UTILITIES: Scandals in St. Louis

Nine months ago, thin-faced, two-fisted Oilman Edward L. Shea left the vice-presidency of Tidewater Associated Oil Co. to head a $940,000,000 utility holding company system, Harrison Williams’ North American Co. Oilman Shea knew he was moving into a trouble spot. Firecrackers had exploded under North American for nearly two years, and one of the new man’s presumptive duties was to stop the noise. But the explosions did not even taper off. Last week they threatened to grow louder.

The explosions came from St. Louis, where the $257,000,000 Union Electric Co., one of its crack subsidiaries, earns for North American about $6,000,000 a year. Across the street from Union Electric on Twelfth Boulevard stands the St. Louis Post-Dispatch, the great Pulitzer newspaper whose mission is policing the community. P-D’s public-utility reporter, a thin-haired A. E. F. sergeant named Sam Shelton, had long beenconvinced that Union Electric was buying politicians. Two years ago he got a break when Union Electric’s moose-tall aristocratic president Louis H. Egan eased out a vice president named Oscar Funk. Funk, who had handled Union Electric’s expense accounts, knew where more bodies were buried than a Nazi concentration-camp keeper. Shelton went after him, got his story, and scampered to SEC.

SEC began a secret investigation, and Sam Shelton began a series of exclusive stories that kept P-D readers in a state of mixed rage and amusement. From testimony in trials that resulted it appeared that: In eight years Union Electric’s Lobbyist Albert Laun and his friends had developed a slush fund of at least $525,000 which never appeared on Union Electric’s books. One company lawyer had kicked back $111,000 in excess fees; another $42,000; a Kansas City equipment salesman had kicked back $70,000; insurance companies had refunded $80,000. This money then went into the campaign funds of candidates for every office in Union Electric’s territory from alderman to Governor of Missouri. Laun, reported Shelton, kept his list of bribees under a carpet in his office. On information supplied by SEC, Al Laun went to Leavenworth three months ago, and Frank Boehm, formerly executive vice president, is now on trial for perjury in Federal court. Since the SEC hearings began, Union Electric’s Missouri tax assessments have been upped 27%.

As these disclosures popped, North American, traditionally aloof from the management details of its subsidiaries, slowly decided that an investment-trust posture toward Union Electric would no longer suffice. Its then President James Francis Fogarty first replaced (but kept on salary) Union Electric Officers Egan ($58,000), Boehm ($41,000), and Laun ($16,800). Few months later, all three resigned and two other officers were demoted. Meanwhile, President Fogarty himself moved upstairs, and Ed Shea moved in.

By last week Ed Shea had heard enough explosions to want to put himself on record. After 21 months of investigation, SEC was not yet through with Union Electric, had ordered North American to consider itself under inquiry, too, and was furthermore planning to extend the inquiry to other North American subsidiaries in Iowa and Illinois. Shea therefore appealed direct to SEC. For the sake of North American’s security holders, he asked that SEC make public its secret records on Union Electric, and hold any future hearings in the open.

Chairman Frank refused. SEC will not help Mr. Shea solve his problem. Likening SEC preliminary investigations to those of a grand jury, Chairman Frank said the testimony was all ex parte, its publication might injure innocent men. To this reply, Chairman Frank added a significant recollection. Over a year ago, SEC had planned to make its proceedings public, but President Fogarty, who is still an officer of North American, had persuaded SEC to keep them private. Oilman Shea, in his anxiety to get to the bottom of the St. Louis Scandals, was now reversing that view. It appeared that North American really had a new (if uncomfortable) boss.