The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1876-02-13
A COLOSSAL SWINDLE.
Arrest of the Treasurer of a Defunci
Insurance Company.
A 10 ST l. T. d @ E r.
The Way Chicago Insurers
Were Robbed.

street by Deputy Sheriff hcGonegal on order
granted by the Supreme Court OF Kings county at the
instance of Mr. Homer Cook Of Chicago. the assignee
In bankruptcy the of the State lnsurSpce Com
pany The action is brought to recover sos, COL 50.
said to have been frauduenty Incorporated by the
defendant the interest on the sum since August
30 1872 and the interest $Sl6,2T4 IS from Decem-
Der g. 1871 to August 80 1872 The defendant held
to bail in the sum OF 500, 600
The circumstances OF the case are somewhat pecu-
liar, to say the least and illustrate in a
most forcble manner the in which policy holders
swndled by dishonest officials when they enter
into combination, evidently done in this case,
defraud these who their conhdng customers
In this the officers Of the company
also the directors OF trust and loan company,
which constituted the bank in which the insur-
company should deposit its funds The two con-
appear to have been worked In unison, and the
manipulAtions carried out to completely de-
lude the unfortunate policy holders while they worked
entirely into the hands and pockets of the officers
Both concerns are now defunct
THE STORY TOLD.
The following are the facts in the case, and they will
be found peculiarly interesting After the great Chicago
fire the State Insurance Company, OF Chicago gave out
that thoy had sustained losses TO the extent $780,
900 and that their assets only $500 600 or this
latter sum $2S1, 900 invested in $50 bonds
and $50 900 in cash. The cash was deposited in the
National Loan and Trust Company, of Chicago The
bonds and other securities placed in the hands Of
George C. Smith, the Treasurer who also Pres
dent of the National Loan and Trust Company The di
OF the insurance company also directors OF
the company II is alleged that the bonds of the
State Insurance Company previously referred TO
converted into cash by the treasurer George Smith,
without the knowledge of the directors, and that
S2S1 000 the proceeds OF the SALE were deposited in
the trust company to the credit OF the insurance
pany making with cash already its credit total
SAL 600 This account was checked against by the in
surance company by drafts drawn by George G smith.
the insurance company, which brought up the whole
OF their to $40o, 900. which was the amount
with which they had to meet their liabilities on losses
by the aggregating, already stated, $700 600
Finding that the company must succumb the directors
formed it is said combination TO buy up the claima
against it at the rate of ten cents on the dollar,
with view of making profit out of the very loss In
order TO do this report was circulated that the losses
against OF $500 0OO or ten cents the dollar
The combination succeeded before the concern was
declared bankrupt in buying up claims 10 the extent oil
$500 600 To pay these
THE TREASURER DREW CHECKS
on the trust company at the rate OF per cent
the amount mentioned and when the creditors from
whom these claims had been purchased surrendered
their policies, with their Endorsement thereon, they
were required 70 give an assignment of their claims TO
the order Of J. b. Smith, a brother of George @.
Smith, the treasurer, and also to C. NJ Smith,
the vice president OF the insurance company
and at the same time u director OF the trust
company These parties then issued notes in
the name q the state Insurance COMPANY, payable
policies surrendered The trust company charged
these up against the insurance company at their face
fictitious charges made in the bank account of tho
company amounting to 500 000 leaving only
balance to the latter OF $il1 600 The insurance
continuing buy up the claims OF the policy holders,
at the of ten centson the dollar until they had
obtained over $500, 900 more which they endcavored
to prove against the In the bankruptcy proceed
ings They then elected secured the appointment
of lawyer named Perkins, the attorney Of the In
torney Of the trust company, as assignee In
bankruptcy. This individual employed bis post
ton to assist in the combination T. purchase
further claims until, by the summer OF 1872 issy bad
bought up all but s225, 900 OF the claims T6Scfec.
bect something wrong for the inventory died in the
BANKRUPTCY bf0cesdlpgs showed only assets TO the
amount Of $40 600 o. when ~ 600 was put down
whole scheme brought to light and the further Pur-
chase Of Claims on the ten cent basis was then
rates and offered 50 cents on the dollar but without
avail Proceedings were instituted against the as
signss for his removal on the ground that he had
His removal was effected Proceedings
menced against George G. Smith and
OTHER OFFICERS
OF the insurance company and also against the trust
company in order 70 compel them pay over TO the
assignee the moneys which they had fraudulenty
applied The result OF these proceedings was that
1857 900 paid TO the assignee and the case
was dismissed dividend of forty cents was then
paid TO the creditors who had not sold their claims
and also upon the 600 purchased by the Ring aud
proved against the estate they thus receiving back
$50 900 Of the $751; 900 they had just paid over The
proceedings which had previously dismissed as
against George c. Smith the treasurer Of the lnsur-
ance company were then, on petition Of the creditors
reopened and an order was granted by Judge Drum
mond for Smith TO show cause why he should pay
over the balance due, amounting with interest," up
ward of 500 0O0 These proceedings are still pending
in the Chicago courts, the defendant claiming
that the Court had Jurisdiction to compel him 70
pay over the money in q summary proceeding OF the
OF that Instituted and that creditors and
the assignee must proceed by full suit law or in
or the Ses cS ont o.
and has since been residing in New York its
suburbs
Another feature in the case which is somewhat in
terestlng is the manner in which the trust companys
operations were conducted This company is also
defunct The claims that purchased by the trust
company at cost Of S2o 900 were charged up against
the insurance company at $3.50 900, thus leaving
prons to the trust company OF 500 600 What was
pany only showed profit for the year
In which this transaction occurred OF $4,000.
tbs GENERAL LEDGER
could not be found 1t was only by It that the mys
terry could be solved The Court ordered the detectives
The only trace discovered Of this missing book was
that the family physician OF OF the officers of the
insurance company had received a package at about
the time the book was reported missing The package
was wrapped up In brown paper, and sealed with the
seal of the National Trust and Loan Company IL
was also said 70 be in size and form correspondent
with that OF the missing ledger The man
from whom the Doctor had received the package was.
he says, at the time in the employ of firm Of which
George G. smith was member The instructions
given TO the Doctor when the parcel was brought TO
him were 70 keep perfectly private until was called
man. six months afterward, says the Doctor,
called for the parcel evening and took away and
10 has not since been seen An employee OF the Doctor
tells somewhat different story and stated during the
OF the proceedings in the Bankruptcy Court that
he received the package under the following cir
cumstances, viz THAT evening while out
driving be hitehed bis horse and buggy TO post
the ofhces OF the National Trust and Loan Company
and went away for few moments to attend 70 some
business and that his return he found the package
on the seat Of The buggy together with note request
ing that no keep the package for friend but without
giving any indication to who the friend was He
says he took the package TO tho Doctor aud that about
months alter he received another anonymous note
asking him 70 take the package and drive to certain
spot and then leave II In the buggy and 60 away for
short time during which the package would be taken
away by friend, who would At future day make
himself known He did as directed and the package
taken away. He did not know, he said, what the
package contained The officers OF the bank endeav-
orcd prove their claim for 5000 0O0 claims which
they had purchased from Of the creditors Judee
Drummond, before whom the case tried, how