutcheon, the attorneys for the company, recommended that the company accept the terms of the settlement. The chairman expressed himself as confident that it was to the best interests of the company that the settlement be effected immediately upon the terms above outlined. The following resolutions were then unanimously adopted: 'Resolved, That the proposed plan of settlement of the matters and differences between this company and Scofield Engineering Co., upon the basis of the payment by this company of $15,000 to Scofield Engineering Co. and securing a release from Scofield Engineering Co. of all claims and demands whatsoever, this company also to take up its $4,000 note, dated June 1, 1913, bearing interest from date, now held by Scofield Engineering Co. be and the same hereby is approved in all respects. "Further resolved, That the treasurer of this company be, and he hereby is, authorized and directed to pay to Scofield Engineering Co., when and as requested by Messrs. Byrne and Cutcheon, attorneys for this company, the sum of $15,000 and to receive from Scofield Engineering Co. a general release of all claims and demands whatsoever of Scofield Engineering Co. against this company. "Further resolved, That the treasurer of this company be, and he hereby is, authorized and directed to pay the note of $4,000 made by this company, dated June 1, 1913, bearing interest from date, now held by Scofield Engineering Co. [261] "Further resolved, That the proper officers of this company be and they hereby are authorized and directed to execute such release and other instruments and papers as in the opinion of the attorneys for the company may be necessary and proper in the final adjustment of the differences between this company and Scofield Engineering Co." The minutes of a meeting of the board of directors of American Public Service Co., held May 29, 1917, contained the following: "The vice president submitted the draft of a contract covering the supervision by the American Public Service Co. of Illinois of the properties of the subsidiary companies of this company and desired the necessary authority to execute said contract for and on behalf of this company. 102777-34-PT 62-44 66 'Upon motion, duly made, seconded, and carried, it was unanimously Resolved, That the proper officers be, and they are hereby authorized, empowered, and directed, for and on behalf of this company, to execute the contract between this company and the American Public Service Co. of Illinois, which contract is submitted to this meeting, covering the supervision by the American Public Service Co. of Illinois of the subsidiary properties of this company, and do any and all things necessary or desirable in the premises." The contract for supervision and management services between the American Public Service Co. (Delaware) and the American Public Service Co. of Illinois, dated May 1, 1917, read as follows: This agreement made this 1st day of May 1917, by and between the American Public Service Co., a corporation organized and existing under the laws of the State of Delaware (hereinafter called the Delaware Co.') and the American Public Service Co. of Illinois, a corporation organized and existing under the laws of the State of Illinois (hereinafter called the Illinois Co.'), [262] witnesseth: [262] Whereas the Delaware Co. owns and controls certain properties in the States of Texas and Oklahoma, through ownership of the securities of the companies operating said properties in Texas and Oklahoma; and Whereas the Illinois Co. is a company organized for the purpose, among others, of supervising the operation and management of public utilities; and "Whereas the Delaware Co. desires the services of the Illinois Co. in supervising the operation of the properties now owned, or hereinafter acquired by the American Public Service Co., considered now or hereafter subsidiary companies of said American Public Service Co. and said Illinois Co. is willing to undertake the supervision of said subsidiary companies, as herein provided; "Now, therefore, the premises considered, and in consideration of the sum of $1 paid each to the other party, receipt of which is hereby acknowledged, and other good and valuable considerations it is agreed as follows: 66 The Illinois Co. agrees to, and will undertake to supervise the operation and management of all of the properties of subsidiary companies of the Delaware Co. now owned by it, or hereafter acquired by it, wherever situate, and for such services the Delaware Co. agrees to pay to the Illinois Co. 21⁄2 percent of the gross income of each and all of the subsidiary companies of said Delaware Co. Provided, however, That said Delaware Co. shall pay to the Illinois Co. further, all out-of-pocket expenses incurred by the said Illinois Co. in caring for the business the subject of this agreement, and said Delaware Co. shall further pay all legal expenses of every kind necessarily incurred in connection with the supervision and management of said properties. "Settlement between the parties shall be made monthly, in such manner as may be mutually agreed upon. 66 'This agreement shall remain in force for 10 years, unless sooner terminated by the agreement of the parties. [263] "In witness whereof the signature of the parties this day and date hereinabove written. That supervision contract, dated May 1, 1917, was canceled by the following agreement dated October 11, 1926: "Memorandum of agreement by and between American Public Service Co., a Delaware corporation (hereinafter referred to as the company'), and the American Public Service Co. of Illinois, an Illinois corporation (hereinafter referred to as the 'Illinois Co.'), witnesseth: "Whereas the parties hereto under date of May 1, 1917, entered into an agreement providing for the supervision of certain properties owned by the company; and "Whereas the parties hereto desire to mutually cancel and release said contract: |