The New York herald., 1877-01-16
S &c U r. | T Y?
Official Investigation of a Life In
surance Company.
SYSTEMATIC DECEPTION and CORRUPTION.


Below viii be found report madc 10 the head OF
insurance Department. resulting from the Official ex
animation Of the Security Lie Insurance Company
made by Deputy Superintendent MCCALL Vne STATE
msns is carefully prepared and exhibits degree Of
ro.,eunsss and deception that has never before been
reached by New York insurance corporation:-
ALBANY, Jan. Is, 1877
70 the Hon. WILLIAM SMITH, Acting superintendent
Of the Insurance Department.
The undersigned bess leave TO respectfully report
that under the provisions contained IN ysur appoint
mrnt. No. 36l. dated November 2S 1876 be has been
engaged since mentioned and up 10 the pres
cut time IN making an OF the Affairs OF the
Security Lille Insurance and Annuity Company Oh 'ne
city OF New York.
length the causes OF the companys insolvency, bus
she last statement OF us officials as on Deceh-
bcr 81 187o showing surplus oi S5l5, OBJ IN COM
parlson with the present deficiency of ~, 0o3 s24,
makes II plain duty to place GU the records oi Inc
dcp,rtmcut q stalcmcnt OF the chicanery and fraud
lht characterize the previous exhibits OF the com.
pauy. Commencing with the lrst item IN their repor!
Vi assets the last statement made by them, nnd
real estate returned cost value overland above en-
cumbrances oi $460,S75. This amount covers Two
pieces OF property the city oil New York-one beng
the compunys building, Nos 81 aud 80 Pine street, the
other IL 63 iO0ths acres oi land Wiiiamsbridgc,
and forming part ot the territory recently annexed
10 New YORK county TIE rst nentionea piece was s
purchased in 1875 Tor $lS0O00 $50 900 being PAID IN
cash, and the balance remaining us mortgage
OFFICIAL GENEROSITY.
Tho second piece acquired IN 1868 by certain ou-
ciaIs OF the company of their private funds and
gwen by them gratuty to their institution In De-
cen,uer 1874 10 enable them 10 make u showing OF
ccptsbe assets on account OF the disaowance n tnat
cutcs0ry by The department. of "agcnts baances ana
''colnutcd commissiuns' to the extent OF $2lS, ,OO0
One hundred and ten thousand dollars OF these un
admitted closed out 10 this item Of real
estate, making the apparent total cost oil the same
$3.50 OU0 instead Of $46SS75, as sworn by the officers
kceardnc The value OF these two items OF real
gwen hereafter return tho companys building at ils
vauo In 1873 OF $50 Ooo over the 500 oo0 nGun.
brance and the Williams bridge property IT $Sl as
reported by the department appraisers
The next principal is that designated as ''socks
nece%Ser Dec ISIS At par value anu now sscer.
famed 10 be $195, 100 l ind the discrepancy OF
ta7o, $50 accounted for as iolows;-sso 0oo Of the
Euges $780, disposed or or rather returned,
70 Francis 4. Walker & Co.. OF New York, from whom.
never paid ior aud the balance 39 $50, converted
into cash pay the losses and expenses OF the year
over and above the income inc receipts beng
bonus he'd ny Walker & Co. tine senior member being
- director in the Security and chairman OF
In the company's possession, but held by
thc firm mentioned as collateral Tor tho
unpaid purchase money-seven per cent being charged
teres thut the securities PRODUCED which was never
six por cent and IN the case OF the District
bonds purchased in this way were reported as being
absolutely the property OF the company. but no state.
ment was made 10 tue aotics o. me oorr1weo
the sworn report Of tho President and Secretary.
DELIBERATE PERJURY.
