Doherty v. Kansas (Cont'd)

The bristle-whiskered jaw of Henry Latham Doherty, eloquent master of far-flung Cities Service Co., clamped shut with satisfaction last week upon a decision in the Shawnee County Court at Topeka, Kan. It was the end of the third round in the great utility championship bout between Cities Service and the State of Kansas, and the round was Tycoon Doherty's. In the first round, Banking Commissioner Carl Newcomer had suddenly suspended sales of Cities Service stock (except first preferred) in the State. In round No. 2, Mr. Doherty's lawyers got a temporary injunction staying the Newcomer order. And now the order was invalidated, by the court's decision that the amendment to Kansas' securities law under which Commissioner Newcomer had acted, was unconstitutional.

Kansas law exempts from State regulation stocks listed on the big-city stock exchanges. The amendment permits the banking commission to prohibit sales of even such listed stocks. The Cities Service lawyers spent most of their energy arguing, not against the law, but against Commissioner Newcomer's motives. They said he had been influenced by "scandal mongers and gossips," had acted arbitrarily merely to help Governor Woodring in his fight for lower gas rates in Kansas, had inquired of the Investment Bankers Association for information on Cities Service* after ordering its suspension, and had written to the Chicago Stock Exchange threatening to bar from Kansas all securities there listed if Cities Service were not promptly stricken from the Chicago Board.

The court at Topeka, in ignoring Commissioner Newcomer's motives and attacking the banking law's amendment, left open an avenue for the next anti-Doherty move. Attorneys for the State said they would seek to get the whole securities act declared unconstitutional, thus putting Cities Service stock wholly at the mercy of the Banking Commission.

Meantime Tycoon Doherty girded himself for the two other aspects of Cities Service's fight in Kansas: a defense against Governor Woodring's campaign to knock 10-c- off the Company's 40-c--per-1000 cu. ft. gas rate; an attack upon the Kansas City Star, from which Tycoon Doherty is demanding $12,000,000 libel damages as the price of inspiring Governor Woodring's rate-war.

*One point on which many a Cities Service shareholder lacks information is the company's earnings. Until last year it never reported charges to reserves for depreciation, depletion, etc. Last year, however, it did show $24,000,000 appropriated for these items. Most companies make these charges before figuring net earnings; Cities Service makes them afterwards. After these charges the common stock earned 68-c- a share for the year, as compared to $1.39 stated as earned per share in the company's annual report. The company's accounting is unaudited.

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