Is that correct?

Mr. MAHAFFIE. The net income figure is after charges, yes, sir. Senator TOBEY. In the Western Pacific case, did your forfeiture plan capitalize "net railway operating income" or "net income after all charges"?

Mr. MAHAFFIE. Well, both, as I said several times this morning. They would have to be considered. Neither is capitalized exclusively. It is considered along with other factors,

Senator TOBEY. Who got up these Western Pacific figures that you sent me in your letter of April 1? You personally, or someone on your staff?

Mr. MAHAFFIE. The staff.

Senator TOBEY. Who on your staff, please?

Mr. MAHAFFIE. Mr. C. W. Caswell of the Bureau of Transport Economics and Statistics, is the man who furnished them to me. Who actually developed the detailed computations I do not know at the

moment.

Senator TOBEY. In having these figures prepared, did you specify that you wanted to show me "net railway operating income" and "net income"?

Mr. MAHAFFIE. Yes, sir, that is what we show. We show both.

Senator TOBEY. Do you seriously ask me to accept these Western Pacific figures in your April 1st letter as being responsive to my request for average earnings since your forfeiture decision in the Western Pacific reorganization?

Mr. MAHAFFIE. I thought they were exactly what you asked.

Senator TOBEY. Mr. Mahaffie, these Western Pacific figures that you furnished me are not at all what I asked for. I did not ask you for figures on "net railway operating income" or on "net income". I asked you for figures that would show the "average earnings" to see how they compare with the estimate of earnings on which you based your forfeiture decision.

Mr. MAHAFFIE. I am sorry, but I do not know any other figures that can be furnished except the net railway operating income and net income.

Senator TOBEY. You and your Commission staff are supposed to be experts in these railroad matters concerning finance and reorganization. Are these Western Pacific figures that you have furnished me, when I asked for earnings figures, an illustration of your expertness? Mr. MAHAFFIE. They certainly are the best figures I could furnish you in answer to your question, sir.

Senator TOBEY. My comment on that is this kind of dealing with a Senator puts him to a lot of labor that should be unnecessary. It means that I have to check every statement you experts make and every solitary figure you experts furnish. Now, I am going to furnish you with the earnings figures I asked you to furnish me. These Western Pacific figures are taken from the financial manuals. And opposite these figures, on the same sheet, I have put the entirely different figures, which you furnished me in your letter and tabulation of April 1st. I ask the reporter to include this sheet in the record at this point. And I ask you, Mr. Mahaflie, to check these figures for accuracy. Please let me know about this before our next hearing what your determination is.17

(The matter referred to is as follows:)

Comparison of the figures which the nominee was requested to furnish for the record with the figures which he did furnish for the record

Senator TOBEY. Mr. Mahaffie, with your letter to me, dated April 8, 1952, you sent me a list of reorganization and receivership cases in which you filed dissents. I have already asked the reporter to include that letter and list in our record.18

Now, this list contains the names of 15 railroad reorganization and receivership cases. In some of these cases, it appears that you dissented on two or three occasions. But I want to ask you whether any of your dissents in any of these cases was ever based on the ground that the forfeitures determined by the majority were unduly severe? Mr. MAHAFFIE. I do not recall that any of them were on that ground, no, sir.

Senator TOBEY. Did you ever dissent in any of these 15 cases on the ground that the majority estimate of future earnings was too low?

Mr. MAHAFFIE. On the ground that the majority estimates were too low?

Senator TOBEY. On the ground that the majority estimates were too low, yes.

Mr. MAHAFFIE. I think there is one there that I referred to in my testimony before, the Louisiana Northwest,19 in which I had some trouble with the majority decision, but it is not of great consequence and the differences are not very great.

Senator TOBEY. Do you recall whether you dissented on the ground that the majority estimate was too high?

Mr. MAHAFFIE. Sir, I think in the C. & E. I. case I dissented on that ground. Is not that listed?

Senator TOBEY. What is that road?

Mr. MAHAFFIE. The Chicago & Eastern Illinois.

