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AMERICAN TELEPHONE AND TELEGRAPH COMPANY
FORD MOTOR COMPANY
GENERAL ELECTRIC COMPANY
Morgan Guaranty held 0.1 percent of American Tele- Morgan Guaranty held 1.6 percent of Exxon stock at the phone und Telegraph Company stock. (Response to end of 1972. (Fortune, July 1973). Emilio Collado, execuMetcalf). Donald E. Procknow, president and director of tive vice president of Exxon, is also a director of Morgan Western Electric Company, a wholly owned subsidiary Guaranty Trust Company. of American Telephone and Telegraph Company, is also a director of Morgan Guaranty Trust Company.
Morgan Guaranty held 1.7 percent of Ford Motor Com
pany common stock in two nominee accounts. (Response Morgan Guaranty held 0.5 percent of Atlantic Richfield to Metcalf). Carter L. Burgess is a director both of the stock. (Response to Metcalf). Ellmore C. Patterson, Morgan Guaranty Trust Company and of the Ford Motor chairman and chief executive officer of Morgan Guaranty Company. Trust Company, is also a director of Atlantic Richfield Oil Company AVON PRODUCTS, INC.
Morgan Guaranty held 2.7 percent of General Electric Morgan Guaranty held 8.2 percent of Avon stock at the stock, mostly as nominee for the account of the Trustee of end of 1972. (Fortune, July 1973). R. Manning Brown, the General Electric Savings and Security Trust. (Rechairman of the New York Life Insurance Company, is a sponse to Metcalf). J. Paul Austin, Chairman and Chief director both of Morgan Guaranty Trust Company and of Executive Officer of Coca Cola Company, is a director both Avon Products, Inc.
of the Morgan Guaranty Trust Company and of the General Electric Company. Thomas S. Gates, director and formerly chairman of the executive committee of the
Morgan Guaranty Trust Company, is also a director of the Morgan Guaranty held 1.4 percent of Burlington
General Electric Company.
GENERAL MOTORS CORPORATION
Morgan Guaranty held 1.5 percent of General Motors stock at the end of 1972. (Fortune, July 1973). Howard Joseph Morgens, Chairman and Chief Executive Officer of
Procter and Gamble Corporation, is a director of Morgan Morgan Guaranty held 3.6 percent of Coca Cola Com- Guaranty Trust Company and a member of the Finance pany stock at the end of 1972. (Fortune, July 1973). Committee and director of the General Motors CorporaJ. Paul Austin, Chairman and Chief Executive Officer of tion. Thomas L. Perkins, counsel with Perkins, Daniels Coca Cola Company, is also a director of Morgan Guar- and McCormack, is a director and member of the Execuanty Trust Company.
tive Committee of Morgan Guaranty Trust Company and a member of the Finance Committee and director of the
General Motors Corporation. Morgan Guaranty held 2.2 percent of Continental Oil
INTERNATIONAL BUSINESS MACHINES CORPORATION stock in three nominee accounts. (Response to Metcalf). J. Paul Austin, Chairman and Chief Executive Officer of Morgan Guaranty held 4.5 percent of IBM stock at the Coca Cola Company, is a director both of Morgun Guar- end of 1972. (Fortune, July 1973). Frank T. Cary, Chairanty Trust Company and of the Continental Oil Company. man and President of International Business Machines
Corporation, is also a director of the Morgan Guaranty
MERCK AND COMPANY Morgan Guaranty held 4.8 percent of Eastman Kodak stock at the end of 1972. (Fortune, July 1973). John Morgan Guaranty held 4.1 percent of Merck's stock at M. Meyer, Jr., director and former Chairman of the Board the end of 1972. (Fortune, July 1973). Walter H. Page, of Morgan Guaranty Trust Company, is also a director president of the Morgan Guaranty Trust Company, is also of Eastman Kodak Company.
a director of Merck and Company.
COCA COLA COMPANY
CONTINENTAL OIL COMPANY
EASTMAN KODAK COMPANY
SOUTHERN RAILWAY COMPANY
Louis W. Menk, Chairman and Chief Executive Officer of
Burlington Northern, is a director of the First National Morgan Guaranty held 3.5 percent of Southern Railway
Bank of Chicago and of the First Bank System of stock in three nominee accounts. (Response to Metcalf). Minneapolis. W. Graham Clayton, Jr., President and Chief Executive
Robert W. Downing, President of Burlington Northern, Officer of the Southern Railway Company, is also a direc
is a director of Northwestern National Bank and the tor of the Morgan Guaranty Trust Company. Ralph F. Leach, Chairman of the Executive Committee of the
Northwest Bancorporation, both of Minneapolis.
