The sun. [volume] (New York [N.Y.]) 1833-1916, 1911-02-28
BLOW AT SURETY COMPANIES
REPORT or THE BONDING cow.
MISSION or CONGRESS.
II Says the Government isn't Adequately
Protected. as the Companies Have
Paid OnI, 5000 Per Cent of the
Amoun; Ibue and After Litigation.

WAsHINGroN, Feb 81 A strong in
dictment of surety companies is con-
tanned in the report of the bonding com
mission submitted to the Senate and
House of Representatives to-day. Sena-
tor Gallinger of New Hampshire is chair
man Of the committee. Representative
Tawney of Minnesota initiated the in
vestigdtion. The committee recommends
legislation creating a fidelity division in
the Treasury Department AT an annual
expenditure of s25 coo year which shall
hereafter have charge of all matters per-
tanning to the bonding Of Government
officers and employees
According to the commissions report
the complete statistics collected during
the last yeur show positively that the
Government IL not receiving adequate
protection from defalcation and that
premium rates charged by the companies
are unreasonably high
That the Government is inadenuately
protected under the present system is
demonstrated, according to the report.
by the fact that the surety companies
! have not paid losses in full. have not
paid them promptly and have not paid
/ ili'i llltN lldHt BditA
only 38 go per cent Of the amount due the
Government under their legitimate losses
and much OF that has been paid only after
long and vcNa'ious litigation
| This state of AFFAIRS is due" ,h. com
mission reports. TO the companies avoid
ance uf Liability on technical grounds
and 10 the insolvency of companies The
s3 ~ per cent of losses unpaid include a
! large amount abandoned through rel ef
acts of Congress. a fact that iliustra as
ou. of ihe greatest defects OF tn. Dreseu,
system Nnen "a iloes occ,.rs under a
bond Tor which the ;o''cer who paws the
premium l. liable. Dut which ~ due to
The dishonesty of "a subordinate. the officer
- relieved bv Congress. the Government
derives no beue'tt from the premiums paid
IN. company. and TIA. taxpayers of the
country bear the burden of the lo--
he report charges that not only have
IN" surety companies failed To pay loss.,
hut that they have also failed 10 prevent
losses Their systematic watchfllness
winch il supposed 10 exist is not SUD-
ported, tn" commission says. by The facts
he commission sent a letter of inquiry
to IN. chief o. the secret service of the
Treasury. all a~-isian treasurars and the
auditors ot the executive department.
a-KIng u any surety COMPANY had ever
furnished Information which had .v.t
prevented a loss, shortage or d.falCa
tion without single exception every
reply was III the negatlV. Ih. First
Assistant Postmaster General did report
however. that occasional requests from
bonding con'pani". 20 t.. released from
an individual surrey We're frequently
due Ia personal spite and not to mis-.
lcond!ct Of the employee in question
IL also appears. SAYS the report
! that the companies are sometime will.
ing to conceal from the Government
tn" fHct that particular employee Is
an .mbezzler If by So doing he will gre.
:" protect them against k)ss IL tnis
praCtlc" does not constitute compound
ing felony il should he made so bv stat
vi.
ira report goes on 10 attempt to show
that the premium rates charged The
'GoNsrnn-nt employees by the s,,rst
companies for executing their fdelit,
bonds have been unreasonablv high
The rates are shown 10 he EXCESSIVE
the commission says, even by the com.
panies own standards. and they are al
the more so when considered in con
nec'ion with the service rendered Pro
lection which does not protect IL high
az any price
With reference 10 the alleged bondins
trust the report says:
Having secured "A practical monopol,
Of the bonds required by the Govern
, msnt OF its employees. seventeen Of III,
twenty-one companies authorized 10 sgr
bonds running to tn. Government appeal
10 have combined in the latter part o.
1905 for the purpose Of raising rate,
and preventing competition
The report takes shot at former
Secretary Of tn. Interior Garfield fol
proposing TO pay an annual premium
of $4,000 on Indian agents bonds.