V. Public Interest and Ratepayer Benefit
The primary question to be determined in this proceeding is whether the proposed transaction is in the public interest and is beneficial to ratepayers. While applicants identified several ratepayer benefits they believe to be significant, DRA has proposed several conditions to ensure that ratepayers do benefit from the proposed transaction.
A. Applicants' Position
Applicants contend that their proposed transaction meets the requirements of § 854(a) because it will result in a company with sound financial structure focusing on the water and wastewater business in the United States that will be well managed and will provide benefits to ratepayers. Although applicants cannot quantify the benefits from the proposed transaction, they identify them as significant. Those ratepayer benefits include a solid capital structure; ability to raise capital on a going forward basis; becoming a United States publicly traded company; local control; enhancement of employee relations; and transparency to Cal-Am's ratepayers.
Applicants are committed to providing American Water with a sound capital structure at the time of the proposed IPO. At the time of the proposed IPO, RWE will infuse capital necessary to reach 45% common equity, with a potential of equity or other equity-like components up to 55%.6
This intended capital structure is within the 45% to 55% debt to equity ratio of publicly traded water utilities within the United States and supports the utility's creditworthiness. Applicants do not expect the current cost of American Water's capital to change as a result of the proposed transaction except due to changes in interest rates. The cost of debt that American Water will incur is expected to be in line with the costs it would incur as a non-core operation of RWE.
Applicants contend that approval of the proposed transaction will enhance American Water's ability to access capital in the United States debt and equity markets, access which is not currently available under the private ownership of RWE. American Water must currently compete for capital with the core energy operations of RWE, whose capital requirements are greater than were anticipated at the time RWE acquired American Water.
Applicants do not expect that approval of the proposed transaction will alter the current investment and capital programs of Cal-Am, which include the Coastal Water Project on the Monterey Peninsula and the retrofit of the San Clemente Dam in Carmel. Access to the United States debt and equity markets will enable American Water to continue providing quality water service throughout its operating subsidiaries in a cost-effective manner.
Applicants contend that the increased transparency of American Water as a publicly traded company is a significant benefit to American Water, to the customers of American Water's operating subsidiaries, and to the public. The proposed transaction will require American Water to be subject to federal securities laws and regulations, as well as New York Stock Exchange rules where American Water's common shares will be listed.
As a publicly traded company, American Water will be required to comply with extensive requirements imposed by the Sarbanes-Oxley legislation, including internal controls over financial reporting and external audit of such controls, corporate officer certification of financial and other information, corporate governance requirements, and enhanced and expedited disclosure, particularly with respect to financial information. None of those requirements is currently applicable to American Water since all of its shares are privately held.
The proposed transaction will shield Cal-Am from the potential risks of remaining a fourth tier subsidiary of a foreign corporation, now refocusing its core business on the European energy markets. There will be no change in the management of Cal-Am or American Water in the ordinary course of business. Local management will be able to make appropriate business decisions, unencumbered by RWE's competing goals.
Employee relations will not be adversely impacted because Cal-Am contemplates no change in employment, employment levels, or compensation. Cal-Am employees will continue to be managed by the same management team, under supervision of its American Water board of directors. Cal-Am will also continue to honor its collective bargaining agreements. In addition, American Water may create an employee stock purchase program following the proposed transaction and employees may invest in American Water. Applicants contend that stable employee relations, coupled with employee ability to purchase stock in their company, will enable Cal-Am to attract and retain qualified employees.
The proposed transaction will be transparent to Cal-Am's ratepayers because there will be no change in the name, management, employees, terms or condition of service. The only change will be an indirect transfer of control from the foreign ownership by RWE to a United States publicly traded company. Ratepayers will have the ability to invest in American Water and obtain ownership interest in the parent of their water supplier.
B. DRA's Position
DRA reviewed the proposed transaction to determine what impact it would have on Cal-Am's ratepayers if applicants' request is approved. DRA concluded that ratepayers will not benefit if this application is denied because RWE has already decided to divest itself of its non-core businesses. DRA finds it not in the public interest to require a foreign entity that does not wish to have ownership to continue to have a controlling interest in Cal-Am.7 DRA also concluded that, if the application is approved, ratepayers will experience an increase in rates and will not receive any quantifiable benefits because applicants themselves could not quantify any benefits.