John M. Budd, Chairman of the Finance Committee of Morgan Guaranty Trust Company, is also a director of the Southern Railway Company.
Burlington Northern, is a director of First National
Bank of St. Paul.
Frank H. Coyne, Vice President (Finance) of Burlington UNION CARBIDE CORPORATION
Northern, is a director of First Trust Company of Morgan Guaranty held 0.9 percent of Union Carbide
St. Paul. stock. (Response to Metcalf). R. Manning Brown, chuir. Philip H. Nason, President of the First National Bank of man of the New York Life Insurance Company, is a St. Paul is a director of the First Bank System, Minnedirector both of the Morgan Guaranty Trust Company apolis, the Federal Reserve Bank of Minneapolis, and of the Union Carbide Corporation.
Allied Bunks International and of Burlington Northern.
Robert B. Wilson, President of U.S. Bancorporation of UNITED AIRCRAFT CORPORATION
Portland, is a director of U.S. National Bank of Oregon
and of Burlington Northern. Morgan Guaranty held 7.0 percent of United Aircraft Donald Dayton is a director of Northwest Bancorporation stock, in four nominee accounts. (Response to Metcalf): and of Burlington Northern. Olcott D. Smith, director and former chairman and presi- Cris Dobbins, Chairman of Ideal Basic Industries, is a dent of the Aetna Life and Casualty Company, is a director both of the Morgan Guaranty Trust Company and of the
director of United Banks of Colorado, United Bank of United Aircraft Corporation
Denver, and of Burlington Northern.
John H. Laeri is a director and former vice chairman of THE LIBRARY OF CONGRESS,
First National City Bank, New York, and director of CONGRESSIONAL RESEARCH SERVICE,
Burlington Northern. Washington, D.C., September 20, 1973. John M. Meyer, Jr. is director and former chairman of the To: Budget Subcommittee, Attention: Vic Reinemer.
board of Morgan Guaranty Trust Company and director From: Julius Allen, Economics Division.
of Burlington Northern. Subject: Directorate linkages involving the Burlington (Source: Standard and Poor's Register of Corporations, Northern and various banks.
Executives, and Directors.)
CORPORATE CLOSENESS: LILCO-IS A CASE IN POINT
[From Newsday, Mar. 22, 1973)
(By Kenneth Crowe) The involvement of the large commercial banks with American The Long Island Lighting Co. is so entwined in the companies is a source of concern to some members of Congress nation's financial power structure that a bill in the past and others who fear an excessive concentration of economic Congress to curb banks could have forced four directors power in the hands of a few banks. How does this involvement to resign from either LILCO or their banks' boards. work? This is the first of two articles that eramine a fairly Capital is the lifeblood of corporate America, and typical case right on the Island, that of Long Island Lighting LILCO, like other elephantine utilities, needs enormous Co.
amounts of money to function For every dollar of revenue
that LILCO earns, the corporation must invest about $4 LILCO President Edward C. Duffy, a director of Long in its generating and gas-electric distribution system. Island Trust Co., which extends à $1,000,000 line of Such a capital structure—which is just the opposite of credit to LILCO. most manufacturing firms-would tend to make any
A fifth LILCO director, Grumman Board Chairman institution bank-oriented, and LILCO is just that.
E. Clinton Towl, was a director of Bankers Trust until A review of LILCO's financial ties shows:
last May when he resigned from the bank to avoid what Four of the nation's superbanks (First National City, his firm termed an "awkward” situation when Bankers Chase Manhattan, Morgan Guaranty Trust and Bankers Trust cut its line of credit to Grumman, because of that Trust) hold large blocks of LILCO stock in their trust
firm's financial difficulties over the Navy F-14 contract. departments and extend substantial lines of credit to
Bankers Trust (the nation's eighth largest bank) extends the utility. A First National City officer sits on LILCO's LILCO a $5,000,000 line of credit. board, and until last May, a Bankers Trust director also
Tuohy said that there was no connection between the sat on LILCO's board.
lines of credit and interlocking directorates with the banks. The chairmen of Long Island's largest bank, Franklin
“I can think of no situation where any of the banks are National, and largest employer, Grumman Corp:, sit going to exert any influence over the Long Island Lighting on LILCO's board. LILCO's chairman, John J. Tuohy Co., Tuohy said. also sits on Franklin National's board.
