The New York herald., 1921-06-18
BUFFALO SQUEEZED
BY FIRE INSURANCE
Head of Monopoly Prom
ises Untermyer to Break
Up Unfair Practices.
GRAFT AT EVERY HAND
Lumber and Plaster Dealers
Exposed as Well as Mort
gage Profits.
GRAFT AT EVERY HAND
PROSECUTIONS DEMANDED
Senator Wadsworth and Attor-
ney General Newton Con-
nected With One Concern.

HcCtcu WIN Out COuCcFU.
Special Despatch to THE NEW YorK HERALD.
BUFFALO, June 17.-Less than an
hours examination Of one witness be-
fore the Lockwood legislative COM
mittee here to-day sufficed to show that
Buffalo has been in the grip Of a fire
insurance monopoly as rigid as the
New York Fire Insurance Exchange
was shown to be.
Asa result of the disclosures Sam
uel Unternyer, chief counsel to the
committee. obtained the promise of
Edmund r. Sigison, manager Of the
Buffalo Association of Fire Under
writer's, to make immediate amend
ments to the organizations regula-
tions SO as to put a stop to the objec-
tionable practices.
Mr.. Sigison called a meeting of the
members for Monday morning on the
understanding that these rules were
to be modified along the lines Of the
reforms put into effect by the New
York Exchange.
This accomplishment, together with
exposures of lumber and plaster COM
binations, described as being as vicious
in their effect upon the building in
dustry as anything yet shown, and a
brief incursion into the financial side
Of the situation were the features of
the closing day of the committees work
here.
The inquiry into the last mentioned
phase of the situation brought into the
record the names of Attorney-General
Charles d. Newton and Senator James
w Wadsworth. Jr., both of whom were
shown to be directors of the Frontier
Mortgage Corporation OF Buffalo. Seu-
ator Wadsworth became a director only
two weeks ago while Attorney General
Newton is also general counsel for the
corporation.
Big PROFITS In Second Mortgages.
The Frontier Mortgage Corporation
was organized in May. 1920. as q brok-
erage concern specializing in second
mortgages. and has handled about $50
transactions involving property in and
near this city An affiliated concern,
known as the j. H. Smoot Corporation,
headed by J.. II. Smoot, a former Chi
cago business man, was organized to
market the stock of the Frontier Cor
poration.
Mr.. Untermyer put into the record
copies of two prospectuses issued by the
latter company, one OF which estimated
profits of 80 per cent. through discount
ing second mortgages. The second puts
the profit at only 20 per cent. and Ed
ward Fl. Hunt, secretary of the cor
poration explained that the irst was
misprint although it was shown that
il differed from the other In several
other particulars
Mr.. Untermyer showed through Mr..
Hunt that by discounting a second mort
gage at 20 per cent, and collecting
interest at 6 per cent. on the full face
amount. the borrower was actually
paying something over Il per cent. for
his money. over the period OF three
years, the longest terms dealt in. He
characterized the discount as an out and
out bonus for the loan. and asked Mr..
Hunt II the practice did not mean that
quite q considerable burden was placed
upon building. Mr.. Hunt explained
that the profits so far had been between
10 and 20 per cent, and that second
mortgage risks were not what investors
desired generally.
snug Little Family Affair.
From a local viewpoint the most in
toresting testimony brought out had
to do with the operation of an alleged
plaster monopoly controlled by Menno
A. Reeb, and in which staggering
profits on gypsum we're rolled up by
his various concerns. This was one of
the combinations against which Mr..
Untermyer urged Federal and State
H. Il tuar. -
which he said the committee would
seek through the courts.
Mr.. Reeb and his family own n two
thirds interest in the Niagara Gypsum
Company. They control the Peerless
Purchase Sales Company. the NJ. a.
Reeb Corporation and the Niagara Falls
Builders supply Company.
The books of the various Reeo con-
Germs came into the committees pos-
session only to-day, so that profits
made at the mine and through the ie-
failing agency were not computed. but
an example OF the progressive nature
OF the operation was shown through
tracing one ton OF the mine product.
This was sold at the mine ny the
Niagara Gypsum Company to the Peer
less Purchase Sales Company for $40
aud rebilied TO the NJ. a. Reeb Corpora
ton at $3.50. Then II was sold to the
Niagara Falls Builders Supply COM
psny for sll, and eventually re'aileG
at s1s.
When Mr.. Reeb was called on the
first day OF the hearing here and asked
IL he was willing to waive immunity
he replied emphatically, II should say
notl'
Summing UP the work Of the COM
mlttee here. Mr. Untermyer made
vigorous demand for immediate prose-
cution OF the leaders In the brick. plas-
ter. gypsum. sand, gravel and lumber
combinations.