The Norfolk and Western Railway financially drained one of its subsidiaries, the Delaware and Hudson Railway, leaving the D & H near bankruptcy, according to the staff of the U.S. Railway Association.

The charges came in a report accompanying the association's approval of a $2 million loan request from the D&H. The new loan brings the total amount of funds approved or to be loaned to the carrier to $30 million.

The staff memorandum charged that the N&W "has not discharged its obligation to the D&H or the public," since the two merged with N&W taking control in 1968.

Specifically, the staff charged that the NW has:

Refused to advance any funds to the D&H:

Failed to assist the D&H management or operations in any meaningful way;

Caused D&H to pay $2.3 million in dividends, including $2 million dividend in 1970 - a year in which D&H had net income of only $619,000;

Utilized in its consolidated returns D&H losses of $27 million and investment tax credits of $2.38 million, thereby reducing its taxes by an estimated $15.5 million.

Maximized its tax benefits by causing D&H to use accelerated depreciation methods, thereby reducing the tax attributes of the D&H, which would be beneficial to it in a merger or reorganization;

Taken for itself a benefit long sought by D&H with the inauguration of through train service with Conrail between New England and Albany and points in Virginia and the Carolinas.

The report suggests that D&H petition the ICC reopen its inclusion order allowing the merger, and impose new conditions on N&W's control over D&H.