Mr. Jones's Proteges

When the New Deal was putting over its "Death Sentence" Public Utility Holding Company Act, Associated Gas and Electric's Howard Hopson spent $1,000,000 lobbying against it. With his roly-poly body and ear-to-ear smile, he became the utility industry's "mystery man" and lone wolf. Last week Hopson was hopelessly ill with heart disease, and Associated (a $1,000,000,000 system) was in financial trouble such as never caught up with it when he was at the helm.

When Hopson became ill, Associated was controlled by a junta consisting of his old partner J. I. Mange; Hopson's three sisters (Norma Jones, Perle Hopson, Amy Starch) ; his brother-in-law, Commercial Research's famed Dr. Daniel Starch. A few weeks ago Mr. Mange went calling on Jesse Jones to see about arranging an RFC loan. Soon Associated got the idea thai Mr. Jones's price for making the loan was a finger in management. Last week, Associated acquired a new president, a veteran Washington lawyer named Roger Whiteford, who is given to lecturing on the trial of Christ; who is a buddy of the Hopson sisters' lawyer, ex-Attorney General Homer Cummings. Pleading ill health, Junta Member Mange resigned as president, board chairman.

Associated evidently believed that after this its RFC loan had been arranged. To New York banks, on the alert for good loans; to other utilitarians, who would like various pieces of Associated; to non-RFC New Deal utility watch dogs, Associated seemed overoptimistic about what the loan could accomplish for it.

Not Associated directly, but its good operating company, NY PA NJ Utilities Co. (Nypan), is trying to borrow money so that Associated can pay off an $8,589,-980 (8%) bond issue which is due March 15, 1940. Also overdue is $5,780,000 owed the U. S. Treasury by Associated as the balance of an $8,700,000 settlement of a $50,000,000 tax claim. Mange wants RFC to lend NY PA NJ enough to pay off the bonds, pay the taxes; he is also asking for another lump for construction, $26,500,000 in all. The catch is that SEC must approve NY PA NJ's passing any part of the loan upstream to its parent, Associated.

If the great boom had given Associated a few more palmy years, it might have succeeded in merging with another $1,000,000,000 system, Standard Gas and Electric Co. Standard runs 26 operating utilities, among them Pittsburgh's large Duquesne Light Co. and Wisconsin Public Service Co. For years Standard was controlled by Chicago's private utility bankers, H. M. Byllesby and Co. Nowadays, Byllesby plays second fiddle in Standard to Manhattan's up-&-coming, bargain-hunting Syndicateer Victor Emmanuel.

The reason for this is that in September 1935 Standard failed to finance repayment of a $24,650,000 note issue, landed in a reorganization proceeding in a Delaware Federal District Court. Charges (among others) by Senator Robert Wagner's Law Partner Simon H. Rifkind that: a stock deal with Standard netted Byllesby $5,000,000 on a $500 investment; an operating company purchase by Byllesby for $845,000 was sold four days later to Standard for $1.365,000, caused the court to appoint special counsel to investigate the Byllesby management. Result: a recommendation for a $100,000,000 stockholders' suit. In July 1938, Standard Trustee Daniel 0. Hastings (onetime Senator from Delaware) sued Byllesby and associates to recover $42,685,409 for the company. To all this, Byllesby filed a defense which relied chiefly on the statute of limitations. A month later, Standard escaped from reorganization, was returned to the common stockholders with Victor Emmanuel now in the driver's seat.

Victor Emmanuel, unlike the Byllesby interests, believes that butter is better than cannon in dealing with the New Deal. Fortnight ago, he hired a new president for Standard, white-haired, McNuttish-looking Leo Thomas Crowley, since 1934 chairman of FDIC. He hired Mr. Crowley through Washington's No. i Big Money employment office, Jesse Jones's RFC, the same office which placed Mr. Crowley's FDIC predecessor, Jones Protege Walter Cummings (TIME, Nov. 27), who heads Chicago's huge Continental Illinois Bank.

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