Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1878-01-18
ANOTHER LIFE BUBBLE.

'cay of the Continental of Netc YO,1s--It
Is Called Gross Irregularities.
Hartford Special, Jan: 49,.
The blow to Hartford insurance interests
occasioned by the downfall of the Charter
Oak Life was supplemented to-day by the
announcement of gross irregularities, to say
the least, In the management of the Cont
mental Life, of this city. There had been
rumors for several weeks past that something
was wrong, and the worst is now revealed
through the report of the special Insurance
commission, appointed by the Legislature
last winter to investigate the affairs of all
State insurance corporations. The COM
mission makes its report to the Legislature,
because doubtful if the ttss IS such as can
be reached by the ordinary legal process war
ranting action by Commissioner Steadman.
The Commission state that in the last annual
statement the Continental Life reported a
capital all paid in and surplus of $325,656.
Examination of it's affairs shows gross
Misrepresentation. Only $4,000 of cap
ital was ever paid in, the remainder being
represented by stockholders notes, the exis-
tence of which has been carefully ignored In
the annual statements. For an item of
$200.00O in United States bonds reported in
the assets, the company had only nominal
title, none whatever for $4,000 in town
bonds, and the $173,516 cash reported in
bank was represented by fictitious deposits.
The ability to make an apparent showing of
such items came through the connivance of
Director, John G. Tracy, WHO is also Presi-
dent of the Farmers g. Mechanics Bank,
where the company deposited, Tracy making
fraudulent entries on the company's pass
book, thereby giving to the company the ap-
pearance of owning cash assets it never
owned. These entries aggregated 1876, 4O8,
and, in recent settlement with the bank,
their genuiness has not even been claimed by
the company.
It is further shown that the company has
purchased 4,670 shares of its own stock, and
vouchers therefor were treated as cash item
in the cash account. Such vouchers, repre-
senting cash expended by the company for
its own stock, were worthless rs assets. The
sum paid was $685. 200, and this, being in
excess of the capital actually paid in, puts
the company iii the condition of having it's
stock wholly unpaid for. The payment Of a
loan of $133,534 to Sharp's Rife Company
and a mortgage of $50, 800 is found contin-
gent upon the success of the Rifle
Company, which is doubtful; yet
the loan has long been carried in the &C
counts as cash item. A large discrepancy
occurs in the valuation Of real estate in and
near Chicago, which came to the company
from Merrill Ladd in trade. In April, i 873,
the Continental loaned $4,000 to Harkin,
Martin & Wheeler, of Chicago, taking a note
with stock of the Utica Cement Company as
collateral. Six months later the firm failed.
The Continental purchased all the stock of
the company. assuming all it's debts, making
the real cost $4,000. Subsequently the
Continental exchanged the cement property
with Ladd for real estate called worth $1a2,
600 and a mortgage back of $4,000, making
the consideration of the property $212, 1000
In July, 1876, Ladd failed, and the cement
property was taken again by the company by
a foreclosure suit at a cost of $3.50, 1888. The
Insurance Commission appraised it at only
$4,000. Various Chicago properties are
overvalued almost doubly, and with real es
tate elsewhere there is a loss by generalization
of $685. 1000, including loss of about $1O,.
600 on loan of S163, 900 on the land of ia
cob and Caroline Forsyth, of Sheffield, about
fifteen miles from Chicago. Other miscel
laneous losses are noted, creating an apparent
impairment of capital of ss148,O00, agains
which the company offers only computation
of recuperative power through lapses, etc., o.
$212,OOO. This would leave small surplus
which, however, would be swept away ane
the capital largely impaired, unless the
Sharp's Rifle Company debt and stockhold
ers' notes are good for their face. The In
surance Commission leaves the settlement O
the problem of solvency to the Legislature
seemingly willing to wash its hands of thil
problem of financial legerdefmain.