New-York tribune., 1917-05-03
Substitution of Securities
Charged in Deal That
Ends in Receivership

between Mr.. Phillips, Deputy Attorney
General w. +. Davis, of Pennsylvania,
Assistant District Attorney William
Harman Black and Leroy A. Lincoln,
counsel to the New York Insurance De
partment.
Meantime, in Pittsburgh, Insurance
Commissioner J. Denny ONeil had
taken possession of the compsny's
Office and assets and applied for war
rants charging the diversion of its
funds. Among those accused by him
were Clarence +. Birdseye, who has
practised law in New York for nearly
forty years and has offices at 25
Church Street; Kellogg Birdseye, of
Mount Vernon, his son; George F..
Montgomery, a promoter, of 253 Broad
way. and Robert R. Moore, president
of the Commercial Trust Company, Of
New York.
Explanation by Moore
OF these. Mr. Moore was the only
one who could be found yesterday. His
connection with the matter lay in the
fact that it was with the proceeds of
a note for s120,000 discounted in his
bank that the Brdseyes had obtained
control Of majority of the company's
stock, and were thereby enabled to
secure more than s1,6OO,0OO Of gilt
edged securities from its vault and
dispose Of real estate in this city val
ued at S9,OOO,OOO. They substituted
therefor bonds of n lumber company
OF a par value of s3,1OO,OOO, which
Montgomery is said to have sold Kel-
loeg Birdseye for $1,1O0,00O.
The loan, Mr.. Moore said, was made
in the regular course Of business to
facilitate transaction already COM
pleted. The money, he said, had not
been paid out until the transfer of the
control Of the company had been com
pieted in the presence of an employe
OF the bank.
in with the statement Of the case given
the District Attorney by Superinten-
dent Phillips. According to Mr.. Phil
lips, the elder Birdseye and his asso-
ciates had previously arranged with
the president and directors of the
Pittsburgh Life and Trust Company to
take over stock control of the company
at $50 a share. S25 above the ruling
market price paying down $40 a share.
Tho bulk of the 100000 thus secured
from the Commercial Trust Company
vas devoted to this purpose and, on tho
passage of checks, the old directors re-
signed in favor Of men carried TO Pitts
burgh 10 qualify temporarily by Kel-
logg Birdseye. and others supplied
from among the clerks of Pittsburgh
law firm.
Take Possession Of Assets
According to Mr.. Phillips. the new
directors. all Of whom had given their
designations to the elder Birdseye to
take effect at his pleasure, then elected
officers and took possession of the S24,-
100000 in assets ofBhe company, in
cluding between $4,000 and $500. 900
in Pittsburgh banks, and the Washing
ton Life Building at las Broadway,
this city. These assets were back of
the 100000 insurance the company
has outstanding and its Sl,000,0OO cap
ital stock.
Immediately the new directors. Mr..
Phillips said. voted 10 sell the Wash
ington Life Building TO George A.
Crawford, of New York, for $4,000 600
in bonds Of the Dare Lumber Company,
a New York corporation operating in
the South.
Crawford, who says he knew moth.
ing OF the millions he was handling.
had taken title to the Washington
Life Building and given mort
gage back for the full amount Of the
purchase price, indorsed checks for
Sl,60O,O00 and transferred title TO
large block of the Dare Lumber Com
pany bonds. All this took but few
minutes, and for being a millionaire
this brief period he says Clarence L.
Birdseye paid him $40.
Meantime Frederick A. Wallis. man
ager in New York for the Fidelity Nut
ual Life Insurance Company of Phila-
delphia, who had tentatively agreed TO
become president of the Pittsburgh
Life, was making inquiries as to the
conditions of the company. He was en-
gagged in this task when Superintendent
Phillips. returning to New York from
a business trip in the West. noted the
sale Of the Washington Life Building.
This was on April -. The next dav he
sent for Clarence +. Birdseye. who had
previously told him some new money
was to be put into the Pittsburgh Life.
No New Money in Company
Questioning Birdseye. he found that
not only had no new money been nut
into the company. but that certain gilt
edged securities had been sold and
bonds of the Dare Lumber Company
TO the par value of $4,000, 600 substi-
tuted. These he did not feel were sde-
quately secured. and he began an in
curry which, he said. disclosed that
Montgomery had arranged 10 purchase
the lumber company for 81 100000 and
had sold 100000 OF its bonds 10
Kellogg Birdseye for sl,l0O,OOO. On
the moneys deposited with the Com
mercial Trust Company Montgomery
received a check for 100000.
On this showing. Superintendent
Phillips dispatched Chief Examiner
Hadley 20 Harrisburg TO take up the
case with tha Insurance n.nartrant nf