Senator TOBEY. Oh, yes. Did you ever dissent in any of these 15 cases on the ground that the forfeiture determined by the majority did not go far enough?

Mr. MAHAFFIE. Well, that was the basis in the C. & E. I. case, if you call it forfeiture. I thought the capitalization was too large, and I think the subsequent history of the railroad eminently proved that I was right.

Senator TOBEY. At our last hearing on March 31, you indicated that no correction was required of what you had said at the previous hearing on March 26 about Commissioner Splawn's opinion in the Missouri Pacific reorganization in 1949.20 That is the impression I got of your testimony. Is that a correct impression?

Mr. MAHAFFIE. Yes, sir, I think so.

Senator TOBEY. You did not recall that Commissioner Splawn questioned the basic estimates on which your majority decision was predicated. I want to quote again these words from Commissioner Splawn's opinion:

There is persuasive evidence that these estimates may be rather conservative. In view of that plain language, would you care to make any further comment?

Mr. MAHAFFIE. From what are you quoting?

Senator TOBEY. I am quoting from Mr. Splawn's statement at the time you considered the matter. That is in 275 ICC at page 152. Mr. MAHAFFIE. That was a concurring, in part, expression, as I think I stated at the time.

Senator TOBEY. What he said was that it was "rather conservative." Mr. MAHAFFIE. That may well be, and I think I agreed that that quite possibly was said by him.

Senator TOBEY. All right.

At the last hearing I also quoted Commissioner Splawn's words to the effect that your majority opinion in the 1949 Missouri Pacific case indulged in broad generalizations on facts which just as adequately support conclusions opposite to those of the majority. Do you remember I said that?

Mr. MAHAFFIE. No, I don't remember it, but I have no reason to doubt it.

Senator TOBEY. Have you any definite comment to make about that statement?

Mr. MAHAFFIE. No, sir.

Senator TOBEY. At our two previous hearings, you insisted that Commissioner Splawn's sole disagreement with your majority deci sion in the 1949 Missouri Pacific case related to the question of the Texas constitution. Do you still think your testimony on that matter was wholly accurate?

Mr. MAHAFFIE. I still think that was certainly his basic trouble with the decision, yes, sir, as far as I understood it.

Senator TOBEY. At the last hearing, I asked you whether you wrote or supervised the writing of the Missouri Pacific forfeiture decisions in 1940 and 1944, and this was your

20 Pp. 12, 20-23, 25.

answer:

21

I wrote neither and I heard neither case. The first Missouri Pacific hearing was before Commissioner Meyer and various of our staff. The second was before Commissioner Miller assisted by staff members.

The impression I got from that answer of yours was that you had nothing to do with the preparation of the 1940 reports and that Commissioner Meyer had more to do with writing or preparing them than the other Commissioners. Is that the impression you intended to convey in regard to those forfeiture reports in 1940?

Mr. MAHAFFIE. Commissioner Meyer sat in that case in the earlier stages and was administratively responsible for the conduct of the proceeding and for bringing forward the report.

Senator TOBEY. In fact, did not Commissioner Meyer leave the Commission on May 1, 1939, the year before those first Missouri Pacific reports were issued, on January 10, 1940, and April 9, 1940? Mr. MAHAFFIE. He left the Commission before the thing was finally decided, yes, sir, but the hearings were conducted by him, as you know, and led up to a proposed report. Commissioner Miller actually, in the second phase of the Missouri Pacific case, died before the final decision on the modifications of the plan, but he, as I stated, had sat in on and heard the testimony and had charge of the case through to its basic decision.

Senator TOBEY. Won't you please clarify our record now on the question as to just which Commissioner or Commissioners had most to do with the writing or preparation of those 1940 reports in the Missouri Pacific case?

Mr. MAHAFFIE. Well, I can't add to what I stated.

Senator TOBEY. Do you still think it was Mr. Meyer?

Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. Now, the impression I got from your testimony at the last hearing with respect to the later Missouri Pacific reports in 1944 was that Commissioner Miller had most to do with the writing or preparation of those 1944 forfeiture reports. In fact, did not Commissioner Miller specifically dissent and object to your majority decision in 1944? Did he not dissent from your majority report of July 4, 1944, and also your majority report of October 9, 1944?

Mr. MAHAFFIE. That may be. I haven't checked that. But if you say so I have no reason to doubt it at all.

Senator TOBEY. I am sure of it. I got that from the record.
I have no doubt it was so.

Mr. MAHAFFIE. I have no reason to doubt it.

Senator TOBEY. Once more, won't you please clarify our record on the question as to just which Commissioner or Commissioners had most to do with the writing or preparation of the 1944 forfeiture reports in the Missouri Pacific case? If you can put that in the record later on, it would be agreeable.

Mr. MAHAFFIE. I do not need that from the record. As far as I know, Commissioner Miller who had heard the testimony, had most to do with them.

Now the case that was decided in August, I think it was, in 1949, followed the taking over of the hearings, and so on, by Commissioner Miller, and he had most to do, of any Commissioner, with them. There is nothing I can add to that that is of value.

Senator TOBEY. Now let us consider the 1949 reports in the Missouri Pacific case. Can you tell me just which Commissioner or

Commissioners had most to do with the writing or preparation of those majority reports, dated August 2, 1949, and December 29, 1949. Mr. MAHAFFIE. As far as I know, Commissioner Miller, certainly with the first report, and he died 3 or 4 days before the second report was issued. I have no recollection of anyone else than he having to do with it as a Commissioner. That, administratively, was in his charge. It probably was circulated to the Commissioner before he became ill. But I'm not sure of that.

Senator TOBEY. Did you, Mr. Mahaffie, write any part of those 1949 reports, or did you supervise the writing of any part of them? Mr. MAHAFFIE. No, sir.

Senator TOBEY. At our last hearing you indicated with respect to forfeitures that it was simply a matter of the Commission's finding that people's investments were no good, that you were simply finding a fact, and that the basic responsibility rests on the law which you have to follow. These were your words: 22

I regret just as much as you do, Senator, having to find that people's investments are no good, but we are following a law.

Don't you want to amplify your remarks on that point in some way? Mr. MAHAFFIE. Yes, I would like to. I have some material here that I would like to call your attention to.

Senator TOBEY. Let me supplement the question there for your information. Don't you want to add that the real big point in forfeitures is the guess or estimate that is made by the Commission? Mr. MAHAFFIE. No, sir.

Senator TOBEY. It is not just the law, but the way you administer the law, is it not?

Mr. MAHAFFIE. No, sir, it is not.

Senator TOBEY. Go ahead.

Mr. MAHAFFIE. It is not a guess at all, it is informed judgment on the record that is made by the parties, who are very intelligent, skilled people and who do the best they can to make a record on which a judgment can be based.23

Senator TOBEY. In view of the record of these roads whose shares have been thrown on the dump heap of securities by the action of the Commission, don't you think it is a rather tragic record?

Mr. MAHAFFIE. I do not, sir.

Senator TOBEY. There must have been some mistakes. Go ahead. Mr. MAHAFFIE. The reason I said I would like to add a little to the discussion at this stage is this: I have before me a compilation by our Bureau of Transport Economics and Statistics entitled "Receiverships and Trustees, 1894-1942 (with preliminary data to June 1943)", which shows for that period the mileage of the roads that went into Court, of roads going into receivership or trusteeship of 246,285. Senator TOBEY. Yes, sir.

Mr. MAHAFFIE. That was up to 1942. Since then there has gone into court for a readjustment of capitalization, foreclosure, and so forth, something over 3,000 miles, or a total figure of 249,320 miles. In this country at this time the total railway mileage, Class I, II, and III, was 236,500 miles. So you will see that in the period covered

2 P. 32.

23 Further discussion of this subject below, pp. 69-74, 104-105, 113-114, 118, 123-131,