New-York tribune., 1909-12-09
CENSURE COMPANY
SAY THAT SYNDICATE
JUGGLED FUNDS.
Report by Massachusetts, and
Ne1o York Departments on
Indemnity Company.

AZ
Following quickly on the heels of the
report OF the investigation OF the Phenix
Insurance Company. which resulted in
the Indictment of its former president,
George p. Sheldon. yesterday. comes an
other which criticises severely the con-
duct and management of the American
Credit Indemnity Company of New York.
This company only last week reduced
its capital from s1.000.000 TO s35o.o00.
acting on preliminary report of the in
surance departments of New York and
Massachusetts.
The officers against whom special
structures are made in the summary Of
the report given out at Albany last night
have already withdrawn from the COM
pany. They are Sidney NJ Phelan. for
merly president, and Samuel d. Winter.
formerly treasurer. both of st. Louis
where are the main offices of the COM
pany. although, as the company is or
ganized under the laws of this state.
il maintains nominal headquarters at
No. S02 Broadway.
Mismanagement, misleading reports of
its financial condition. the payment of
excessive dividends and extravaganza are
some of the causes which contributed TO
the impairment of the companys capital,
according TO the Insurance commission
ers' report.
SYNDICATE AT WORK.
Phelan and Winter. it is made plain in
the summary Of the report, which will be
issued i'm full I'm a few days, were not
above making use of their opportunities
as officials of the company for their own
private emolument President Phelan. 1t
is pointed out. for instance. overdrew
more than $500 in 1906 and there were
overdrafts made by other officers. The
existence OF a syndicate" such as used
TO operate in the affairs of the Equitable
Life Assurance Society in the palmy days
before 1905 is also made known.
When the American Credit Indemnity
Company OF Louisiana was taken over
by the New York company Of the same
name in 1902 and 1903, the transaction
was apparently to increase the working
capital of the New York company, but
its purpose seems rather says the re-
will already the property of the latter
company for the benefit of the stock
holders of the Louisiana company In
particular. those most largely interested
in this stock being Messrs. Phelan and
Warner"
This transaction, the details of which
are given in the report. Injured greatly
10 the benefit of those on the inside, and.
in the judgment OF the departments not
at all 10 the New York company; indeed.
To its detriment.
INSURANCE LAW VIOLATED.
The report also points out that such
transaction was I'm direct violation Of
the New York insurance law prohibiting
one insurance company from obtaining
by purchase or otherwise the control OF
another insurance company"
To this exchange of stock transaction
the Insurance departments credit the
troubles Of the company. Whereas three
thousand shares OF the increase of stock
late in 1902 was eagerly taken up by the
public at $3.50 a share, an additional is
sue Of two thousand shares in June.
1903, found few purchasers and re-
maiRed largely in the hands Of the syndi-
cate which promoted it. Since then
there has been steady decline I'm the
value of the stock.
Unfortunately, those who have bought
the stock since that time are the chief
sufferers. and ''for this says the report.
"the departments feel that those who
managed the syndicate transactions are
ter has turned out the company as an
entity suffered is clearly demonstrable.
and for this such syndicate managers
are equally censurable. The history Of
this company is therefore properly de-
tailed by the examiners and their
structures on the conduct OF controlling
officers and directors fully merited."
DIVIDENDS DENOUNCED.
The report calls attention 10 the dec
laration OF excessive dividends. particu-
larly 10 one of 43 per cent in 1902. seem
ingly for the purpose OF establishing in
that-the syndicate year-a fictitious
value for the company's stock" There
was another dividend of Is per cent in
1908. when, according to the examiners, a
dividend should not have been thought
OF at all. coming just after a severe
panic.
Had the syndicate borne the expenses
of it's syndicating operations. as il should
have done. the impairment TO the capital
would have been some $50. 900 less than
it is.
As 10 the improper disbursements
made by the company. the report says
they were Of various kinds-advances to
agents who were earning no commits
sions, advances to agents that the latter
might. for instance, in one case. meet
his obligations 20 the lntra directorate
syndicate and. i'm another. that the
money might be lent 10 the company's
president: also by overdrafts to Presi-
dent Phelan. whose overdrafts in 1906
amounted 10 upward Of 100000: and also.
generally. by extravagant methods of
doing business
CREDIT INSURANCE PROBE.
The practices and operations referred
10, the report states. will probably be
prevented in future. In conclusion the
report, which is signed by William II.
1Io,ohl,s.s G,,periptepdent ~ Ipsuro,,.o