LILCO Treasurer Fred C. Eggerstedt Jr. said: "All The involvement of the superbanks with LILCO is a of those lines of credit were there before the people on phenomenon that has been noted on a national scale with
the board were there.” Eggerstedt said the utility is in the concern by those, such as Sen. Lee Metcalf (D-Mont.) position of being a constant borrower from banks on a and Rep. Wright Patman (D-Tex.), who are opposed to
short-term basis (which is very profitable for the banks) such concentrations of economic power.
in order to be in a position to float its huge bond issues Patman, longtime chairman of the House Banking at the most opportune time for the company. In recent Committee, focused on the question in his staff's definitive years, Eggerstedt said, LILCO has been trying to trim study of the commercial banks and their trust activities these short-term borrowings, because of the requirement by in 1968. Patman said in his introduction to the study: the banks-in recent tight money markets-that the “... the data presented here for the first time show that borrower leave 20 percent of every million loaned on the American economy of today is in the greatest danger interest-free deposit. of being dominated by a handful of corporations in a single
Metcall's executive assistant, Vic Reinemer, views the industry (commercial banks) as it has been since the great interest-free deposits, which the banks can use to lend money trusts of the early 1900s.
out at high interest rates, as one of the rewards the banks "Commercial banks control the investments of billions derive from their relationships with utilities and other of dollars of funds and vote large blocks of stock of major businesses. corporations in practically every important industry in Reinemer and Metcalf are the leading advocates of the economy. These same banking institutions have gained unveiling those who control the votes in the nation's representation on boards of directors of and serve as major corporations with particular emphasis on utilities. They sources of credit for many of these same major industrial frequently point out that while the Federal Power Comcorporations . , . the question that the Congress and the
mission requires utilities such as LILCO to file annual American people must decide is whether this situation
reports showing their 10 top owners, the names listed for should be allowed to continue and develop further without
the most part are front names for the banks. substantial legislative and administrative checks to this concentration of economic power in the hands of a few."
For example, the commission's report for 1971 shows
Chase Manhattan through two nominees-Kane & Co. An outgrowth of the Patman study was a bill, H.R.
and Cudd & Co.-holding 5.1 percent (1,036,415 shares, 5700, which died with the past 92nd Congress, designed the largest block held by a single institution) of LILCO to prohibit conflicts of interest and to encourage compe- common stock in its trust department. The bank, which tition in the banking industry. One of the bill's provisions is prohibited by law from beneficial ownership (a beneprohibited interlocking directorates among banks and corporations that maintain substantial loan relationships. the securities for mutual funds, pension plans, estates and
ficial owner receives dividends) of any of the stock, holds Had this provision passed into law, four of LILCO's 11
individuals. Metcalf and Reinemer, however, are condirectors could possibly have been forced to resign from
cerned about "proprietary” ownership, which means the either their banking or corporate affiliations.
power to vote the stock. The bank refuses to reveal how The four LILCO board members and their banking affili- much of its block of LILCO stock it may vote at its own ations are:
discretion, and claims the use of front names, or nominees, Eben W. Pyne, senior vice president of First National is a business convenience rather than an attempt to hide City Bank (the nation's second largest commercial bank) control. which extends a $12,000,000 line of credit to LILCO. As a point of comparison, the 1971 commission report
Tuohy and Harold Gleason, board members of Franklin shows that all of LILCO's directors and officers together National Bank (Long Island's largest bank and 21st had proprietary or voting rights to only 276,198 shares, largest in the nation), which extends a $7,500,000 credit or 1.3 percent of the company's 20,185,039 shares. The line to LILCO. Gleason is chairman of the bank's board. report said 88,053 individuals and institutions own stock
in LILCO. While som
me in the financial field claim that * Chase Manhattan-Cudd & Co. and Kane & Co., control of five percent of the stock of a widely held com-. 1,001,991 shares or 4.9 percent, indicating the sale of pany could mean effective control of a corporation, some stock after the Federal Power Commission report Patman said that 1 or 2 percent can be enough to “gain
Was issued. tremendous influence over a company's policies and
First National City-King & Co. and Gerlach & Co., operations."
