The Birmingham age-herald., 1905-12-16
SOUTHERN MUTUAL UNDER INSPECTION Secretary McDavid Directs At- torney General to Act PRESIDENT ORR EXPLAINS Deputy Commissioner shorter's Report Makes Grave Charges Against
 Administration of Com
 pany's Affairs.
PRESIDENT ORR EXPLAINS


 the suggestion made by Deputy Commis- sioner Shorter and require the Southern Mutual Aid association of Birmingham tc liquidate it's obligatiop3.
 The report of MT Shorter, based on ar expert examination made by Cleve Huff man, expert accountant in Birmingham has been handed to the attorney genera with instructions to take such steps as are necessary to protect the pollcyholders
 For many weeks there have come tc the secretary of state who is ex-offcio stae insurance commissioner complaints of alleged practices of the Southern Mu- tual Aid association of Birmingham, an in- surance company writing sick and death risks, with accident or disability fea- lures. Among the alleged troubles was a charge that they were sending agents through the state getting up policies up- on which there would be maturity at the end of a ten year period It was held out and discovered by the commissioner that those policies were promises to return to the policyholders all they had paid in at the expiration of ten years less the amount of benefits they had drawn. Quite num- Der of these policies were maturing.
 In his letter to Secretary of State Me-
 Shorter's Report.
 "The sworn statement of the South ern Mutual Aid association of Birming- ham, which is on file In this office dis closes the fact affirmatively that the as- sociation owns absolutely $27, 200 in bonds, a md hot tha fpta should show credit of the interest earn ing capacity of the bonds at the rate of 6 per cent; on the contrary the boks show debit. In other words 1t appears that the company Is paying 8 certain amount of money for the use of the bonds and it necessarily follows that the association should receive the income thereof If the company owns the bonds then some one owes the association the income. If any one other than the company Is entitled to the interest on the bonds then the state ment as filed with this department is pal pably incorrect and misleading Of all the bonds above mentioned only slO00, con sisting of one Alabam bond, is on de- posit with this department to protect the Alabama policyholders.
 "The fact is also disclosed that about
 
 tentine or endowment feature, as a part of the contract are due and unpaid, which fixes liability within itself of about s1sO1 | less the benefits paid. These policies gre falling due, daily increasing the liability 1 of the association at an alarming rate and assuming that these contracts are a liability, the association Is hopelessly in- solvent, even if all the bonds are worth 100 cents on the dollar, and were within | nf rtp
 MT Shorter also reports "an absence of system in bookkeeping and "a sys- tenn of 'kiting drafts with the Virginia department"
 C. P. Orr, president of the company, has written a letter to Secretary McDa- vid of which a portion follows:
 MT. Orr's Reply.
 '1he draft kiting' of the Virginia de- partment is the result of an intense emer- gency. Our business was, and is, being attacked by a Virginia competitor, and a very bitten war has been going on all this summer and there were times when the Virginia department was in need of more funds than the weekly receipts would supply at the time. and the man. ager resorted to the quickest device at his hands to raise the money. by drafts on his head office. We do not uphold this as good practice, but deplore the necessity and explain It. as the result of extraordi- nary circumstances, temporary only and now discontinued.
 MT. Huffman's criticism that we are cancelling certain policies in great mum bers and are probably negligent in col lecting upon same, giving as corroborative evidence probably the case of one com plaining member which came to his no tce, Is one without due knowledge ol the premises We cannot cancel any polio, , 1 npl he har tn or more assessments and the ratio of oul receipts to our debit completely refutes any charge of negligence in collecting.
 Ten-Year PollcyhoIders. "In the matter of our treatment ot our ten year policyholders. I cannot hell but feel that the inspection has showr you that the intention of the manage ment Is to do only what Is right and proper in the premises.
 Now regarding the interest received on our bonds. The Alabama bond is thu only increment left by the former man agement to the good. On January 1, 1904 1t became necessary to make depos of s50O0 with the Florida treasurer, ant on July l. the same year, s10.OvJ with thu Virginia treasurer, as prerequisites tc con tinuing business in these states. Ther' were a large number of ten year policies , in Florida which could have been evadeI prpDaDlN Dy ueCnlllnS to Tlldhe tnis utpoSl had we so desired. To meet these require ments I donated to the association $500 Pensacola bonds, to be acknowledged b, stock certificates whenever the associa ton increased its capitalization from $500 to $5O,O00. as resolutions of the board O directors frequently allude to. All this il , clearly shown on the minute books. Emf nent attorneys have advised us that though we have s5oOo capital stock, yer, different laws exist now than when thu association was incorporated and it Ii doubtful if we can legally increase ou capitalization to $o0ooo. Therefore, l hav' nothing to show for my bonds.
 Recommendation on Bonds.
 Instead and until this stock can be is sued in some way, the association re munerates me for the service the bonds are doing it. In the southern departmen this remuneration is per cent on the fac, of the bonds. In the Virginia departmen it takes the form of stated amounts. Al have gotten from the Virginia de partment Is the coupons from the bonds Some of them I got direct and of then no record has been kept on these book ond some l have gotten through MT Smith. who. in my absence, received then from the parties holding the bonds, whicl | accounts for some of the items whicf seem to worry Mir Huffman. It may bs that we have not made entries to show these matters up as Mir. Huffman de sires them, but the above are the fact. stated in clear manner.
 ''There is nothing in this association that I desire to conceal, but there arc lots of things being said by my compet