The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1905-07-07

amount was exactly three times the
amount received by the next largest |
participant
OF the total profits of 1904, 5O4.39, |
Sl67,741.5O was received by eight indi- !
viduals who were directors in the So
ciety and six of them members of the
executive and finance committees.
In the cases of one purchase of syn
dictate securities the society was guar
anteed to be given the benefit of any
decline in prices during the life of the
syndicate In furtherance of this guar
antee, the society received a rebate of
$4,000, and subsequently sold the Sc
Curities at profit of $71,SS2. The syn
dicate's profit on the transaction was
$11, 93O.55.
In one case in which the syndicate
profit was $3O,21O.SS, the society now
holds the securities purchased, which
at present quotations show loss of
about 100000.
In all other cases the society has
either made a profit or could make
profit by selling the securities at the
present market.
The net result to the society Of the
purchase of these syndicate securities
has been a very considerable profit. If
the society had acquired the securities
by taking allotments in the original
undertakings to which the Hyde syn
dictate was a party, it would have
mare larger profits.
Or if the society's directors who
figured in the syndicate had acted
solely for the society, the societys
profit would have been $167, 741 so great
er than it was.
1t is elementary that a corporation is
a trustee for its stockholders, the funds
and other property held in the name
of the corporation constituting the
trust estate; and where the business
conducted is that of insurance the cor
poration is also a trustee for the
policyhOlders. At least this is so in
the case of mutual insurance or insur-
ance conducted on the mutual plan"
But a corporation must act through
natural persons, and therefore, those
who exercise the corporate powers-the
officers and directors-necessa as
sumo the character of trustees. Now
Messrs. Alexander and Hyde are the
chief executive officers as well as di-
rectors of the Equitable Society. They
are also members of its executive and
finance committees, which have charge
of the investment of the society's funds
With respect to the funds and other
property of the society they are, there
fore, in the highest sense fiduciaries
and are governed by the principles of
the law of trusts, which are not less
strict-in some instances stricter-than
the moral code itself. one of the most
fundamental of these principles is that
a trustee shall not profit at the expense
of the trust estate. Another, closely
connected with that just mentioned, is
that a trustee shall not enter into any
relation with the trust estate in which
his interests and those of the estate
may conflict. as, for example, the re-
lation of buyer and seller.
In his letter to the committee dated
April q, 1905 Mr.. Hyde admits that he
together with Mr. James w. Alexander
and the other omcers named by him
was member of a syndicate, known
as James H. Hyde and Associates"
which, in seven different instances, was
member of underwriting syndicates
which sold the securities underwrtten
to the Equitabue Society at an adj
vance in prices which yielded Mr. Hyde
and his associates, as participants in
the underwriting syndicate, in the ag-
gregate a profit of $155, 444 .9S. These
sales were made almost Immediately
after t allotment to the Hyde syndi-
cate of it's share of the underwritten
securities; in one case only three days
interviewed.
In this course of dealing with a cor
poration which they were serving in
positions of the highest trust and deli
cacy these officials were buddy of a
breach of propriety and a serious breach
of trust which, so far as the principle
of the thing is concerned, is not miti-
gated by the fact that the society has
lost nothing by the transaction, but is
the gamer by reason of the subse-
quent increase in the market value of
the securities which it purchased.
The committee has been advised by
Mr.. Hyde that he has deposited with
the cashier of the society his check for
| SCI, 446 49, the amount of his share of
the profits on the aforementioned
! transactions, with the request that the
/ DAOeAu uSGluG WHtlHtI those pIOHlS
rightly belong to himself or to the So
ciety. The committee recommends that
the board inform Mr.. Hyde that, in its
opinion, those profits were obtained in
! violation of the rights of the society
and that therefore he is indebted to
the society in an amount equal to the
profits in question, and that his check
for that amount will be placed to the
credit of the society.
The committee fLds as fact that
the syndicate operations were conduct
ed as described in Mr.. Hyde's letter OF
April q for the benefit of the persons
and in the proportions, therein named
and that said persons received the res
pective amounts retailed by Mr.. Hyde
and that such of them who were di-
rectors and members of the executive
committee at the time the purchases OF
said securities were authorized, are
likewise indebted to the society II
4, f,,,, To l, f,,kg 90