Howard Duncan had a photographic memory for numbers that he put to good use for personal gain as the assistant treasurer at NIPSCO in the 1920's and 30's. After confessing to the company president that he had embezzled $132,000, he offered to help NIPSCO auditors unravel his scheme in exchange for leniency, but still faced a sentence of 2 to 13 years at his trial on charges of stealing $1,500 from the company .
That's where we pick up the story from my Feb. 3 column.
Duncan announced to the amazed judge that he had appropriated $132,000, not $1,500, and that his method was still unfathomed by NIPSCO auditors.
He also said that he had taken the precaution of amassing evidence, contained in a thick green envelope, of major league hanky-panky. Essentially, Duncan charged that NIPSCO had padded its capitalization, getting authority to sell bonds for improvements and then loaning the proceeds to the holding companies instead of putting the money into improvements.
Such maneuvering, he said, as well as dissipation of the operating company’s income, was for the purpose of justifying rates being charged to utility consumers. At the time, NIPSCO was a $100 million concern that controlled and managed utility companies serving 25 northern Indiana cities.
It was controlled by Midland Utilities, with headquarters in Indianapolis. Midland Utilities, in turn, was controlled by Midland United of Chicago, which was owned jointly by Commonwealth Edison, Public Service Company of Northern Illinois, and Middle West Utilities Company – three blue chips in the stack of the infamous Samuel Insull.
In general, Duncan charged that when the holding companies borrowed money from the operating companies, they sometimes substituted worthless collateral for the collateral originally posted, or no collateral at all. These loans, he charged, went into a revolving fund that provided financial window dressing for the various companies as they needed it.
To make sure he could prove his charges, Duncan had begun copying and abstracting documents from company files about the same time he started taking cash from the funds passing through his hands.
“If this envelope contains what you (Conroy) say it does, then I’ll parole this man – even if the utility company objects,” Judge Murray said as he instructed Prosecutor Robert Estill to take it before the grand jury.
Crown Point Mayor W. Vincent Youkey, who had been battling NIPSCO about Crown Point’s lighting situation, demanded to attend grand jury hearings. Estill denied the request.
Governor Paul V. McNutt also expressed interest in the thick green envelope, and G-man Emmett Murphy met with Estill seeking evidence of mail fraud.
Almost three decades later, when the feds were challenging its tax payments, the Big House in Indiana Harbor contended with the IRS and won, considering the alternatives, a virtual tax rebate. And why not? For many years the Big House’s chief financial wizard had been, you guessed it - none other than Howard Duncan.