Mr. Doherty Defers

From time to time in the past few years, the press has noted that Henry Latham Doherty, 66, whose Cities Service assets foot up to some $1,250,000,000, was visiting Philadelphia's Temple University Hospital for treatments to his ailing throat. Month ago the press discovered that when he visited Temple Hospital, the alert, goateed petroleum tycoon used the name of "Mr. Eggleston." Fact is, Henry Latham Doherty's home is a ten-room apartment on the hospital's top floor where medical attention is never more than a few moments away.

Last week Mr. Doherty was pleased to learn that the annual Roosevelt Birthday Ball, which he and shrewd Publicity Man Carl Byoir started rolling four years ago when they were working together on Coral Gables promotion, had again earned many thousand dollars for the care of infantile paralysis patients. Far from pleasing, however, was the news that the Public Utility Act of 1935, which he spent $200,000 to defeat in Congress, had been partly upheld in New York Circuit Court (TIME, Feb. 8). With rough weather ahead for Cities Service, from Temple Hospital last week old Mr. Doherty made one of the rare compromises of his life, offered to pay the company $1,250,000 in settlement of a stockholders' suit against him.

Based on findings of the Federal Trade Commission, the suit charged Mr. Doherty with making an $18,000,000 profit at the expense of the company in 1929. In that year Cities Service Co. paid Mr. Doherty $20,500,000 for 200,000 shares of Cities Service common stock at $102.50 a share. Mr. Doherty had originally acquired the stock for about $13.26 a share. His voting power reduced by the sale, Mr. Doherty then gave $1,000,000 of his $20,500.000 back to Cities Service for 1,000,000 shares of $1 non-cumulative 5% stock created especially for him. Cities Service common has one-twentieth of a vote per share. Mr. Doherty's new stock had one vote per share. His voting power was thus increased from about 6% to 30%--un-questioned control of the company. At the trial which began last month in Manhattan, Mr. Doherty's attorneys, John W. Davis and Joseph M. Proskauer, declared that "no decent and no proper motive" moved Cities Service's plaintiff stockholders. Mr. Doherty, they said, had been induced to sell the 200,000 shares by Cities Service directors in order to make his estate more liquid in the event of his death. Because the selling price was $17.50 below the market, Cities Service actually made a profit of from $3,000,000 to $10,000,000 on the deal. Furthermore, Mr. Doherty retained and still holds 2,431,000 of Cities Service's 37.500,000 outstanding common shares, sold not a single share later in 1929 when the market price rose 200% above the price he received in the questioned deal. As for the 1,000,000 shares of special stock, they were issued to Mr. Doherty to shield his management against the threat of "power ful financial groups" which at that time were circling hungrily around Cities Service. The issue has since been retired.

With this nicely articulated case against him, Percival E. Jackson, attorney for the plaintiffs, hid his surprise last week, quickly joined in a motion for adjournment when Mr. Proskauer read Mr. Doherty's offer of settlement. It included a tender of attorneys' fees for the suing stockholders. Wrote Mr. Doherty from his ten hospital rooms: "I would not have it thought that any payment made by me to settle the present situation could be considered in the slightest degree as an admission of any remissness. . . . [Our] organization is built up to manage properties and not to conduct litigation . . . moreover, no company is helped in the present state of public opinion by charges against its officers, no matter how unfounded."

-President Roosevelt's mother, at a Birthday Ball.

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