The 1968 Patman study said the trend of the 19:30s 573,838 or 2.8 percent. for management to control a corporation "may now be Morgan Guaranty-Carson & Co., Reing & Co., giving way to a new trend toward control through Douglass & Co., and Genoy & Co., 618,715 shares or large blocks of stock in these corporations." Eggerstedt 3.1 percent. said, “I know that general theme song (possibility of Wilmington Trust Co.-Dean & Davis, 312,440 or control by the banks). It isn't so.... These banks don't
1.5 percent. control the vote. If they don't like what's going on, they
National Shawmut Bank of Boston--Ferro & Co., don't try to change it. They sell. It's as simple as that. They're not in the business of trying to run the company;
174,000, or .9 percent. They're in the business of trying to purchase good
Irving Trust Co.-Gilmet & Co., 131,800 or .7 percent. investments.” Robert G. Olmsted, a LILCO director, Bank of New York-Varley & Co., 120,000, or .6 said banks “lean over backwards' not to get into manage- percent. ment.” Why? "I think they're very sensitive to the Bankers Trust Co.-Salkeld & Co., 101,967, or .5 percent. political implications," he said. Eggerstedt provided the following list of banks with
First Jersey National Bank-Lages & Co., 100,000 or their nominees (or front names) and the percentage of
.5 percent. stock held in LILCO as of March, 1972:
NEXT: Keeping the money in the family.
(By Kenneth Crowe) Stone & Webster Inc. is expected to be paid $16,- power in the U.S. build their arguments that too few men 670,000-or approximately $2,000,000 more than the or institutions control too large a segment of the economy. lowest bidder-for the architect-engineering contract on An interlock occurs when an officer or director of one the Long Island Lighting Co.'s Shoreham nuclear power corporation sits on the board of directors of a second plant.
corporation. LILCO said that Stone & Webster, whose services were
Opposition to interlocks are almost as old as the concept costliest of three of the four other engineering companies itself. In 1913, Louis D. Brandeis (later a U.S. Supreme considered, was selected for the contract on May 31, 1967, Court justice) wrote in Harper's Weekly: "Obviously, inbecause of the firm's “professional qualifications and ex- terlocking directorates, and all that term implies, must be perience.” There also are a number of business-director
effectually prohibited before the freedom of American financial links between LILCO and Stone & Webster, al- business can be regained. ..." though the utility insists these did not enter into the
The LILCO-Stone & Webster ties: awarding of the contract.
The thread of these ties can be traced through LILCO Pyne is a senior vice president of the nation's second Director Eben W. Pyne and is outlined in the Arthur D. largest commercial bank--First National City Bank--and Little Inc. study (published in December, 1968) for the is in charge of the bank's Long Island-Staten Island Atornic Energy Commission and the Justice Department Group. When LILCO was going through a corporate entitled: "Competition in the Nuclear Power Supply In- reorganization in the late 1940s and was considered a dustry” under a chart entitled "Corporate Relationships questionable financial risk, First National City was the Through Director Affiliations."
only bank that would lend it substantial sums of money. LILCO board Chairman John J. Tuohy said he was un- First National City continues to extend an important aware of the various corporate relationships involved and line of credit to LILCO-$12,000,000; holds 573,836 insisted that they had nothing to do with the awarding of shares (or 2.8 percent) of LILCO's common stock in its the contruct to Stone & Webster.
trust department; and performs such financial services Interlocking directorates are the blueprints on which for the utility as serving as transfer agent for LILCO's those concerned about the concentration of economic stock, for which it is paid fees of about $100,000 a year.