DRA recommends that 17 conditions be imposed upon American Water and Cal-Am to ensure that Cal-Am's ratepayers benefit from the proposed transaction. Those conditions, along with applicants' position on each condition, are detailed in Appendix B to this order.
C. Discussion
Applicants do not believe that DRA's conditions need to be imposed as part of the approval process because the conditions merely restate applicants' commitments as part of the proposed transaction. However, applicants do not object to the specific imposition of the conditions if they assure the Commission that the proposed transaction will not harm ratepayers.
With no general opposition to the proposed transfer or conditions, we consider and review each of the conditions that DRA seeks to impose upon approval of the transfer of indirect control of Cal-Am.
Applicants concur with Condition Numbers 1 through 7, and 12 recommended by DRA, with minor modifications to Condition Numbers 4, 7, and 12. These conditions pertain to maintaining adequate capital, current policies and service quality, a business headquarters and operational field offices in California, employee collective bargaining agreements, notification of any bond downgrading, and adherence to the Commission's affiliate transaction rules.
DRA concurs with the minor modifications that applicants made to Condition Numbers 4 and 7.8 Although DRA did not specifically address applicants' proposed modification to Condition Number 12, which requires RWE to continue to abide by the Commission's affiliate transaction rules as long as RWE has a controlling interest in American Water, that modification merely clarifies the condition. However, that condition is silent on what constitutes a controlling interest. Based on applicants' and DRA's testimony, a controlling interest as set forth in Condition Number 12 shall be defined as 10% or more.9
Given that no party disputes Condition Numbers 1 through 7 and 12, approval of the proposed transaction should be subject to those conditions, as modified by applicants. We now address DRA's remaining nine conditions, all of which applicants oppose.10
This condition will preclude American Water, Cal-Am, and its ratepayers from incurring any costs or obligations that may arise from the proposed transaction, whether direct or indirect. It also requires RWE to reimburse American Water for all direct and indirect transaction costs that have already been paid by American Water.
DRA seeks to impose this condition on the basis that such costs would not occur but for the desire of RWE to divest itself of American Water.11 As to the reimbursement requirement from RWE to American Water, DRA is concerned that any payment of transaction costs by American Water will reduce the amount of money American Water will have available for Cal-Am and other water affiliates.12
Applicants affirm that they do not seek recovery of the costs of the proposed transaction. Hence, there is no opposition to this aspect of the condition. Applicants do oppose RWE being required to reimburse American Water for already incurred costs applicable to the proposed transfer. Applicants also oppose being precluded in future general rate proceedings from seeking the recovery of ongoing, non-startup costs American Water incurs as a publicly traded company. Applicants seek to modify this condition so that RWE need not reimburse American Water for cost it has incurred related to the proposed transaction and to allow Cal-Am to seek recovery of ongoing costs it incurs as a publicly traded company in future rate proceedings.
To the extent that American Water has paid for costs related to the proposed transaction with its own funds, such funds will effectively be repaid when RWE infuses capital into American Water upon the issuance of the IPO. This position was affirmed by a DRA witness, who testified that although American Water may pick up costs attributed to the proposed transaction, such costs will be repaid to American Water when RWE capitalizes American Water prior to going to the IPO market.13 Hence, this aspect of the condition is moot.
In regards to seeking recovery of ongoing costs as a result of being a publicly traded company, applicants estimate that American Water's annual ongoing cost, which includes Sarbanes-Oxley compliance and additional audit fees, will be approximately $2 million in the first year and $1 million a year thereafter. Less than 5% of those ongoing annual costs will be allocated to Cal-Am. That equates to approximately $96,000 the first year and $48,000 annually thereafter. To the extent that Cal-Am would be authorized to recover those costs, the bills of ratepayers would increase four cents per month more for the first year and half that amount, or two cents per month, thereafter, based on a $40 monthly bill.14
As privately owned companies, American Water's and Cal-Am's operational practices and financial positions are confidential, not available to ratepayers or the general public. As a publicly traded company, ratepayers will benefit through public disclosure of American Water's and Cal-Am's financial reporting, accounting, internal controls, general business practices, corporate governance, executive compensation reporting, issuance of securities, and related financial business matters. Ratepayers will benefit from public disclosure and openness of the operations of American Water and Cal-Am.
