The Los Angeles Times from Los Angeles, California • 44

FTC Claims Firms Hid Gas Reserves BIcsSnarlrtCimrt Tl usiness rinance TUESDAY, JUNE 10, 1975 Port III 7 Oil Price Fear Sinks Market; Dow Falls 9.54 i 1 -ifM i iPi 6 in- k'1" inn' IT'S CALLED ESSENCE-Edward Lewis is the publisher of Essence, a publication aimed at black, college-educated women. The magazine has overcome major financial problems to survive in competitive market. Timet photo by Steve Fontanini AMONG THE MEDIA The Essence of Success: Black Women's Fashions Agency Accuses 11 of Underestimating Supply for Profit From Tints Wirt Storiccs WASHINGTON The nation's 11 largest natural gas producers and an industry trade organization were accused Monday of underestimating natural gas reserves to gain price advantages. The Federal Trade Commission's Bureau of Competition report accused the American Gas Assn. and the companies of "concertedly maintaining a deficient natural gas reserve reporting program, which influences the price at which producers sell natural gas to interstate pipeline companies." The report by the Bureau of Competition contains the first formal government accusation that natural gas reserves have been underestimated.

Besides the AGA, the companies named were: Continental Oil Exxon Gulf Oil Mobil Oil Pennzoil Shell Oil Standard Oil Co. of California, Standard Oil Co. Indiana, Tenneco Texaco and Union Oil Co. of California. The bureau recommended federal action against the AGA and the 11 companies, charging unfair trade practices.

It said "AGA reserve reporting procedures are tantamount to collusive price-rigging." The report was turned over to an investigating subcommittee of the House Interstate Foreign Commerce Committee, which is expected to hear testimony on the report next Monday. Natural gas reserve estimates are one of the ingredients used by the Federal Power Commission to set natural gas prices. Generally, the smaller the reserves the higher the price a company is allowed to charge. Kenneth Anderson, assistant director of the Bureau of Competition, asked to estimate how much the alleged underestimating had cost the American public in higher gas prices, said, "beyond saying that the consumer probably paid more than he would have it's very difficult to make a hard estimate." There has been running debate in recent months between consumer groups and natural gas producers, over whether the industry had deliberately underestimated its reserves to force price increases. John Jacobs, the chairman of the Please Turn to Page 9, Col.

2 National Ford said new higK-mileage models will go on soU next week. In California, the cars Ford Pinto and Mustang II and Mercury Bobcat models will be rated at 18 miles per gallon of gasoline in the city and 28 m.p.g. on the highway. Ford Motor Co. said.

That's 1 m.p.g. better in the city and 3 m.p.g. better on the highway than the best versions of those cars currently sold here. Prices of the cars to be designated "MPG" modelswill be unchanged. Ford said.

Outside of California, where emissions standards are more lenient. Ford said the "MPG" models are rated at 23 m.p.g. in the city and 34 m.p.g. on the highway. Gulf and Sun raised their wholesale gasoline prices.

Gulf Oil Pittsburgh, and Sun Oil SL Davids. announced two cent a gallon increases and said the price boosts are in line with Federal Energy Administration provisions permitting them to pass along increased costs. The higher gasoline prices will be effective immediately at company-owned stations and will most likely be passed along to motorists at other stations. The companies did not disclose the wholesale prices they charge. Treasury bill interest rates fell to a 2 year low this week.

The average yield on 91-day bills fell at the latest weekly auction to 5.080 from 5.258 at the previous sale. It was the lowest since 4.945 on Dec.4. 1972, the Treasury Department reported. The average yield on the companion issue of 182-day bills declined to 5.283 from 5.505. It was the lowest since 5.230, also on Dec.

4. 1972. Pan Am and Delta reported declines in May traffic volume. Pan American World Airways reported it flew 1.370 billion revenue passenger miles, including charter, for May. off 17.7 from the same month last year.

Delta Air Lines said its 1.260 billion revenue passenger miles flown last month, were down 2.7 from May, 1974. Meanwhile, Pacific Southwest Airlines reported its May traffic volume of 566,855 revenue passengers was down almost 1 from a year ago. Air California flew 49.2 million revenue passenger miles in May, up 5.2 from last year. Two banks recovered money lost when Herstatt collapsed. Seattle-First National Bank received $18 million while Girard parent of Girard Bank of Philadelphia, said it recovered $3.5 million.

The money came from funds of Bankhaus I.D. Herstatt, which were on deposit in other U.S. banks when the West German bank closed its doors last spring. Seattle-First had an initial loss of $22.5 million in interrupted foreign exchange transaction with Herstatt, while Girard had $5 million on deposit with the German bank when it closed. Frem Times Wire Services NEW YORK The stock market sustained a sharp setback Monday because of a familiar worry world oil prices.

