The New York herald., 1922-06-16
UNTERMYER ASSAILS
UNDERWRITING PLAN
Says Insurance Corpora
tions Buy Stocks Backed
by Their Own Heads.
OFFICERS ALWAYS WIN
Can Unload on Their Com
panies, Which Pay for
Any Losses.
GET COMMISSIONS TOO
Henry Evans, Chairman of
Three Boards, Admits Profits
in Sugar Transaction.
GET COMMISSIONS Toe

The manner in which flnanciers
blocks of stock and turning them over
to companies in which they were in
terested was disclosed yesterday at
the resumption of the Lockwood COM
mittee's investigation into insurance
companies.
Virtually in every instance cited the
companies lost money. The under
writers apparently assumed no risk
of loss, since they were able without
difficulty to unload the stock upon the
companies under their control.
Samuel Untermyer.. counsel for the
committee, turned the investigation
toward fire insurance companies in an
effort to support his contention that
the investments of these companies
should be restricted in the same man.
ner as life insurance companies. A
bill, to this effect will be recommended
to the next Legislature.
What we are proposing to show"
said the counsel, els substantially that
these fire insurance companies buy Sc
curities that their own officers under
write in syndicates, .t.at the officers
get underwriting commissions and the
insurance companies get the securities
on which there have been large losses" :"
The inquiry brought one the names
Henry Evans. chairman OF the boards OF
the American Eagle Fire Insurance
Company and the Fidelity Phenix Fire
Insurance Company Of New York: Will
lam Woodward of the Hanover National
Bank; Cornelius N. Bliss. Jr.. Daniel G.
Reid. George w. Dawson, William ].
Matheson and Louis j.. Clarke as being
among the financiers who were shown to
have frequently maie profits from un-
derwriting transactions.
Evans Admits Gains.
Mr.. Evans admitted that his COM
panies sustained a loss Of $220.S69 on
the purchase of a block OF stock of the
Cuba Cane Sugar Company through sub
sequent depreciation while he personally
made a profit Of $,9,S72 from tho
syndicate underwriting In which he was
participant.
Some Of the syridicates in which Mr.
Evans and others took a prominent part
were those organized to sell the stock
OF the p. +. Goodrich Company. the
Pierce-Arrow Company and the Pan
American Petroleum Company. In each
instance Mr.. Untermyer produced fig
ures showing that the stock had de-
creased in value during the period 1t
was held by the companies and con-
siderable losses were entailed. The pre-
ferred stock Of the Cuba Cane Sugar
Company, which was issued at par. Is
now selling around 33, the testimony
showed. and the common stock which
at one time had a market around SO
is now selling at is or IS.
Robert " White OF the firm of j. 4
w. Seligman & Co. testified as to vari-
Gus amounts which prominent financiers
made as profits from the underwriting
of this stock. Cornelius N. Bliss. Jr
took no stock. but received a profit of
$2.663 for underwriting 200 shares OF
preferred Louis L. Clarke received
s14.9ni for $50 shares of preferred. and
Daniel G. Reid netted s5s.617 for the
underwriting of 1900 shares of pre-
ferred and 2,100 shares OF common
Other stock underwriting undertakings
produced similar profits.
The Underwriters Profit.
Mr.. Untermyer produced list of the
directors of the American Eagle Fire
Insurance Company, the Continental Fire
Insurance Company. the Home Insurance
Company and the Fidelity Phoenix Fire
Insurance Company, and Mr.. Dawson,
Mr.. Matheson and Mr.. Reid as directors
in the Continental and Mr.. Bliss and
Mr.. Clarke as directors in the Home
Insurance Company.
The Steel and Tube Company of Amer
ica, according to the testimony Of Jack
son p. Olcott Of Dillon. Reed & Co..
delivered their stock to the Van King
firm at 30. the underwriters got 1t at SO
and the public paid 9s. The stock was
offered to we'll known underwriters. who.
according to the custom, guaranteed
that the syndicate would dispose of 1t.
"If the underwater can sell the stock
to mis- companies he does not have to
take any of 1t at all; he just gets the
profit?' said Mr.. Untermyer.
Eyes, that is right" replied Mr.. Olcott
"You are aware, are you not. that 1t
is considered quite a privilege for a man
20 be on the list OF underwriters?"
"I should say 1t was"
"And II is quite source OF profit
throughout the year to the men who are
on that list. isn't it,"
Eyes"