Similarly situated regulated water companies are able to obtain recovery of reasonable ongoing costs in general rate proceedings. Cal-Am should be treated no differently. Cal-Am should be given an opportunity to justify its ongoing costs of being a publicly traded company and seek recovery of those costs in future general rate proceedings, as do other publicly traded companies.
Applicants' proposed modification to Condition Number 8 is adopted.
This condition will require the cost of any new debt for Cal-Am from the present time to five years after RWE and its affiliates no longer retain a controlling interest of American Water to be based on a Standard & Poor's (S&P) credit rating of A for secured debt and a Moody's Investment Services (Moody's) credit rating of Baa1 for senior unsecured debt.15
DRA proposed this condition to protect ratepayers from higher debt costs which DRA expects to result from a downgrade of American Water's credit rating to an A- from an A rating by S&P at the time RWE announced that it was going to divest itself of American Water.
Applicants contend that the credit ratios of American Water will improve in the future because RWE is going to inject common equity capital to replace some of American Water's debt.16 Applicants oppose freezing American Water's cost of debt for any period of time into the future. They believe Cal-Am should be allowed to recover its actual market-based cost of capital in future general rate proceedings and thusly earn a reasonable rate of return.
A credit rating, which impacts how much debt will cost, is the opinion of credit rating agencies on the overall general creditworthiness of a company based on their individual analysis of relevant risks, considering both qualitative and quantitative factors.17 Two such credit rating agencies are S&P and Moody's. Qualitative factors used by rating agencies, not measurable, are based on their informed judgment and include factors such as competitiveness and growth prospects, caliber of management, and regulatory framework. Quantitative factors are measurable. The three primary quantitative measurements used by rating agencies are funds from operations to total debt, pretax coverage ratios, and total debt to total capital.18
Prior to the acquisition of American Water by RWE in 2003, American Water had an S&P credit rating of A- and a Moody's credit rating of Baa1. Upon RWE acquiring American Water in 2003, the S&P credit rating improved one step to a credit rating of A but lowered to a credit rating of A- upon the 2005 announcement of RWE that it will divest itself of American Water.19 S&P also placed American Water on a negative credit watch as part of the recent downgrade to an A-. In issuing that negative credit watch, S&P stated that it was waiting to see what American Water's business plan will be, to understand the debt refinancing that will occur, and to see what conditions will be placed on the proposed transaction by the various regulatory agencies.20
There is no assurance that the credit ratings of American Water, or even RWE, will remain unchanged for at least five years into the future. Credit ratings are based on future conditions, some of which are under the control of an individual company and some of which are not. DRA acknowledges that debt ratings can change anytime due to factors not under the control of a company such as regulatory environment, market structure, competition, environmental conditions, litigation, geographic location, and customer demographics.21
To impute the cost of debt based on a specific S&P credit rating for at least five years into the future ignores the qualitative and quantitative factors not under the control of American Water and Cal-Am, and could only harm Cal-Am and its ratepayers through a disparity between regulatory and actual earnings. To ignore these conditions can only weaken the financial condition of Cal-Am and American Water and thus result in higher costs of future debt and equity and lead to non-investment grade credit ratings. Even though DRA estimated that a one-step downgrade in an S&P credit rating would increase the cost of new debt by 0.15%, it acknowledges that a credit rating is not the sole criteria for determining the cost of new debt.22
General rate proceedings are the proper forum to address recovery of reasonable and prudent business costs. We decline to impose an S&P credit rating of A for secured debt and a Moody's credit rating of Baa1 for senior unsecured debt from now until five years after RWE and its affiliates no longer retain a controlling interest in American Water. Condition Number 9 is not adopted.
This condition will require RWE to provide an equity investment of 50% to American Water at the date of divestiture, resulting in a capital structure of 50% equity and 50% debt.23
DRA believes that its proposed capital structure is necessary to ensure that the IPO is not detrimental to Cal-Am's ratepayers.24 DRA also believes that Cal-Am's ratepayers will benefit though lower debt cost because its proposal will strengthen the capital structure and credit ratings for American Water and AWCC, an affiliate which will provide debt financing to Cal-Am.