The Dow Jones average of 30 industrials fell 9.54 to 830.10, and losers outnumbered gainers 995 to 503 among the 1356 issues traded on the New York Stock Exchange. Standard root's 500-stock index dropped 1.27 to 91.21, and the Big Board's composite index was off 0.65 at 48.54. The American Stock Exchange market value index was off 0.79 at 89.90. In the over-the-counter market, the Nasdaq composite index fell 0.76 to 84.01. NYSE volume dwindled to 20.67 million shares from 22.23 million on Friday.

The Dow was down only about two points going into the last 90 minutes of the session, when reports of a predicted new price increase by the Organization of Petroleum Exporting Countries crossed news wires on Wall Street. Several delegates at an OPEC meeting in Africa said the gathering at Libreville, Gabon, could be expected to agree on a price hike to take effect Sept. 30. And an OPEC committee recommended that the organization switch from pegging the oil price in straight dollars to setting it in terms of an average of leading currencies. Analysts said such a move, if adopted, would mean that any future declines in the value of the dollar against other currencies in the pricing formula would translate into increased costs for OPEC oil in this country.

At the opening, the market had made a weak gesture at a rally amid a round of prime rate cuts to 7 from 7V4 by many of the major banks. But the buying dried up quickly, just as it had on Friday when New York's First National City Bank set the stage for the other banks' moves by lowering its basic rate on business loans to 634 from 7. Please Turn to Page 11. Col. (i Garrett denied allegations of misconduct as SEC chairman.

In its latest edition, Forbes Magazine alleged that current Securities Exchange Commission Chairman Ray A. Garrett Jr. helped screen from investors the information that the Chicago Milwaukee Corp. was boosting its revenues by quietly selling off land holdings. Garrett has done legal work for Chicago Milwaukee, the nation's sixth largest railroad, and served for two years on the company's board of directors before taking over as SEC chairman in 1972.

During a news conference called to respond to the article, Garrett said the report "is absolutely without any foundation." California A judge denied a trial delay for Arnholt Smith and Philip Toft. San Diego financier Smith and his longtime associate are to go on trial at 10 a.m. next Tuesday on felony charges of misapplying assets of the defunct U.S. National Bank of San Diego. VS.

Dist. Judge Robert H. Schnacke rejected their motions for postponement until the new federal courthouse in San Diego is completed some months from now. Smith's motion said that prejudicial publicity has precluded a fair trial at present. Toft said that health problems have made it unable for him to assist in preparing his defense.

Chief Asst. VS. Atty. Warren Reese opposed the motions. A judge heard further arguments in the Equity Funding civil case.

VS. Dist Judge Malcolm M. Lucas listened to three hours of arguments from attorneys representing plaintiffs and defendants in the civil litigation arising from the Equity Funding Corp. of America scandal. The plaintiffs sought the judge's certification of plaintiff and defendant classes, a preliminary step in the complex case.

Judge Lucas took the case under submission. Last month, he dismissed as defendants in the case the states of California and Illinois, ruling they had constitutional "sovereign immunity." The two states had been sued because they were responsible for regulating Equity Funding's key life insurance subsidiary. World BP confirmed it got an offer for its Norwegian interests. British Petroleum Co. confirmed that the Norwegian government has made an offer for BFs principal assets in Norway.

A spokesman for the 011 company said in London that BP believes it should accept the offer although, he added, the proposal is still being negotiated. If an agreement is reached, he said, BP would expect to receive about $61 million for its Norwegian interests. They include about 1,000 retail outlets, excluding marine facilities, a 31,000 deadweight ton tanker and several other small vessels. Developing nations rejected the IMF's proposals on gold. Ministers of 24 developing nations voted against proposals for disposal of gold held by the International Monetary Fund and called for increased and supplementary assistance.

A communique issued after a Paris meeting of the ministers said none of the four IMF proposals for gradually phasing out gold was acceptable. The statement indicated that no arrangement would be agreed upon unless the developing nations received a substantial increase in the flow of financial resources. At the Top U.S. Home Corp. named a new president and chief executive.

Ben F. Harrison, former president of a unit of Jim Walter assumes the two posts immediately. He succeeds Stuart S. Golding, who resigned but continues as a consultant to U.S. Home, a builder of homes and apartment communities in Florida, Texas and several other states.

The Clearwater, firm had 1973 revenues of $360.51 million. Briefly Told LTV expects profits for the second quarter ending June 30 to be "off substantially" from the record $2.06 a share earned a year ago United Aircraft Products expects a first half profit of 80 cents a share, vs. 51 cents a share last year. At the request of the British government, Boeing will extend, through June, its agreement with Rolls-Royce (1971) Ltd. to develop a version of the Boeing 747 jumbo jet using a Rolls-Royce jet engine REA Express asked the ICC to approve an average rate reduction of 12 for certain surface package shipments The U.S.