Tho next item. where my examination revealed
discrepancy between tho statement as made to tho
department the facts as found them, was the re-
turn " s1 aorua ISIS A1a did UssSco
exis. as an asset OF the company, nor has It ex-
listed as such since BY including the re.
books were made 10 show balance of $55 70S 6S; but
a u matter of ct II 10 doubtful ut any time during
subject to the check Of the officers To the forced ex
hibit above described $4,000 was added, TO ''gve
good appearances TO tho statement" although tho
credit had foundation In TACT, and involved delib
srate perjury ON the part OF the companys officials In
AS 10 Tho item of ssuucollected and deferred prc.
miums $77O, ,l2O" have doubt that the sum was
In excess the proper amount by At least 5000 000
come 70 the conclusion, after ascertaning from the
schedules giving these items In detail and prepared
during the examination, that ut the present time
$685. $40 10 all that Is outstanding, and that
December 81, 1875, $780, 900 would he generous est
mate Of the same considering the company's method
OF cancellation, Its annual returns showing large
number OF revived policies,
taled false return Of tho income and expenditures
accordingly fictitious credit OF premium receipts
10 the amount OF $3.50, 900 made aud sworn to
talsey 10 cover the incorrect of
cash. In disbursements the interest paid ON borrowed
money returned as ''cash dividends paid policy
holders to avoid answering tho inquiries that true
exhibit would have rendered necessary. and a con-
saerable portion OF salaries and advertising expenses
wns also returned paid Tor 'surrendered p0lcies'
TO prevent tho criticism that proper showing OF
penses would have provoked.
flnd also that tho mortality OF the company was cx-
cesse and to conceal the fact large amouns expended
death losses carried annually into expenses
s'paid fer iorfetod policies"
The preparation Of the premium loan and note
schedules and tho data Tor valuations oil policies
voived upon Mrssrs Ballard, Holmes and Cross, whom
you dctned 20 assist me In the examination On ac-
count of the fraudulent condition OF the actuarys
books these gentlemen were obliged to check each
poiicy from the agency REGISTERS which required five
weeks OF careful and'arduous labor.
Nine hundred and cighty.onc poiicies with reserve
Of $543 500, were found unrecorded on the valuation
books, whicn had becE annually prepared by the ac-
tuary Of the company, H. L. Case, Jr, and affirmed by
hts affidavit contain .a The policies In torcc, with
The necessary data for the valuation OF same"
OTHER METHODS OF FRAUD.
During the year 1873 scheme was set on foot by
the officers induce the parties holding policies from
the earlier years OF the companys exstcnce-and at
tached TO which large rescrt esto relinqush the
same aud receive In exchange similar policies having
dates Of issue. The iater were returned 10 the
department without any statement OF their being con-
uations old contracts several hundred thousand
dollars Of beng cancelad each year since
the date mentioned This method OF reducing the lia
biiit,es became practicable In the minds OF the o
Accrs that each December they would cause
TO be written large numbers Of these sub
ssitute policies report them January actually
In force (marking OF the oldl and send them out
In the ensuing year 10 take their chances OF accept
return. Premium noie aud loan policy hold
have been duped Tor several years by the form OF
receipt gwen when their premiums were paid us TO
the amount OF their Indebtedness upon said notes and
loans. TO explain: "A, holding a note policy with
payable In advance, was notified 10 pay his cash pre-
mum. with an additional amount Of ~ 20 Tor
interest on notes. This latter sum would indicate,
at seven per cent interest, $50 principal out
standing, and he coEcIuded in consequence that
94O OF the notes had been cancelled by profits
II 10 now shown that small dividend was declared on
note and loun policies and applied BY the company in
reduction of interest 10 dcccive tho policy holders as
10 the amount OF note Indebtedness and 10 mako Tor
the time being conviction IN their minds that what
had been promised 10 ''divdcnds canccllng notes.
wss being realized.
In conclusion, report that on the day tho receiver
was appointed--December H. 1SIG-thcrc were out
standing 543 policies covering s2l 900 OF insur
ancc OF these policies there were 4. 76l on which tho
premiums payable entirely IN cash, and the re-
msinder were on the halt note system The actual
condition OF the company was as foliows:-
Real estate over and above encumbranccs. 2ll
Bonds and mortgages WCoi
STOCKS AND BONDS.
Par Mdrke
Value ra'ue
United States currency SKIES, reg.
United States ten.fortcs, registered ~, 900 el,O0t
United States nve-twcnties regis
~