Applicants state that they are committed to providing a strong capital structure to American Water. They oppose a strict 50% equity ratio on the basis that it is too rigid and will preclude them from taking advantage of market conditions at the time of divestiture.25 Applicants seek to modify this condition to a range of 45% to 55% equity and agree to infuse equity as needed to maintain this proposed equity range.26
The equity ratio in a capital structure must be sufficient to maintain a reasonable credit rating and attract capital, as addressed in our discussion of Condition Number 9. It also must be sufficient to provide a margin of safety for payment of interest, reasonable dividends, and to retain some money in the business to fulfill public utility service obligations. Although neither DRA nor applicants provided analytical data supporting their individual proposals, we observe that both proposals are comparable with other water utilities.
We are reluctant to adopt a specific equity ratio for a proposed transaction that may occur more than two years in the future.27 Consistent with D.89-11-068, we decline to micro-manage the capital structure of a public utility. We instead give American Water and Cal-Am discretion to manage their capital structures with a view towards a balance between shareholders' interest, regulatory requirements, and ratepayers' interests.28 Such discretion will provide applicants the flexibility to take advantage of market conditions at the time the IPO is issued, the reasonableness of which will be addressed in Cal-Am's general rate or cost of capital proceeding.
Applicants' proposed modification to Condition Number 10 is adopted.
This condition will require all costs of the proposed transaction, for a period of five years, to be absorbed by American Water using the RWE equity infusion and will preclude these costs from being passed on to Cal-Am's ratepayers. Transaction costs include increases in directors and officers liability insurance, audit fees, annual stock exchange fees, employee stock purchase program costs, and Sarbanes-Oxley compliance costs.
This condition is an extension of Condition Number 8 and differs only to the extent that it imposes a five-year moratorium for seeking recovery of costs directly and indirectly attributed to the proposed transaction. We have already addressed when Cal-Am may seek recovery of such costs in our discussion of Condition Number 8.
This condition will require Cal-Am to make capital expenditures of not less than $62.2 million in 2007, $126.9 million in 2008, $181.0 million in 2008, and $97.6 million in 2010.29 If capital expenditures in any of these years are projected to be below the minimum by 10% or more, then Cal-Am must notify the Commission and explain why.
DRA proposes this condition out of its concern that the new owners and new management may change how Cal-Am operates and how capital expenditures are made.30 DRA acknowledges that the capital investments, customer service, and water quality of Cal-Am are adequate.31
No one disputes that Cal-Am will need to make future capital investments. If this condition is adopted, Cal-Am need only satisfy the minimum capital expenditure amounts, regardless of the actual plant investment needs of each of its seven districts.
Applicants are already committed to providing Cal-Am with adequate capital to fulfill all of its service obligations and to ensure that there is no adverse impact on the quality of customer service, water quality, and reliability of service as a result of this transaction.32 One such project requiring new capital is the Coastal Water Project in Monterey (Application 04-09-019).
Ongoing reviews and approval of capital budgets for each of the seven districts of Cal-Am are undertaken through general rate proceedings. That ongoing review considers capital expenditures needed to meet customer needs, source of supply development, and economic conditions. It also considers capital project delays due to changing circumstances such as weather, shortage of materials, and environmental and local permitting issues.
This condition is not necessary because the review and approval process undertaken in general rate proceedings, along with Condition Numbers 1, 2, and 3 being adopted in this order, provides sufficient assurance that Cal-Am will have adequate capital to fulfill its capital improvement obligations in each of its seven districts.
This condition will require that all of the conditions set forth in a 2002 settlement agreement that authorized RWE to acquire an indirect control of Cal-Am to remain in place until RWE no longer holds a controlling interest in American Water.
No one disputes that RWE should continue to comply with the conditions set forth in D.02-12-068 until RWE no longer holds a controlling interest in American Water.33 There is a dispute over when RWE will no longer have that controlling interest in American Water. Is it when RWE owns less than a 10% interest in American Water or less than 50%?
DRA asserts that RWE will continue to retain a controlling interest in American Water until it has less than a 10% interest in American Water.34 That percentage is identical to the Financial Accounting Standards Board (FASB) Opinion 57 definition of controlling interest, which addresses related party disclosures in financial statements.35 FASB Opinion 57 indicates that principal owners remain in control if they have more than 10% of the voting interest.