Court of Appeals refused to rehear the corporate control dispute that led to a $25.79 million damage award to Chris-Craft Industries against Bangor Punts and others The Kuwaiti government summoned representatives of BP and Gulf Oil for talks signaling a complete takeover of their oil interest In Kuwait Warner Electric Brakt Clutch will close three plants in northern Illinois this week to adjust inventories, High Court Bars Suit on Blue Chip Fraud Charges BT MARGARET Tinwt Stall The magazine was once called "Sapphire," but that smacked too much of Amos 'n Andy. Now called "Essence," it is a glossy, sophisticated publication aimed at the black, college-educated woman in the 18-34 age group, married or single. It is now in its fifth year, at a time when many magazines are having financial difficulties. The monthly boasts a circulation of 400,000 with a newsstand price of 75 cents and a yearly subscription price of $6. "We play heavily on the "black is beautiful' theme because we feel there are a lot of black women out there who have struggled and who have overcome and now need to be told they have much to offer," says Edward Lewis, 35, bachelor publisher and board chairman of Essence Communications, New York.

During a recent interview at the magazine's West Coast offices in Hollywood, Lewis discussed the magazine's success and his hope of building "a full communications complex" patterned loosely after Hugh Hefner's Playboy Enterprises Inc. without the heavy emphasis on sex. Caesars World Kills Off Plan for Mark Anthony 7 say. Caesar, that Antony is dead." Antony and Cleopatra. Shakespeare.

BY AL DELUGACH Times Stiff Writer Caesars World Los Angeles-based casino operator, Monday reported the demise of its plans for a $150 million, 2,000 room "super hotel" the Mark Anthony on the Las Vegas Strip. For the last three years, the Mark Anthony (an unplanned departure in the spelling of its namesake in history and literature) was foreseen as a noble companion to the company's Caesar's Palace. The Mark Anthony was to be built on the site of the Thunderbird Hotel. But, a spokesman sadly conceded, it was in vain that the company searched the world for the indispensable ingredient money. We can't raise the financing," said William Weinberger, assistant to President William H.

McElnea who had briefly noted the tidings of the Mark Anthony in the third quarter earnings report of Caesars World. Asked if the firm had sought Arab Please Turn to Page 1 1. Col. 2 THE BIG TAX BREAK A. KILGORE Wriltr He admits, with a grin, that he wants to be "an empire builder." A native of the Bronx, with college degrees from the University of New Mexico which he attended on a sports scholarship, Lewis was working at First National City Bank of New York when he became involved in efforts to attract more blacks into black businesses.

He and several colleagues realized there might be a market for a fashion magazine for black women. Financing proved difficult, however, so he resigned his bank position to work fulltime at raising funds. "Investors and advertisers were skeptical and the skepticism was both of a professional and racial nature," Lewis said. "Several things operated against us. We were without publishing experience, we were opening a new magazine while others were closing their doors, and we were black." The old-line black magazines such as Ebony and Jet also provided competition, he said.

Lewis had hoped to launch the magazine with $1 million but, instead, he published the first issue with only $130,000 behind him. "Until recently, it has been a struggle'" he said, "and there were at least four different times when I thought we might go under. On our first issue, we printed 200,000 copies and sold only 75,000. "Our pre-publication excitement, generated by unpaid and unsolicited publicity because we were black-oriented, was better than our product. We had no editorial focus.

It was too stylized, too intellectual and irrelevant to all but maybe 1 of black women, and that 1 was reading Please Turn lo Page 1.1. Col. I MOST BIG BANKS CUT PRIME TO 7 Prom Timts Wirt Services Most of the nation's largest commercial banks Monday lowered their prime lending rate to 7 from 7V4. Banks announcing the cut in the interest charged their biggest and most creditworthy corporate loan customers included: Bank of America and Wells Fargo, both of San Francisco; United California Bank, Los Angeles; and Chase Manhattan, Marine Midland, Morgan Guaranty, Manufacturers Hanover and Chemical Bank, all based in New York. Last Friday, First National City Bank of New York cut its prime rate to 634, the lowest figure in more than two years.

MYSTERY their customers, or pass along the whole thing to their customers. The companies must make their choice by June 26. The California Public Utilities Commission (PUC) decided to look into the issue, and called several of the state's major utilities Pacific Gas Electric San Diego Gas Electric Southern California Edison Southern California Gas Co. and others to a conference on the subject on May 21. The cities of Los Angeles and San Francisco and a consumer group all supported the idea of flowing the benefits of the tax credit through to the public in the form of lower rates.

