The Washington herald., 1913-02-28

Wightman & Dudley shall be known as
managing underwriters Of said first party
and shall have the right to Issue or cause
to be issued all policies of fire insurance
1t is authorized to issue, with power to
fix the lines and amounts of insurance
to be accepted: 90" to appoint or remove
all subordinate, local. or general agents
Of the fire insurance business OF first
party: to fix their rate OF compensation:
that said second parties shall pass upon
or accept or reject all risks offered to the
company; superintend the payment OF
losses; answer and defend in the name OF
first party all processes and issues IN
courts Of law or equity caused or grow
ing out of said fire insurance underwrit-
ing business. and to employ necessary
counsel In connection Herewith"
Continuing. the report says:
From this 1t will be seen that Tut
tie, Wightman & Dudley have the abso-
lutte power of determining what policies
shall issue
IF Tuttle, Wightman & Dudley
thought 1t to their interest to have the
loss paid. 1t must be done. under this
contract, whatever the legal or morale
rights of the company. Also. under this
contract. Tuttle, Wightman & Dudley
may employ counsel and defend, when
the company does not desire to stand
the cost and expense Of litigation. but
this matter is taken out OF their hands
under this contract. The hands of the
company are absolutely tied for the Pc
riod of fifteen years; they could See
their assets being consumed by improvi-
dent underwriting and be helpless to
remedy it
Intercsts Oppose Each Other.
Calling attention to the clause in the
underwriting contract which permits the
companies to step in and pass upon
risks and cancel policies when the fire
losses for any one year exceed 81 per
cent of the net premiums written In any
State. or in any province in Canada, the
report says:
1T will he noticed that this does not
give the insurance company any right
to interfere until the end of the year
and after the losses of that year have
been paid and disclose the fact that they
have amounted 10 more than 80 per
cent"
Concluding the criticism of the under
writing contracts. the report says:
The interests of Tuttle. W-ightman &
Dudley are diametrically opposed to the
interests of the stockholders Of the in
surance company, and they ought not to
be managers of both companies.
I'VE feel that this contract should he
set aside, voluntarily. If possible. legally.
II necessary. The evidence in this case
discloses the fact that at the time Mr..
Tuttle caused this contract to be made
with himself by the officers of the in
surance company. that he mad the vot-
ing power of practically all the stock
of the company. and was absolutely
dominating and controlling its officers.
Under such circumstances no court of
equity would allow such n contract to
stand"
Critfcism Less Severe
Criticism Of the sales contracts is less
severe.
While we deem these contracts unfair
to the stockholders" says the report,
they are not fraught with the same
danger as the underwriting contracts"
The profits to Tuttle. Wightman & Dud-
Icy. Inc. however. are declared to he too
great. Says the report on this point:
Up to the 1st of January. Tuttle.
Wightman & Dudley had drawn from the
subscribed surplus fund Of the CONNER
Cial Fire Insurance Company. sl30. ~. so,
and they had drawn from the subscribed
surplus fund OF the First National Fire
Insurance Company. S::222 "a IS. or total
ot S35i, i,ol9a3. That is too large
Literature is Attacked.
BY far the severest criticism in the Re-
port Is aimed at the promotion literature
OF the companies. On this point. the re-
port says, in part:
THE author Of this literature has
fine knaCk for emphasizing a desirable
fact and ConCealinE an undesirable one.
While he is careful never to lie he is
equally careful not TO tell the truth. II
a damaging one.
''He has positive genius for so shap-
ing a sentence that upon careful analysis
it may he found 10 he true, Yet as seen
hy the casual reader conveys an entirely
different impression II is literally true.
hut rhetOrlcaliy false. Almost every
sentence reveals this cunning art. II
seems to he another confirmation Of the
criticism that language is made to con
ceql and not To reveal thought
Counsel admits that this literature is
somewhat optimistic We are inclined to
think that it is more than that-that It
IS misleading: that it is deliberately de-
signed 10 make, false impressions and
convey wrong ideas. Many of the state
ments can only be justified upon the
grounds Of poetic license. or. more ac-
Curately speaking. promoters license"
Inrhnm Is Exonerated.
In the opinion of the committee many
investors were influenced by the presence
of men high in official life upon the dircc-
torate of the companies. The alleged in
difference of men is arraigned in the re-
port. which says: This practice of pub
lie men thus allowing their names to be
used for exploiting or promotion pur-
poses cannot he too harshly condemned"
According TO the report, these men.
whose names are not mentioned in TINS
connection, have paid but slight atten-
ton to the actual government and man
ag-ment OF the company. They have al
lowed the mana cement of this company
to fall almost wholly under the control
of Tuttlc Wightman & Dudley An.
other statement is: 1T is equally appar-
mitted their good names to he used to
decoy investors eXerted but small effort
to protect and safeguard the interests of
their confidantes"
Superintendent Of Insurance George w
Ingham Is completely exonerated of any
charge Of collusion with the companies
OF his reports on the condition of the
companies. the Commttee finds nothing
in them to criticize Mr. Ingham is
criticized for failing TO keep books of
record concerning certain expenditures in
connection with looking up the record
of the firm of Tuttle, Wightman & Dud-
ley. and which expenditures he was re-
imbursed by the insurance companies
Companie Are Solvent.
The report concludes with a warning to
stockholders not to unload their stock at
a great loss under the Misrepresentation
that the comma oies are Ipsolyapt Tp