made effective, the common stock which they own, representing 60 percent of the investment, a large proportion of which was in cash, will have a substantial value. Knowing the propriety of their investment as indicated throughout this brief, they feel they have a just right to consideration in case of a forced distribution of Engineers assets. Such a forced dismemberment of the company would cause a substantial economic loss to innocent investors in the preferred and common stocks of the Engineers Co. inimical to the national interest. In addition, the elimination of the support of the Engineers Co. to its subsidiaries would be detrimental to their credit and would deprive them of many of the advantages shown in this brief, and would therefore be adverse rather than beneficial to the interests of the consuming public. For example, there can be no doubt that the senior securities of the Savannah Co. would suffer as a result of the withdrawal of the holding company support-the company might even be thrown into receivership through inability to obtain money to repay the Engineers Co. for its present loan, which would be necessary in case of dismemberment. It is an established fact that the senior securities of all of the subsidiary companies have sold on a better basis because of the existence of the holding company, and we have already illustrated that this backing was more than an intangible thing-it was represented by actual loans to support the subsidiary and by investment in the common stock to give the senior securities more backing. We believe that the removal of this support would again represent an economic loss and would increase the cost of service by our constituent companies over a period of time due to the increased cost of money. SUMMARY We conclude from the foregoing paragraphs that 1. The securities of the company were not improperly issued; that they were issued strictly in conformance with existing laws and for good consideration, including substantial amounts of cash; and that the preferred stock is now held by investors over a wide area, including 17 percent by trustees and fiduciary investors, and 20 percent by women. 2. The company has used large amounts of the cash it has raised, for both temporary loans to its subsidiaries and for permanent investment in the common stocks, thus furnishing substantial financial assistance to its subsidiaries in the development of service to customers and enabling the operating companies to obtain senior money more economically. 3. The company is furnishing at cost, through its central organization, many essential services to its subsidiaries making for sound and economical operation and for the promulgation of fair public utility principles. 4. The controlling policies of the company with respect to the rate-paying public, to its employees and to investors, both in subsidiaries and in the parent company, have been reasonably fair and sound. 5. The operating subsidiaries of the company, either singly or in groups, constitute geographically and economically integrated public utility systems. The ability of the Engineers Co. to furnish an investment medium more stable through diversity has enabled it to support the credit of its individual subsidiaries. This backing has provided these subsidiaries with capital needed to extend their lines into thinly populated areas and by reducing their cost of securing capital has made possible lower rates to their consumers. 6. The facts contained in the Federal Trade Commission report show that the company has been guilty of a few abuses such as are charged against the industry in general, and that when any such abuse has been recognized by the company, steps have been taken, wherever possible, to remove such abuse. 7. The dismemberment of the company would cause unnecessary loss to investors in securities of both the company and its subsidiaries, would constitute an unnecessary destruction of useful wealth, and would offer no advantage that could not be as well obtained by strict regulation. Neither would it be in the interest of the public served. CONCLUSION Engineers Public Service Co. is in existence. It was legally formed. Ninetynine millions of dollars have been invested in it, most of which was originally invested by those who were in no way affiliated in fact or in interest with the company. Both fairness and the welfare of the nation suggest that the Government encourage preservation rather than the destruction of this useful wealth. The record of this company, as outlined above and as reported in the Federal Trade Commission's investigation, certainly does not warrant its destruction punitively or otherwise. Such destruction would serve no useful purpose. It would inflict needless and irreparable injury on many innocent investors and entail a needless economic loss. Such a course would serve notice on the Nation that any of its most respected traditions are subject to vengeful abrogation. Economic uncertainty would be fomented. Fairminded investors can accept philosophically losses resulting from changing conditions and even from injudicious management on the part of corporation officials, but naturally they would be panic-stricken at the idea of deliberate destruction through the actions of their Government. When they invest in any enterprise, they recognize the possibility of loss from changing conditions and feel that through governmental regulation authorities and courts, they can ameliorate the harm of injudicious management, but they recognize they have no defense against governmental destruction, and that all invested wealth would be subject to like treatment based on an important precedent that might be established in the present instance. Engineers Public Service Co. does not intend to attempt to condone any past mistakes it may have made, nor would it wish in any manner to attempt to justify abuses or bad practices of which other holding companies might be guilty. Its officers are thoroughly convinced that abuses and bad practices must be corrected and then made impossible. We cannot have any valid objection to corrective legislation; on the contrary, we fully recognize our obligation to cooperate in arriving at effective legislation for the purpose of proper regulation of holding companies, but we feel it is our public duty to emphasize the undesirable and dire consequences of legislation designed to destroy. Throughout the entire fabric of American business runs the holding company. The electric industry is not the only one affected by this device. If their very nature is iniquitous, holding companies should be eliminated from all business. Although in the past they might have been subjected to abuse, we believe we have shown that, nevertheless, they are capable of serving some very useful purposes. We hope that it will be agreed from the facts presented here describing the development of Engineers Public Service Co. that this company has rendered some real useful services to its constituent operating companies. If you think it has also erred, should not the legislation developed be designed to eliminate the improprieties and preserve for the public the possible useful functions of these companies? No other nation is so adequately served electrically as is the United States. The enormous electrical development of the past two decades would never have materialized but for the holding company. The fact that these companies might have been used also for exploitation does not detract from the fact that because of them and in spite of glaring instances of exploitation they have caused this to become the best served nation electrically. The possibility of exploitation should certainly be removed, but their ability to advance the art should be carefully preserved. EXHIBIT A Analysis of preferred and common stock accounts of Engineers Public Service Co. (Delaware) as of Dec. 31, 1934 Sold for cash: 11 |