Pyne, an Old Westbury resident, also serves on the reviewed by the utility's engineering, construction and board of directors of the conglomerate W. R. Grace & Co., purchasing departments. an international industrial concern with interests in Duffy said that an evaluation of the figures submitted chemicals, consumer products and natural resources, showed that Stone & Webster was the second highest such as oil.
bidder. The lowest bids came from Burns & Roe and Pyne's wife, Hilda Holloway Pyne, is a great-grand- United Engineers & Constructors, which were 11 to 12 perdaughter of William R. Grace, founder of the company, cent lower than Stone & Webster's figures . . . or a and daughter of William Grace Holloway, deceased, who difference of about $2,000,000 based on the value of the was chairman of W. R. Grace for 10 years, from 1945 to present contract. 1955. Mrs. Pyne and her daughters shared in two estates But, Duffy said, the two lowest bidders were the first which court records indicate held large interests in W. R. eliminated by his staff. This left three companies in the Grace & Co. Pyne himself is listed as holding 17,116 running: Bechtel Corp., probably the most experienced shares in W. R. Grace.
firm in the nuclear power plant construction field at the J. Peter Grace of North Hills, chairman of W. R. time; Stone & Webster; and Ebasco Services, which had Grace, has been a director of Stone & Webster since 1945, built most of LILCO's modern fossil-fuel power plants. and is also a director of First National City. Whitney Duffy said, "We didn't award this on the basis of price. Stone, chairman of Stone & Webster, was a member of We examined the work they had done . the people they W. R. Grace's board of directors from May, 1959 to had and how long they had been with them [for stability of March, 1964. Pyne was elected to the W. R. Grace board organization)." in 1960.
Bechtel was one percent higher than Stone & Webster, Stone & Webster owns about 1,770,000 shares (or and Ebasco was five percent lower, which is $835,000 on the approximately 8 percent) of the Transcontinental Gas basis of the present contract. Duffy said that at the time the Pipe Line Corp., which provides LILCO with most contract was awarded, Stone & Webster had the edge on expeof its natural gas supply, a commodity that is allegedly rience in nuclear construction in the U.S. over Ebasco. At that in short supply. Stone & Webster, which is a diversified point, Stone & Webster had completed several such plants, company, also provides banking investment services for
and Ebasco had four under way in the U.S. and six under Transco, such as underwriting its bond issues. William M.
way overseas. Egan, Stone & Webster's financial vice president, said Tuohy said that none of his directors either boosted or his firm doesn't interfere in the management of Transco. denigrated any of the engineering firms, but accepted the “We maintain a hands-off position,” Egan said.
recommendations of the LILCO management. "We were Whitney Stone also is a member of the board of Chase just trying to get the right outfit to do the job,” he said. Manhattan Bank, the Nation's third largest commercial While Tuohy's perspective is from the inside, and is that bank. Chase Manhattan extends a credit line of $5,000,000 of one who knows the truth of the situation, the LILCOto LILCO and through its trust department is the largest Stone & Webster links arouse some skepticism in outside institutional holder of stock in the corporation-1,001,991 observers. shares of LILCO common stock.
Irving Like, former attorney for the Lloyd Harbor Tuohy, chairman of LILCO, was asked in an interview, Study Group, which has opposed LILCO's Shoreham “Are you aware of any financial or corporate interlocks be- plant, said: "What troubles me is that you have this type tween LILCO, the banks that service
or any of its
of a concentration of financial and industrial power, which directors—and Stone & Webster?” He replied, “None.” is committed to a project long before you have any permit
LILCO's chairman was shown a chart depicting in issued. Money being loaned, deals being made outside of graphic form the interconnections laid out above between the public view. It's a fait accompli,” he said. “The whole Pyne, the director, First National City bank, W. R. deal has been made for the building of the plant, the Grace, Stone & Webster. Transcontinental, Chase Man- money's been put up, the contracts have been let, the hattan, and LILCO. Tuohy's response was, “You astonish procurement and manufacturing has taken place, all me. All that is of great interest. It really has nothing to do without the authority of a construction permit. with anything. I'm not awaie of these relationships. The “That means by the time the licensing board sits or rest is, I wouldn't say without interest, but it's without hears the application, you already have a substantial meaning to me, I can assure you, as far as doing business financial commitment made to the project,” Like I said. with Stone & Webster."
"I can't imagine the licensing board is going to reject the Tuohy and LILCO President Edward C. Duffy said the permit when the people who have a vested interest in the contract was awarded to Stone & Webster by LILCO's issuance of that permit are not only the utility, but all board of directors on the recommendation of LILCO's the others: the banks that are financing the construction management. Duffy said that sealed proposals were ob- of the project, the architects who have the seed contracts, tained from five leading engineering firms which then were the fabricators. In the face of that you've got just an