The sun., 1910-05-02
UNITED SURETY co. PUT OUT
THE INSURANCE DEPARTMENT
cRITICISES TRLST 40. roo.

hidden the United States Surety Com
pany of Baltimore to 10 business In this
state. alleging impairment of the COM
panys capital and irregularities in the
conduct Of It's business. The depart
neat finds that krnes, J Knahe. Jr.,
of Baltimore and William Knahe of this
city. who until recently controlled the
company, used the company for their
personal ends In financial operations.
and the investigation which brought
theas 20 light also revealed such prac-
tices on the part Of some financial insti-
tufiOns that the Insurance Department
hAa brought them to tho attention of
The Banking Department In the one
specific case affecting banking insti-
tuition made public in the Insurance
Department formal statement Il 10
sst forth that the Metropolitan Trust
Company got 10 ner cent for disoohnting
q note of the Knahes secured by an in
demnity bond given by the surety com
pany.
The Insurance Departments announce
ment Ia A. follows:
The New York Insurance Department
has deciined ~ reissue the license of the
United Surety Company Of Baltimore. a
Maryland corporation. which has been doing
business In New Nork some days ago t
directed such company 10 cease writing
business in this state THIS action is based
upon disclosures a. To ifs condition and the
manaaement II the company by u former
oontrolling interest. which resulted IN an
impairment Of the ssOn .uOO capital ~ the
hV bYF HfHNf fHHn "A fN.4s
oovery Of various irregularities. which In
TIE judgment Of the department made it
unsafe for the company longer 10 do busi-
ness In the state.
II h understood by The dcpartmr that
az . meeting ~ the directors and stock
holders of the company held AZ Baltimore
on Friday last the directors represen'ing
the former controlling ownership resigned
and we're supplantrd hy directors repre-
senting Thomas ~ Bovlr-. "a Baltimore
capitalist. Who has recently acquired g. 80
q the S.OoO shares ~ tins company capital
stock. and that NJ such meetings committee
rspresenting stockholders vas appointed
70 o0nAider all question. as TO the future Of
the company
For some time reOrvership, which
would have been seriously detrimental 20
tho interests of the pohcvhoIderS has been
threatened. hut n b. now thought that that
danger has been aycrted and that their
Interests will be- fully protected. A. re-
cent meeting the capital stock Of the COM
pany vas reduced from ssOO. .ooo 10 $3.50. 40.
- that Il now has capital IN the latter sum
and q surplus Of about SlBnUo It, hnan-
cal condition. ~ thus indicated. was re-
Gently verified by the Msryllnd depart
mens and the American audit Company
AmHnmH HHta Co., s.F Ell
former controlling ownership. vhich was
vested In Messrs. Ernr-r Knabc. Ir.. Of
baltimore. and William knabe of NrN
Nork. we're the retention on deposit In
financial Institutions Of cash LARGELY in
excess 0f the needs of the company and
apparently that the Me~-rs kuane might
borrow from such nnan' ial u~iitui ions FOR
their individual purposes the writing of
honds In excess Of the 20 yer cent limit
required by tho New York law tho making
a. collateral loans 20 friends and associates
81 the controlling Owners on inadequate
securities and the giving by the company
of bonds guaranteeing the payments ~
the prOmissory notes OF the Messrs knabe
4 1agFant case Of tho Kind last mentioned
was the giving last August NJ a bond. Of
which there h no proper 70. ord n the
hooks Of the company aud on vhich no
premium was pad 70 indemnify the Metro
politan Trust Company Of New York On
anOte Of sli5. 90 made bv the Messrz Knale
10 the surety company aud udor--d by
the surety company without authority and
apparently without consideration
For this Transaction fne trust CON pany
Faceived in addition ro ifs legitimate q per
cent. discount bonus payment ut mo
rate of 10 per cent per auuum and appears
10 have made little inquiry sI'Hrr l. 10 rho
validity Of the bond which DO took M as 10
the authority oi fhs ofiosrs oI fhe surety
company 20 indorsn commercial paper OF me
company controlling ovnsr.
The department took the evidence
Of the Messrs. knabe, Of their agent
Walter A. Mason and of Woe Prasid
Beverly Chew Of th. trust company
Il appears that Mason carried on the
negotiations and that he was known o.
the trust company 90 ho Iu the service
of the knabas. lhd trust company on
August 2. 1879. discounted % siN months
note Of the knabes for Sil5.D0O. the note
beng 90 the order ~ the surety com
pany and ind0rzed bv the company
The trust company charged the usual
Q per cent. for the discounting but re-
ceived IN addition a bonus amounting
- 10 per cent. per anuum, m other words
G.TsO. Il was further stated but was
denied by Mr.. Chew that the bonus
payment was made not by check but In
currency. which WAS put into an envelOpe
and laid on the desk Of the vice president
Of the trust company. II appears further
that whereas this 10 per cent. bonus u
admitted. together with the manner
OF its payment, there - some dispute
IN the testimony a. 20 who received 81, $50,
which represents the difference between
the 10 per cent. bonus or commission
credited on the books 0f the trust com
pany and ~ per cent bonus or COM
miaaiOn which the Messrs. knabe paid
The knRbes seem tO have been good
payers Of these bonuses. Tor their tssti-
mOny shows that in something over
year they paid between So. 80 and So no
10 brokers representing them IN such
tFnnsactiOns the greater part Of the money
being turned over o. the hnauioal Iusti-
tutions that lent the money.
A. 10 the bonus that wis given 10 the
trust company 20 Indemnify u against
lnss on the sii5,DD note the president
Of the surety company testified that there
vas no record u the bond in th. bond
books or files Of his company and that
20 premium had been paid for it
Tha Investigation brought out rpla-
tons Of the Knabas and the surety com
pany with three trust companies which
we're carried 90 the attention ut the Bank
ing Department Two of the trust COIN
pnnies are New lurk rumuauIss- the
third h New Jer-sy COMPANY In an
afhsr eaze than that u' tho Matrupuli-
tan Just quoted the trust company held
= sdrsey bond eNeCIfst Iy the surety
company 10 secure individual indebted
Bess Ol The knabs-- Moreover IL Wa de-
vel0ped than In no" uA.'- Of both the
New York companir- large bonuses we're
PAID above the legal interest
Wkfln trsraH a. fIrss Ns.HHIa. AFFsttF.H
Life Insurance. Association aud League
the Insurance BaDarf u4tsuf found that IIa