Dirty Backwash

Last week it became quite clear that Samuel Insull, biggest utilitarian in U. S. history and once the biggest businessman west of the Alleghenies, had used the accountant's art to inflate his profits, to hide losses, to make large dividends seem justified. Up to now it has been assumed that Mr. Insull failed with honor. Now this is put in doubt.

This revelation, and a host of others, put a new light on the precipitous departure of Samuel Insull to Paris (from Quebec, aboard the Empress of Britain) and the flight of his brother, Martin John Insull to Canada. In Chicago the state's legal department opened an office to hear the complaints of investors, and set to examining extradition laws. But no criminal complaint had been filed and Insull loyalists insisted that the brothers expatriated themselves solely to avoid annoyance, petty litigation that would lead nowhere.

Most striking of last week's disclosures was news that Samuel Insull had been thrown out as co-receiver of Middle West Utilities, a post he accepted when his system crashed (TIME, April 25) and from which he supposedly resigned (TIME, June 13). The company's bankers and Judge Walter C. Lindley had learned that while Martin Insull was in Indiana visiting his daughter he received a $170,000 margin call from a broker. Samuel Insull met it out of Mississippi Valley Utilities funds. Martin Insull later gave a personal note for the amount, borrowed $66,000 more from the company. The company advanced $261,000 to other persons, mostly to enable them to buy Insull securities.

''All that is so far awav." commented

Samuel Insull in Paris last week, adding that his chief present concern is Mrs. Insull's health.

When asked where his brother was. Samuel Insull, who lives in an expensive ($10 a day) hotel on his $1,500 monthly pension, said he did not know. But the Press located Brother Martin in Anne McLean's Boarding House ($20 a week) in Orillia, Ont., a small town 86 mi. north of Toronto. No sadder birthday has long-nosed Martin Insull had than the one which came last week, his 63rd. He described himself as a "man without a job, without plans, without a future.'' Asked what he did all the time, he replied, "Oh, I take long walks and I read; that is about all. ... I never go to the pictures. ... I just walk and read." He said he had no idea when he would return to Chicago. "I understand it is lovely up here in the fall and I am fairly comfortable. . . . This perhaps is not all I have been used to but it is not so bad. I am getting three square meals a day and they are pretty good meals.'' Asked if he would return to Chicago if summoned he answered, "I presume I would." Poverty has forced him to give up riding, his one recreation. At first he took his fall well, thinking his wife and daughter secure with funds he had given them. Then he learned both had been wiped out by the decline in Insull stocks.

The revelations which cast a new angle on the Insull situation last week, which made Samuel Insull seem worse than an old man crushed by circumstances beyond his control, came as the result of a five-month inquest into the books of Insull Utility Investments, Middle West Utilities and Mississippi Valley Utilities by Arthur Andersen & Co.. accountants. In addition to juggled income statements and the loan to Martin Insull, the backwash included the following facts:

P: Insull Utility Investments has assets of only $27,473,000 against liabilities of $105,000,000 after writing off capital liability (preferred and common stock) of $148,000,000. An $8,000,000 investment in subsidiaries, including Insull, Son & Co., was valued by the auditors at $00000.

P: Marshall Emmett Sampsell, president of Middle West controlled Central Illinois Public Service, resigned at the request of the receivers. They found he had "borrowed" 4,000 shares of its $100 par preferred from the treasury, used it as collateral on a joint bank loan with Martin Insull. The company has filed claims with bonding companies for its loss. Two months ago Mr. Sampsell's wife hanged herself.

P:The audit of Middle West did not list its assets at market value, obscuring the company's actual condition. The receivers last week seemed to feel that better conditions and good management might enable it to pull through, with the possible lopping off of the eastern properties. Grover C. Neff, chief operating executive of Wisconsin Power & Light Co., was made president of the company last week. The report showed that Middle West indulged in huge security operations, chiefly attempts to support its own stock. It made large gifts to subsidiaries to enable them to "write down" losses, also loaned them funds for stock deals. Unusual for a utility, it had bank investments in Peoples Trust & Savings (being liquidated), A. B. Leach & Co. (being liquidated) and Hill, Joiner & Co. It also had an investment in Chicago Opera Shops Building, storehouse for the Opera's stage sets and costumes. Among its receivables are $300,000 in notes secured by South Bend real estate and signed by George M. Studebaker and Clement Studebaker Jr. Another receivable is 50-c- borrowed by Martin Insull.

P: Attentively awaited by Chicagoans was the Insull "syndicate list" showing what prominent persons were enabled to buy Insull securities at less than market prices. This was not published although Chicago papers seemed sure of its existence.

Secure in Chicago business and society despite the flight of his father and uncle, last week Samuel Insull Jr. bowed to his losses, rented the bottom floor of his 25th and 26th-floor duplex. By doing so he lost a kitchen, living room, dining room and several bedrooms. He still has room enough for a comfortable home for himself, his wife, and Samuel Insull III, age 1.

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