The Providence news. (Providence [R.I.]) 1891-1906, 1905-12-22
MUTUAL'S
PROFIT.
And LOSS

New York, Dec. 22.--Stephen M. Smith,
second assistant treasurer OF the Mutual
Life, was called as the first witness be-
fore the insurance investigating commit
tee today. He produced statement OF
the net profits OF the company from the
sale OF securities In the last 10 years, up
10 Sept 30. 1905. This showed a net credit
to the profit aud loss account OF sl2 2S26.-
429 exclusive OF 100000 OF Mercantile
bonds, that were marked off the books in
1903
Charles +. Preller, auditor OF the Mu-
tual testified he received the quarterly
reports OF these profits OF the treasurer
and said it was the custom to credit prof
it's and charge losses on securities TO the
profit and loss account. IL was the GUS
tom 10 reduce the book values OF real es-
tate and charge the reduction TO profit
and loss by instruction OF the president
| or vice prcSicdnt.
The prices OF the net profit were an
nually submitted To the president or vice
president who would instruct what ad-
| justment should be made and what
amounts should be debited to the profit
and loss account by reason OF the reduc-
! ton OF the book value or real estate.
In 1904 there was n net profit from the
/ sale OF securities OF Sl.O36, ,4l0. and at the
end Of the year by adjustment there was
charged of sl0i7,G45. go that when tho
account was closed there was no profit
shown from the sale OF securities, tho
book value OF real estate bolng reduced
80 that all profit was offset. A number
Of the reports OF the net credit to profit
| and loss by the sale OF securities OF other
! years We're Inquired into by Mr.. Hughes.
Supt. Hendricks and Chief Examiner
Isaac Vanderpool OF the insurance de-
partment testified yesterday that they
/ l,.J -. ~
| Mutual Life were greater than reported,
and that the profits had been used to con-
ceal losses This line OF inquiry was
taken today to bring out how this mnnip-
ulation OF figures was carried out
After an analysis of the reports Mr..
Hughes asked:
The net results OF these entries and
transactions was that the profits from the
sale OF securities was used to keep down
the book value OF real estate, wasn't
h?"
"Yes, SIR" Mr. Preller replied
Mr.. Preller was asked to look up the
memoranda OF instruction from the presi-
dent or vice president by which these
transfers were made and was then ex-
cused.
Mr.. Vanderpool. who was on tho stand
yesterday. then resumed his testimony.
He said he had examined the profit and
loss account Of the Mutual Life and was
acquainted with what Mr. Preler had
testified to.
"Why did you not report II to the
superintendentt?" asked Mr.. Hughes
II didn't think Il necessary TO do so.
the witness replied.
"You have examined the report OF
l9o4?"
II have"
"And you observe there IL no profit
from the sale OF ledger assets?"
81 do"
And you knew that was untrue. didn't
your
He finally answered that he did know
II was untrue. He added that the pro-
ceedure OF the Mutual Lfe was a con-
ceament of profits ard losses He said
the same procedure was carried on by
other companies, although the practice
was not general.
He specifically mentioned the New York
Life as one OF the companies which maze
similar reports.
In 1901 Mr.. Vanderpoel said the New
York Life charged of agents balances and
reduced real estate values out or the
profits from the sale OF the stock OF
the New York Security company.
He said he never went back of the
ledsers and 1t was not his custom to ex.
anime The correspondence In connection
with ledger entries TO ascertain IL they
ere correctly entered.
"In looking over the Hanover bank ac-
count. did you find 100000 paid 10 Andrew
Hamilton in 1902" asked Mr. Hughes.
IL did not"
Mr.. vanderpool said that In a report on
the Mutual reserve In 1899, he criticised
the company. The company objected to
these criticisms. and when the report was
published the Objectionable portion had
been eliminated Louis +. Payn was SUI
perintendent OF insurance in 1Ssa Mr. Van
6erpool said the superintendent OF in
surance has the right TO eliminate any
thing from report, but he did not know
OF another case where any OF his reports
had been expunged.
Mr.. Vandcrpool gave way temporarily
to Charles Gretsinger. assistant auditor
OF the Mutual IAfe. who produced the
original Instructions for the figures In the
reduction OF the book value or real es-
tate These were signed by Richard A.
McCurdy. the former president OF the
company.