Danielian Scores Holding Company Methods Illustrated By Insull Collapse--Demands Rigid Federal Regulations

"It is only as a result of the inadequacy of corporation laws in the United States that the operators of more than a few of our glant holding companies do not at present find themselves in a position similar to that of Mr. Insull," it was stated by N. R. Danielian '28, instructor and tutor in Economics, in an interview last night. Dr. Daniclian has been conducting an investigation of public utility holding companies to be read before the Seventy-third Congress.

"The Insulls hedged themselves against legal complications," continued Danicilian "by showing income and profits in their statements from the sale of securities to securities and subsidiary companies, although not a cent of real income came into the system. This game can be kept up only by the sale of more securities to the public. As soon as the public becomes disinclined to buy any more paper the crash is only a matter of time.

"However, the particular points upon which the Insulls were indicated are economically of minor importance. The embezzlement and larceny, while they create a moral revulsion in the public mind, are insignificant in comparison with the questionable, though "legal" practices perpetrated by the company in terms of tens of millions of dollars. But the more significant crimes are not amenable to court action under the present laws. It is a sad commentary on our corporation laws that of all the unorthodoxy methods which caused the loss of hundreds of millions of dollars to investors in Insull companies, the only basis for action against them is the withdrawal of a few hundred thousand dollars.

"Even more disturbing is the knowledge that there are other huge holding companies still in existence which are responsible for similar practices and should properly he subjected to the same rate. Their managements, however, by a magic of circumstances have succeeded in escaping the clutches of the law. It is fortunate that there still are companies with enviable managerial records. This, however, does not counter-balance the existence of companies whose managements are willing to practice inflation and deception of the public by paying dividends out of capital. The necessity for Federal regulation, therefore, still remains.