Applicants assert that they will lose their ability to control American Water when they have less than a 50% voting interest in American Water because they will no longer be able to control American Water at that level.36
This controlling interest question is moot as long as applicants satisfy their stated intent of offering 100% of the shares in American Water through the IPO and offering any unsubscribed shares in subsequent offerings as soon as reasonably practical following the IPO. However, applicants' modification to this proposal conflicts with their intent to preclude buyers of the IPO from acquiring control of American Water. Applicants seek to preclude individual buyers or a group of buyers from obtaining a controlling interest in American Water by instructing their investment bankers not to allocate 10% or more of the stock to any individual buyer or group of buyers.37
The less than 10% condition is consistent with the FASB 57 controlling interest definition, which applicants propose to preclude any individual buyer or group of buyers from gaining control of American Water by acquiring 10% or more of the IPO, and consistent with applicants' stated intent to divest itself of all interest in American Water. The condition proposed by DRA is adopted. If applicants and their affiliates cumulatively have more than a 10%, but less than 50% interest in American Water and find themselves in a minority position and unable to comply with any of the conditions set forth in Appendix C, Cal-Am should file an application explaining why applicants cannot comply and request an exemption from the condition.
This condition will require a one-year deferral of Cal-Am rate increases, escalation year step increases, and the next general rate case in each of its jurisdictions.
DRA seeks to impose this condition to ensure that ratepayers receive some benefit from the proposed transaction by deferring a rate increase. DRA provides no analysis to substantiate that its proposed condition will actually benefit ratepayers.
Applicants oppose this condition on the basis that it will impose a significant financial hardship on Cal-Am because Cal-Am would expect to lose $26.8 million of authorized revenue under DRA's proposal, approximately 24% of its 2011 projected revenues and more than eliminate its authorized earnings for one entire year.38 Applicants also oppose this condition because it will preclude Cal-Am from earning a reasonable return on its investment and adversely impact the quantitative measurements used by rating agencies.
This condition may appear to provide a short-term benefit to ratepayers. However, the evidence in this proceeding shows that any short-term benefit will be offset by long-term harm. The revenue loss will have a negative impact on the cash flow of Cal-Am, making it difficult for Cal-Am to fund capital projects and to attract investors in the capital market, thereby driving up the cost of debt. Even DRA acknowledges that its proposed deferral of rate changes may impact the credit rating of American Water, may result in rate shock to the ratepayers of Cal-Am when the authorized but delayed rates go into effect, and may adversely affect the ability of Cal-Am to continue paying its operating costs.39
This condition will also unfairly preclude Cal-Am from earning a reasonable return on its investment. The legal standard for setting a fair rate of return has been established by the United States Supreme Court in the Bluefield and Hope cases.40 The Bluefield decision states that a public utility is entitled to earn a return upon its property employed for the convenience of the public and sets forth parameters to assess a reasonable return. The Hope decision reinforces the Bluefield decision and emphasizes that such returns should be sufficient to cover operating expenses and capital costs of the business.
The evidence in this proceeding does not substantiate that ratepayers will benefit from this condition. Condition Number 15 is not adopted.
This condition will require American Water to provide $100,000 of shareholders funds annually for a five-year period to develop, promote or otherwise obtain a low-income assistance program underway in cooperation with the Commission. Cal-Am will be precluded from recovering those funds from its ratepayers.
DRA acknowledged that Cal-Am already provides low-income assistance funding pursuant to § 739.7 and that Cal-Am currently recovers prudently incurred low-income assistance program costs from ratepayers. Although DRA sees this proposal as a ratepayer benefit, it nevertheless acknowledges that approval will adversely impact the ability of Cal-Am to earn its authorized rate of return because Cal-Am will not be allowed to recover the $100,000 annually for a five-year period applicable to low-income ratepayers.41
Consistent with our discussion of Condition Number 15, Cal-Am should be afforded a reasonable opportunity to recover its cost of doing business. Condition Number 16 is not adopted.
This condition will require American Water to provide shareholder funds of $100,000 annually for a five-year period to assist small troubled water systems. Cal-Am would not seek to recover these funds.
While small troubled water companies may benefit from this proposed condition, DRA has not substantiated that Cal-Am ratepayers will receive any benefit. Approval of this condition is expected to provide a benefit to small troubled water companies not parties to the proposed transaction and to their ratepayers. With the funds going to other regulated entities, Cal-Am's ratepayers will receive no benefit from this condition.
This condition is not adopted because it does not benefit Cal-Am's shareholders or ratepayers. Other California regulated entities obtaining similar approval are not required to assist small troubled water companies at shareholder expense.
