Evening star., 1939-04-08
Pendergast Charges
Reported Based Upon
Tip Given Roosevelt
Gov. Sturk Glanced Upon
Gossip in Democratic
PorIeys, Paper Says
Special Dispatch to The Star.

Special Dispatch to The Star.
KANSAS CITY, April 8.-Gov
Lloyd c. Stark personally gave
President Roosevelt the tip that led
to indictment of T. j. Pendergast,
Kansas City Democratic boss, on
charges of evading Federal income
taxes on $315,000, the Kansas City
Star said today.
Pendergast and r. E. OMalley,
former State insurance superinten-
dent dismissed by Gov. Stark, were
indicted yesterday by a Federal
grand jury.
At Washington, Treasury officials
said they received no tip from Gov.
Stark. but that their own agents
had developed the case.
. The Kansas City Star, in special
dispatch from Washington, said:
Even before his election Gin 1856
Gov. Stark learned of the payment
of large sums of money" in connec-
ton with $9.5OO,OOO fire insurance
rate compromise in 1885 and finally
took his case direct to President
Roosevelt"
U. S. Probes Tax Angle.
Meantime, the Government was
investigating alleged evasion of in
come tax payments on $460,000 paid
to the late Charles R. Street of Chi
cago, insurance executive who ne
gotiated settlement of the insurance
rate controversy.
Gov. Stark's tip and the Federal
investigation merged into the grand
jury investigation.
OF the S460,000 paid to Street by
a dozen insurance companies, the
grand jury charged Pendergast re-
ceived s3l5,000 in 1885 and 1886, but
did not report it in his income tax
returns. OMalley, the jury charged,
received $4,000.
The Kansas City Star said Gov.
Stark chanced upon gossip about a
big insurance case pay-off" in DEM
ocratic party parleys in 1896 but at
the time did not suspect that Pen
3ergast was involved. In the COM
promise, policyholders were given 20
per cent of the impounded $4,000 900
premiums, the insurers the rest.
Breaks With Pendergast.
Gov. Stark, elected with Pender-
tgast support, quietly began an in
vestigation, broke with Pendergast
when the latter asked him to re-
appoint O'Malley, and reported his
suspicious to Roosevelt.
The Presidents interest, the Kan
sas City Star said, precipitated CO.
ordinated investigation by the
Treasury Department income tax
agents, Attorney Generals staff and
Federal Bureau of Investigation men
which led to the grand jury indict-
'rnents.
Both Pendergast and OMalley
eaid mo comment" about the
charges. Pendergast was freed on
10000 bond pending a hearing
April "a. O'Malley, who flew home
from Baltimore last night, is to ap-
pear before United States commits
Sioner today.
If convicted, Pendergast and
OMalley would face maximum pen
elites of five years Imprisonment,
10000 fine, or both, on each of two
charges.
Grew Out of Rate Hike.
The Missouri insurance case grew
out of a rate hike by the companies
more than decade ago The in
crease was blocked by the State after
huge collections had been made and
those collections were impounded.
Subsequently there was an agree
nent, with O'Malley acting for the
state, to have the impounded funds
distributed thus: 20 per cent to the
Solicy holders, so per cent to the
companies, 80 per cent to pay for
the costs of litigation and the at
torney fees.
That part of the agreement ap-
proved in Federal Court, involving
the S9,500,000, was carried out. A
similar agreement covering i'm
pounded funds handled through the
State courts, involving a little over
sl,000O00, was halted by Gov. Stark.
He dismissed O'Malley and obtained
court action which resulted in an
order for the money to be returned
100 per cent to the policv holders