Aces over Kings

Ever since the Supreme Court upheld the registration provisions of the Public Utility Holding Company Act, the utility industry has resembled a poker game with vast stakes and SEC Chairman William O. Douglas dealing. Last week, Bill Douglas dealt a new hand to an intriguing set of opponents--lean, smart, Floyd Odium of Atlas Corp., fat, cunning Howard Hopson of Associated Gas & Electric Co. and bald, battle-worn Harley Clarke, late president of Utilities Power & Light Corp. As this hard-bitten trio of utility financiers studied their cards, kibitzers gathered thick around. For the play was the first test of the notorious utility "death sentence," and everyone agreed that Bill Douglas had dealt shrewdly.

The "death sentence" (section 11B) of the Act provides that once the utility holding companies have registered, SEC has the power to force simplification of any utility pyramid into a single geographically integrated system. Most commentators have expected that whatever company Bill Douglas chose to chop up first would ap peal the "death sentence" to the Supreme Court. Here, Bill Douglas was smart -- he picked $303,813,000 Utilities Power & Light, which is already in 776 receivership. SEC must pass on such reorganizations anyway. Last week, Chairman Douglas jubilantly called newshawks to his office, announced that it would be unfair to U. P. & L. stockholders to "pull them out of reorganization on the normal basis of a fair plan and then bump them again with an order under Section nB. . . ." SEC, therefore, would draw up its own plan in hearings beginning August 8.

Other factors also made U. P. & L. the perfect SEC choice. Promoter Harley Clarke threw together this "scatteration" of properties in 588 communities in 24 States and Canada in the 1920s, then floated three stock issues and two bond issues. By 1935, when U. P. & L. debentures sold as low as 20 1/4-c- on the dollar, Floyd Odium's big investment trust. Atlas Corp., bought up enough of them to gain control in a complex deal with RFC. which had its hands on Harley Clarke's key holding company (TIME, July 22, 1935). Harley Clarke was soon shoved out of office and in last week's poker game this toppled tycoon sat quietly on whatever cards he may still hold.

Howard Hopson blundered in letting his Associated Gas system buy a fat chunk of U. P. & L. Class B stock in the 1920s. when shares sold as high as $90; Class B shares are now selling at about $1 each. What is more, in receiverships, debentures come before stock. So Floyd Odium's aces looked better than Howard Hopson's kings. In any case, Bill Douglas stands to win, for Floyd Odium hastened to say that he, for one, would not appeal any "death sentence" for U. P. & L. He thought it was "good economics apart from any statutory requirement. . . ."

If this piqued the die-hards in the industry, they had cause to ponder too. For Bill Douglas, though disclaiming any further death sentence plans "because of our belief that the substantial companies in the industry are making progress" in designing such reorganizations, also declared: "This action on the part of the commission means the commission means business."

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