D. Conclusion
The proposed transaction is in the public interest. Cal-Am and its parent American Water will return to a United States publicly traded company from private ownership by a foreign company which no longer considers American Water to be a part of its core business and which seeks to divest itself of its water operations.
Ratepayers of Cal-Am will benefit from the replacement of ownership no longer interested in providing service to them. Ratepayers will also benefit from a transparent corporate structure but with no change in the name of the companies, management, terms of condition of service, or employees. The proposed transaction will also benefit ratepayers through the ability of Cal-Am and American Water to obtain new capital without competing against the capital needs of RWE's core companies. The adoption of the conditions set forth in Appendix A to this order helps ensure that ratepayers will be protected and benefited.
6 The capital structure of American Water as of December 31, 2005 consisted of 53% debt and 47% preferred and common stock.
7 Exhibit 14, p. 10-2.
8 Reporter's Transcript Vol. 5, pp. 312 and 313.
9 Reporter's Transcript Vol. 4, p. 216 and Vol. 5, p. 313.
10 The following recommended conditions are paraphrased. Specific language of each condition can be found in Appendix B to this order.
11 Reporter's Transcript Vol. 5, p. 290.
12 Id.
13 Reporter's Transcript Vol. 6, p. 326.
14 Exhibit 10, p. 4.
15 The S&P range of investment grade credit rating consists of nine steps with BBB being the lowest and AAA the highest rating. A credit rating of A- is two steps above and a credit rating of A is three steps above a credit rating of BBB. Moody's also has nine steps in its range of investment grade credit ratings with Baa2 being the lowest and Aaa the highest step. A credit rating of Baa1 is one step above a credit rating of Baa2.
16 Reporter's Transcript Vol. 4, pp. 218 and 219.
17 Exhibit 5, p. 13.
18 Funds from operations to total debt is a measurement of how many years it will take for a company to repay all of its debt with internally generated cash flows, pretax coverage is an earnings measurement, and total debt to total capital is a financial leverage indicator.
19 There is no direct evidence on what impact the acquisition and subsequent divestiture announcement of divestiture had on American Water's credit rating from Moody's. However, a comparison of the proposed conditions set forth in Appendix B and prior conditions in Appendix C shows that American Water currently has the same Baa1 credit rating from Moody's.
20 Reporter's Transcript Vol. 4, pp. 174 and 175.
21 Reporter's Transcript Vol. 6, p. 351 and p. 352.
22 Reporter's Transcript Vol. 6, p. 327 and Vol. 5, p. 291 and p. 292.
23 American Water's capital structure at December 31, 2005 consisted of 47% preferred and common stock and 53% debt.
24 Reporter's Transcript Vol. 6, p. 343.
25 Exhibit 6, p. 15.
26 Id.
27 Reporter's Transcript, Vol. 4, p. 214.
28 33 CPUC 2d 495 at 541 to 545 (1989).
29 DRA indicated that these amounts appear in applicants' CA-DRA-02-Q020 response to a DRA data request, which was not submitted into the record of this proceeding.
30 Reporter's Transcript Vol. 5, p. 293.
31 Reporter's Transcript Vol. 6, p. 354.
32 Condition Numbers 1, 2, and 3.
33 This is consistent with Rule 12.5 of the Commission's Rules of Practice and Procedure which prohibits the adoption of a settlement agreement to constitute approval of, or precedent regarding, any principle or issue in the proceeding or in any future proceeding.
34 Reporter's Transcript Vol. 5, p. 313.
35 FASB is an authoritative body which establishes a common set of accounting concepts, standards, procedures, and conventions, commonly know as "Generally Accepted Accounting Principles" (GAAP). GAAP, in turn, is recognized by the accounting profession as a whole, and is used by most enterprises as a basis for their external financial statements and reports.
36 Reporter's Transcript Vol. 4, p. 223.
37 Reporter's Transcript Vol. 4, p. 216.
38 Exhibit 10, p. 2 and p. 3.
39 Reporter's Transcript Vol. 5, p. 295 and p. 296.
40 Federal Power Commission v. Hope Natural Gas Company, 320 U.S. 591 (1944) and Bluefield Water Works & Improvement Company v. Public Service Commission of the State of Virginia, 262 U.S. 679 (1923).
41 Reporter's Transcript Vol. 5, p. 309.
