Associated Gas and Electric
Howard Colwell Hopson | |
|---|---|
| Born | 8 May 1882 Fort Atkinson, Wisconsin, U.S. |
| Died | 22 December 1949 (aged 67) Greenwich, Connecticut, U.S. |
| Occupation(s) | Entrepreneur, business executive |
| Known for | Developing Associated Gas and Electric; convicted of defrauding investors |
Howard Colwell Hopson (May 8, 1882 – December 22, 1949) was an American entrepreneur who was found guilty of defrauding investors out of more than $20 million (equivalent to several hundred million in today's dollars). He developed Associated Gas and Electric (AG&E) into one of the foremost electricity suppliers of its era, ranking third nationwide and fifth among holding companies.
Hopson pursued studies at the University of Wisconsin and George Washington University. Following positions at the Interstate Commerce Commission and New York Public Service Commission, he established a consulting enterprise. In the late 1910s, he gained controlling interest in AG&E, growing it into an international utility serving two million customers. After his fraudulent activities were uncovered in the late 1930s, Hopson served prison time until 1943 and passed away in 1949.
His deceptive conduct highlighted the widespread corporate malfeasance of the period, prompting significant legislation such as the Public Utility Holding Company Act of 1935, Securities Act of 1933, and Securities Exchange Act of 1934.
Early life
Born in 1882 in Fort Atkinson, Wisconsin to Edgar Delos Hopson and Mary Colwell, Howard Hopson began working early in factories and as a newspaper editor. He attended the University of Wisconsin under economist Richard T. Ely and aided John R. Commons before obtaining a master's degree from George Washington University. He served as assistant editor at the Jefferson County Union and joined the Interstate Commerce Commission in 1907. By 1908, he became secretary at the New York Public Service Commission, rising to lead its Division of Capitalization by 1913. He earned a law degree in 1908 and was admitted to practice before the Supreme Court in 1913.
Hopson wed Elenore Evans in 1921; she died by suicide the following year.
Between 1908 and 1915, Hopson played a pivotal role in regulating utilities in New York, using political ties to further his career. Later infamous for evading regulations he once helped create, he departed the commission in 1915 to launch H.C. Hopson and Company, a consulting firm serving major utilities such as American Telephone & Telegraph, Consolidated Gas Company of New York, and Electric Bond and Share Company. By 1921, his earnings had reached $100,000 annually.
Associated Gas and Electric
Together with John I. Mange, Hopson purchased the Associated Gas and Electric Company (AG&E) of New York for $298,318.19. At that time, AG&E served 44,000 customers with earnings totaling $3.5 million. Established in 1906 as a holding company, it controlled several gas companies.
The Ithaca Gas Light Company—founded in 1852 with $75,000 capital and initially serving just 28 customers—became part of AG&E in 1906 under William T. Morris. Originally composed of fourteen companies valued at $1.2 million, these were consolidated into four by 1914 under the New York State Gas and Electric Corporation. AG&E’s holdings included firms located in upstate New York as well as Kentucky and Tennessee. Following Hopson’s acquisition, AG&E expanded rapidly into Massachusetts, New Hampshire, Maine, Maryland, Pennsylvania, and even the Philippines.
By the 1930s, AG&E’s assets had grown beyond $1 billion with revenues reaching $133 million, serving approximately 1.75 million customers across some 6,000 communities. At its height, it encompassed over 250 corporations—sometimes reported as up to 522 or even "5,800 names"—offering electricity, steam, ice, water, and transportation services across 26 states plus Canada and the Philippines to an estimated population of 20 million.
AG&E ranked as the third largest electricity producer in the United States—accounting for about 9% of national output—behind J.P. Morgan's United Corporation (23%) and Samuel Insull's holding companies (11%). It was also among the top five holding companies by market capitalization. AG&E shares reached a peak price of $61 per share with roughly half a million investors contributing over $1 billion in capital.
Scandal
In 1935, Senator Hugo Black launched an inquiry into utility firms suspected of attempting to sway the outcome of the Wheeler-Rayburn Act vote, a legislation that threatened to dismantle holding companies unless they could justify their existence. The Committee of American Utility Executives actively opposed the legislation, dispatching nearly 97,000 telegrams to House representatives before the decision. Black's investigation revealed approximately 250,000 telegrams, many of which were fraudulent; investigators noted an unusual concentration of surnames beginning with the letter B. A Western Union operator testified that Mr. Herron, an executive at Utilities Investing Corporation (a subsidiary of AG&E), dictated these communications daily, often forging signatures sourced from directories or obtained through bribed courier boys compensated per signature. Corporations financed numerous lobbyists and frequently influenced newspapers by acquiring controlling stakes or threatening to withdraw advertising revenue.
In August 1935, Hopson acknowledged applying pressure on prominent newspapers such as The New York Times, Hearst outlets, and others by threatening to pull advertising funds. He also filed libel suits against several publications including the Atlantic Monthly and The New Republic. AG&E reportedly spent $875,531.95 on lobbying efforts and had suspended dividend payments since 1931-32, despite Hopson earning over $500,000 annually between 1922 and 1933. After being subpoenaed and failing to appear initially, a nationwide search was conducted to locate him.
Upon Hopson’s eventual court appearance, jurisdictional conflicts emerged between House and Senate committees until they agreed to jointly conduct questioning. The scandal involving AG&E was instrumental in facilitating the enactment of the Public Utility Holding Company Act of 1935. To prevent dissolution, AG&E consolidated its holdings down to roughly 60 companies by 1938; Hopson retired that year with $18.7 million in bonds and fees.
Facing overwhelming debt—estimated at $493 million compared to $120 million in assets—AG&E filed for bankruptcy on January 10, 1940. This triggered nearly 400 lawsuits from states and municipalities. Shareholders accused Hopson of fraud warranting an 85-year prison sentence; he was convicted in January 1940 on 17 counts of mail fraud and two counts of income tax evasion, receiving a five-year sentence from Judge Alfred Conkling Coxe Jr. At sentencing, Hopson was mentally deteriorated due to tertiary syphilis and was incarcerated in Lewisberry, Pennsylvania.
During bankruptcy proceedings, Denis J. Driscoll and William Thorp oversaw AG&E’s dissolution and restructuring. The SEC characterized AG&E as "a vehicle for an enormous scheme designed to obstruct, delay, and defraud." AG&E’s direct successors included General Public Utilities Corporation and New York State Gas and Electric Company; spin-offs encompassed Canadian Power Corporation and Rochester Gas and Electric. Additional companies emerging from AG&E included Metropolitan Edison Company, Pennsylvania Electric Company, and Jersey Central Power & Light, all now part of FirstEnergy. Senior debt holders recovered between eight and forty cents on the dollar, while junior creditors lost their entire investment.
Death
Following his release from prison in 1943, Hopson spent most of his remaining years at Brooklea Sanatorium. He passed away on December 22, 1949, in Greenwich, Connecticut due to a cerebral hemorrhage. He was laid to rest at Mount Auburn Cemetery, Cambridge, Massachusetts.