The utilities were divided, with each of the options attracting some of the firms. With only a few hours' notice, the STEIGER Writer tices William O. Douglas and William J. Brennan Jr. The court's decision also was taken against the advice of the Securities Exchange Commission, which filed a brief in the case.

The case (Blue Chip Stamps et al versus Manor Drug Stores 74-124) stems from an antitrust settlement in 1967 in which the nine big retailers who owned 90 of the shares of the old Blue Chip Stamp Co. agreed to give up a major portion of their control. The old company was merged into a new one, Blue Chip Stamps, and the new company offered to sell 55 of its shares to other retailers who had used Blue Chip trading stamps but had allegedly been frozen out of ownership of the company. Only about 50 of the shares offered for sale in this fashion were purchased, and the company later sold shares to the public. Two years later, in 1970, a company named Manor Drug Stores filed suit against Blue Chip Stamps on behalf of itself and other retailers to whom the shares had been offered.

The suit charged that Blue Chip had intentionally made the prospectus overly pessimistic because it wanted to sell the shares to the public at a higher price than could be realized under the forced offering to the retailers. Among the allegedly false statements in the prospectus wereihat profits would be adversely affected by sale of part of the company's trading stamp business in California, that suits against the company claimed a total of $29 million in damages, and that the company expected 97.5 of the stamps it issued to be redeemed. Actually, the Manor Drug suit claimed, only 90 of Blue Chip stamps are redeemed and the $29 million in pending lawsuits were promptly settled for $1 million. Moreover, none of the pessimistic statements were included in a prospectus issued a year later when Blue Chip offered its shares to the general public, the Manor Drug suit alleged. A lower court dismissed the suit, which sought more than $46 million in damages, because Manor Drug Stores and the other retailers had Please Turn to Page II.

Col. I BY PAUL E. Times StaH WASHINGTON Blue Chip Stamps may not be sued for securities fraud by would-be investors who claim the company issued a mislead-ingly pessimistic prospectus designed to dissuade them from buying its shares, the Supreme Court ruled Monday. The high court held 6-3 that U.S. securities laws permit only a buyer or seller of a stock or bond to sue for fraud and since the would-be investors never bought, they are out of luck.

The decision drew a tart dissent from Justice Harry A. Blackmun. He said it denied the would-be investors from maintaining a suit against Los Angeles-based Blue Chip "because they do not fit the mechanistic categories of either 'purchaser' or Blackmun said this was wrong "because the very purpose of the alleged scheme (by Blue Ciip) was to inhibit these plaintiffs from ever acquiring the status of He said the result of the decision would be to limit the ability of investors to obtain legal redress for fraud. He was joined in his dissent by Jus- vs. the PUC PUC hearing examiner decided to call a "public hearing" that same afternoon.

Only one utility was nimble enough to offer any testimony, with the rest contenting themselves with filing legal briefs later. At the conclusion of the public hearing; the hearing examiner and Commissioner D. W. Holmes said they would recommend that the full commission issue an order saying that (1) the PUC doesn't require the utilities to choose any one of the three options, and (2) that the third option lowering utility rates was the "prudent" one. That may sound fairly mild, except that the PUC can do some fairly tough things to a utility whose management has acted "imprudently," in its view.

These include cutting its Please Turn to Page 9, Col. 1 70 60 850 40 30 20 10 800 90 80 34 32 30 28 28 24 22 20 18 16 14 12 10 52 5t JH 5231 530 1 66 1 613 wx indino mmoM i NEW YORK-The Dow Jonei 30 industrial overage closed Monday at 830.10, down 9,54, High during the day was 844.49; the low, 827.99, The Amex closed off 0.79, lONDON-The Financial Timet Index of 30 Industrial stocks closed at 352.3, off 9 7, The 1975 high of 365 3 was set June 5, The 1975 low of 146,9 was set Jan, 6, TOKVO-The Tokyo Stock Exchange 225-share Index closed ot 4,489.02. down 35. 1 1. The 1975 high of 4,564.52 was set Moy 12.

The 1975 low of was set Jan, 10, Case of the Federal Lav BY ALEXANDER AUERBACH Times StaH Writer If you are the type who likes to work out Chinese puzzles or outguess the heroes of detective novels, you'll just love a problem confronting utilities and state regulators. Especially since the outcome will affect your wallet, Like any good conundrum, this one had a deceptively simple beginning; On March 29, an amendment to federal tax laws became effective, increasing the investment tax credit for utilities to 10 from the old level of 4. This meant the utilities would get a hefty tax break if they put money into new equipment, Uncle Sam gave the utilities three choices on what they could do with the savings; they could hang onto it for themselves, share some of it with I.