New-York tribune., 1905-07-19
RECEIVER SUIT POSSIBLE
NEW EQUITABLE PHASE.
Doubt Cast Upon Legality Of
PoIcyhoLder Directors.


the trustees of the Ryan stock of the Equitable
Life Assurance Society had been qualified simply
as policyholders yesterday raised more pointedly
than the question as TO whether they had
been legally elected. and whether the trustee
scheme itself was in conformity with the charter
Of the society and the State Insurance laws.
That these directors were not legally elected was
the opinion OF a lawyer who has been in touch
with the naturalization movement from the be-
ginning
THE trustees, in following out their course OF
| having these directors elected. were taking a
grave risk" he said. "a risk which might leave
opportunity for suit for receiver for the
Equitable by some stockholder or poIcyholder
who felt that his interests were unguarded II
these directors were not legally qualified there
is no legal governing body for the Equitable;
therefore, no one competent to handle its funds"
The announcement which brought forth these
views was the following statement. issued by
George F. Parker secretary to the trustees:
Messrs. Grover Cleveland, George westing-
mouse and Morgan J. OBrten, trustees of the
majority OF the Equitable stock, announce that
al or the OO2 shares of stock of the Equitable
Lie Assurance Society delivered to them by Mr.
Ihonas +. Ryan have been transferred to their
names as trustees, and that it is represented
py q single certificate held by them. subject to
the trust agreement
From this 1t followed naturally that all the
directors named by the trustees had been quail
ned merely as policyholders. not in accordance
with the provision in the socety's charter,
which says that each director must hold at least
i've shares of stock This was confirmed from
an official source. whence, also. it was learned
that the 6O2 shares of stock were 342 which had
STOOD IN the name of James Hazen Hyde and
LOU which had been apportioned among thirty
Two dummies" Some Of these dummies" have
not yet resigned, and apparently this transfer
or stock will disQualify them AS to this phase
nobody would speak
This naming directors OF men unqualified
oy stock was practically as Illegal as the old
dummy" plan, according to the lawyer who
predicted receivership suits. When amendments
to the charter Of the Equitable had been drawn.
Which would have permitted policyholders TO
De elected directors, Franklin B. Lord, a mi
nor1ty stockholGer. brought suit which was de-
clded IN his favor by Justice Maddox in the
supreme Court in Brooklyn Justice Maddox
also issued an injunction preventing any at
tempt at further amendments looking toward
naturalization. until the argument on the ap-
peal in the Lord suit
Although the State insurance laws permitted
a policyholder to become 4 director. the un-
AMENDED charter Of the Equitable would not
the lawyer said. No amendments to the char
ter were possible because of this injunction. The
charter was itsei: practically part of the State
laws. as it was contract between the State
and the Equitable. under those laws
The trustees. therefore. in naming directors
who not qualified by stock were acting
beyond their powers, and these directors were
not duly qualified. They might become de
facto directors for a certain purpose" but
when the stockholders came to vote. at the next
annual election the question might with pro-
priety be raised to whether the board con-
tanned enough legally constituted directors to
transact business and whether there should not
be a receiver for the Equitable's funds
In opposition to these views it was pointed out
last night that before Mr.. Ryan purchased the
stock he consulted carefully with EIihu Root
who also acting for Mr.. Hyde. and with
Paul D. Cravath, both OF whom approved of the
trusteeship Samuel Unterlnyer, Mr. Hyde's
lawyer. also favored this plan. Mr.. Cleveland.
a shrewd lawyer. and Justice O'Brien at the
head OF the highest court In the State never
would have gone into any proposition as to the
legality Of which there existed the least doubt
il WAS said
The certificate transferring the SOP shares to
the trustees was made out yesterday by william
Alexander. the secretary OF the society At the
next meeting Of the board. July 26. two more
directors viii be named by the trustees. and
probably elected.
Attorney General Mayer was in town yester-
day, preparing his papers in the suits to be
brought against EQuitabe directors for an ac-
counting and to debar them from holding office
IN any insurance company IN this State. He
hopes to have this work finished by Thursday
Friday, but the task is so great that IL may
take much longer.
Mr. Mayer at first refused to discuss the insin-
uations in Superintendent HendrtCks's statement
that the testimony taken by him had leaked"
from the Attorney Generals Office Later he
said that his copy OF the testimony had been
seen only by himself and one member OF his
staG
Il speak for him just as much as for myself
when I say that the leak did not occur in my
deparement," said Mr., Mayer.
His copy not kept under lock and key
he said, but he refused consider the possibility
Of its having been loaned purloined by some
one interested. He is making investigation
determine for his own satisfaction where the
leak was
Paul Morton. chairman OF the board, refused
TO discuss the legal status OF the trustees and
the directors they have named. He also would
not talk about his investigation OF the loan for
S6S5 600 which the Equitable has been carrying
with the Mercantile Trust Company. This Ioan
which has varied in size from time to time. ac-
cording 70 Superintendent Hendricks, has alb
sorbed the attention both Of Superintendent
Hendricks and of Superintendent Ktlburn OF the
State Banking Department
H c. Deming. president of the Mercantile
Trust Company, said that stories that some OF
the shipbuildng suits had been settled with
funds from this loan were false. as were other
stories that the money had been used for secret
services OF various sorts. 1t is said downtown
however, that much Of Superintendent Hen
dricks's work at present is being devoted TO fol-
lowing up the transactions in which this loan
account was concerned, and that his next re-
port would put out material of great interest to
some Of the lawyers and directors.
MISTAKE OVER JAMES M'MAHoN.
To the Editor of The Tribune
Sir: In the sketches of the directors OF the
Eauitable given in The Tribune of July Is the
undersigned has been mistaken for the distin-