New-York tribune., 1905-12-19
FLY-BY-NlGHT INSURANCE
ASSETS JUGGLED TO SUIT.
Astounding Revelations as to
Methods of Minor Companies.

Although its probing was confined to minor
companies yesterday. the insurance investigating
committee turned up some most remarkable and
astounding conditions In the Empire Life, for
example. it showed a company with S4,oo0,0o0
insurance outstanding which had only $1,000
in Ne1p-Tork water bonds and local bank
balance of 800 assets. Moreover, the cir
culars of this company, read by Mr.. Hughes,
indicated promises OF surrender values for pol
icies, when. instead Of any fund for this pur-
pose. there was outstanding contested claims
for $4,000. In the face of all this. the only
official the company seemed to possess. Sec
retary, testified that the companys roseate cir
cu!ars 10 the public had never been challenged
by the State Insurance Department
Hardly less striking was the condition OF the
Provident Savings Life Testimony was intro
duced which showed that for several years an
actual deficit. which involved the solvency of
the company had only been avoided by the most
barefaced Juggling with the value of property
owned by the company. To meet the actual
Joss in operation property was steadily marked
up in book value utterly out of proportion to
actual enhancement, and this plan was pursued
for several years.
Conditions in the third company examined,
the Life Association of America, were equally
astounding. practical gift of $4,000 of the
funds of the company to two officials, Henry b.
TownsIey and Eugene Van Schaick, to enable
them to purchase stock of the company and
without other apparent reason was revealed
Moreover, there were many loans on worthless
stock by this company which provoked the
sharpest sort of comment from Mr. Hughes
why do you mention that stock to call the
attention OF the newspapers to it, was the
inquiry of Henry B. Townsley. president Of this
company.
Because I want to show that you loaned
money on worthless collateral the retort
OF Mr. Hughes.
Earlier In the day Mr. Hughes, in one of the
few public comments he has made in the his
tory of the investigation. referred to Mr. Har-
rinnan's explanation OF his reference to eX-
Governor Odells political influence.
You are quite a huJnorist TO assist IN such
a Joke" some one suggested to Mr.. Hughes
IF 1 am" was the dry comment, 'I am an
unconscious humorfst."
The suggestion that Mr.. Hartman will be
recalled to explain his humorous retort to a
serious question has no basis in fact. The COM
Ynittee considers that It has obtained all the in
formation it needs from Mr.. Hartman. SEN
ator Armstrong said last night however, that
the committee would like TO hear from William
H Mcintyre and General Louis Fitzgerald. This
comment grew ont of the report that the former
had attended the recent Hyde dinner. The sub
pnne servers of the committee sought him
there In vain. There are several other witnesses
desired by the committee who have found it
convenient to stay out Of reach.
TIE testimony CT Stacy Wilson, OF the En-
pfre Life Insurance Company, already referred
TO- zas In many ways the most astonishing that
the committee has heard. Mr.. Wilson testified
tAat his company IVES carrying outstanding in
suranoe amounting to 100000 and that he
uas secretary and manager OF the company.
which had no president 1t also had no prop
erty. For assets It had 5000 water bonds
and q small bank account, which was conven-
iently located in the island of Trinidad, in the
West Indies. Its only local bank account in
the Nassau Bank. totaIled 500. This was the
sum total of it's assets. OF liabilities, however
IL had much more generous supply. There are
outstanding death claims of over S5oOOo. It's
annual receipts amounted to SISo1 and It's
expenses TO $4,000
Mr.. Hughes read some of the literature Of
the company IN which mention made Of
q reserve fund guaranteeing insurance. Mr.
Wilson admitted that there reserve
fund had been none at the time the circular
WIS issued, and explained that 1t had been
estimated" 20 per cent mortuary fund was
likewise shown TO be non-existent.
The company had been excluded from most
States New-York, Pennsylvania and West
Virginia were the only ones IN which it did
connection. In 1903 it had a controversy with
the local State department, but this was set
tied as Mr. Wilson explained. by the"depart-
rnent coming around to view" Ex-senator
Charles P McClelland, the Democratic states
man who resided at the Albany House Of
Mirth.'' represented the company in this action
and received 500 for his work. Mr.. McClelland
had fixed the sum as far less After discussing
a number of complaints In policies where set
tIement was refused. Mr.. Hughes closed the ex-
animation by compelling the witness to ac-
knowledge that his company had means Of
settling claims save through the payments that
came on the outstanding policies and through
assessments.
The transactions Of Henry B. Townsley and
Eugene Van Schaick. president and secretary
Of the Life Association of America, occupied Mr..
Hughes for some time This company has orig
jnaIlv been an assessment company. but it was
decided 20 change it to stock company in 1900
Option was given TO the policyholders to take
ont stock but Dir. Townsley personally stepped
in to take up a large block of shares. Not hav-
ing the money ne resorted to a peculiar device
He deposited the stock. which he was purchas-
ing. as collateral for loan Of $4,000 with the
Ganseyoort Bank.
Then TO satisfy the bank, he deposited the
check OF the insurance company for the amount
loaned with the same bank. This however,
failed TO satisfy the New-Jersey Department,
which ordered the loan taken up. To meet this
emergency The directors voted $4,000 TO Towns
lev and Won Schaick for services. Meantime
,ba check OF the company, deposited with the
kank had been drawn, so that the s9o,oUV mao 10
be Endorsed directly back 70 the coinpanE, a91 ~, -
This remarkable transaction was only one OF
ee--araj in which this stock was loaned as col
lateral and Rfr. Hughes scEutinized Mr- I~o"hs- ~
Iez;s checkbook with the nlnutest attenILoIi
-; - -.-.e a SIS 600 loan with q Paterson N J