# UNITED

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3A0e9abb0f07206d61

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

UNITED

SECURITIES

STATES

AND EXCHANGE

WASHINGTON

August

D.C

23

COMMISSION

20549

1991

Cohen Esq
Levy Kroll
Simonds
1050 Connecticut
Avenue N.W
Washington D.C 20036
Gary

Freedman

Re

Dear

Mutual Benefit Fund File No 2-36663
MBL Growth Fund Inc
File No 2-96199
MAP Government
Fund Inc File No 2-78975
The Specialty Managers Trust File No 33-23512
Mutual Benefit Variable Contract
Account-7
File No 286722
Markston Investment
File No 801-15894
Management
Mutual Benefit Financial Service
Company File No
Directed
Services
Inc File No 801-32675

801-8154

Mr Cohen

Enclosed
is our response to your letters of August
1991
and August 23 1991
By incorporating
our answer into the
enclosed photocopies
of your letters we avoid having
to recite
or summarize the facts
involved
In any future
correspondence
our Reference
No IP3-91

on

this

matter please

Sincerely
Heidi Stain
Assistant Chief
Office of Insurance
Products
and Legal Compliance

refer

to

[Pub. Avail.: Aug. 23, 1991]
Our Reference
No IP-3-91
Mutual Benefit Fund
File No 236663
MBL Growth Fund Inc

Inc
File No 278975
The Specialty Managers
Trust
File No 3323512
Mutual Benefit Variable
Contract Account7
File No 286722
Markston Investment

RESPONSE
OF THE OFFICE
INSURANCE PRODUCTS
DIVISION OF INVESTMENT

OF
MANAGEMENT

Management
File No 80115894
Mutual Benefit Financial
Services Company
File No 801-8154
Directed
Inc
Services
File No 801-32675

Based
letters of

upon the facts and representations set forth in your
1991 and August 23 1991 and without
August
necessarily agreeing with your legal analysis we would not
recommend
enforcement
action to the Commission against Mutual
Benefit Fund MBL Growth Fund Inc
MAP Government
Fund Inc
The Specialty Managers Trust Mutual Benefit Variable Contract
Account7 Markston Investment Management
Mutual
Benefit Financial
Service Company
and Directed
Inc
Services
pursuant to Sections
15a
and 15b
of the Investment
Company Act of 1940 if Markston
FISCO and DSI continue to perform under their respective
investment advisory
agreements and principal underwriting
further interestholder
vote
agreements without

Markston

DSI

FISCO

2a

On July 16 1991 the Superior Court of New Jersey entered
an Order appointing
of Insurance
the Conunissioner
of New Jersey
as Rehabilitator
of Mutual Benefit Life Insurance
You
Company
note in your letter that there has been no sale or purchase
of
contracts
in connection
advisory or underwriting
with the
of the Rehabilitator
appointment
Moreover you state that the
of the Rehabilitator
has not resulted
appointment
in
in
change
the managing partners
directors or key management
of
personnel
FISCO or DSI
Your letter dated August 23 1991 states
Markston
that the Superior Court of New Jersey on August
1991 entered

1/

The Division declines
to express an opinion
on whether
facts and circumstances
presented
by your letter would
See Investment
satisfy Rule 2a-6
Company Act Release
No 10809 Aug
note
1979

the

an

Order

Continuing Rehabilitators Appointment
and Granting Other Relief

Continuing

Restraints

that facts or conditions different from
those presented
in your letters might require
different
conclusion
Further this response only expresses the Divisions
action and does not purport to express
position on enforcement
on the questions presented
any legal conclusions
You

should

Michael
Wible
Staff Attorney
August 23 1991

note

LAW OFFICES

FREEDMANLEVyKROLLSIMONDS
WASHINGTON

SQUARE-I050
WASHINGTON
202

CONNECTICUT

AVEN

20036-5366
457-5100

GARY 0.COHEN
202 457-5107

CABLE
ATTORNEYS
TELECOPI ER 202-457-5151

August

BY HAND

1991

1940
1940

Act/2a4
Act/15a4

1940

Act/15b

1940

Act/Rule

2a6

DELIVERY

Mr

Clifford
Kirsch Esq
Assistant Director
Office of Insurance
Products
Legal Compliance
Division of Investment
Management
U.S Securities and Exchange
Commission
450
5th Street N.W
Room 10167 Stop 106
20549
Washington D.C

Re

Mutual Benefit Fund Benefit Fund
File No 8112046 and No 236663
MBL Growth Fund Inc
Growth Fund
File No 8113593 and No 296199
MAP Government
Fund Inc MAP Fund
File No 8113548 and No 278975
The Specialty Managers Trust Managers
Tfust
File No 8115629 and No 3323512
Mutual Benefit Variable Contract Account-7
File No 8113853 and No 286722
Markston
Investment
Management
Markston
File No 80115894
Mutual Benefit Financial Service Company
File No 8018154 and No 815263
Directed
Services Inc
File No 80132675 and No 839104

VCA-7

FISCO

DSI

Dear

Mr Kirsch
We

that

write on behalf

of

the

abovenamed companies

the Commission staff furnish us with

letter

to

stating

request
that

it

FREEDMAN

LEvy

will

SIM0NDS

KROLL

not

recommend

Markston

FISCO and

investment

advisory

agreements

and

Commission take

that

the

DSI

continue

principal

service

underwriting

vote

under

the

highly

further

if

management

including

interestholder

described

circumstances

unusual

and

agreements

distributors and sales agreements without

action

their respective

perform under

to

including

agreements

enforcement

below

Companies

Growth

Benefit

and

management

investment

1940

Act

of
as

the

management

VCA-7

account

of

Mutual

life insurance

states

Markston
which

licensed

to

engage

in the

Columbia

is

general

partnership
by Mutual

Act

Benefit

in New

and

Puerto

51%

Benefit

subsidiaries

of

of

Mutual

Life

in

1845

business

in

Rico

the

Life

Benefit

Jersey

life insurance

Life
as

registered
Mutual

organized

of

whollyowned indirect

Mutual

Act

District

owned

The

under

company

Company

Act

the

Life

the

as

Investment

Benefit

the

are indirectly

are both

company

registered

business trust registered

is

separate

investment

presently

Trust

the

under

management

and

under

companies

company

Company

mutual

are corporations

investment

is

is

Funds

Managers

Insurance

all 50

MAP

interests
FISCO

and

Benefit

in
DSI

Life

FREEDMAN

LEvY

SIM0NDS

KROLL

Markston
under

the

FISCO

Investment

and

DSI

are

Advisers

Act

of

under

the

Securities

Exchange

Act

adviser

for Benefit

and Growth

Funds

broker-dealers

registered

1934

Markston

is investment

FISCO

is

investment

underwriter

for Benefit

investment

VCA-7

and

Growth

and

MAP

Funds

and

VCA-7

with

Markston

and

FISCO

regarding

which

has

agreed

to

Mutual

has

for

the

proper

Benefit

Life

organized

Funds Managers

underwriter

principal

entered

entity the personnel

necessary

Trust

are also

DSI

and

Life

each

and

Fund

Benefit

it

FISCO

registered

MAP

Mutual

to

advisers

for

and

pursuant

the

1940

adviser

inents

by

adviser

investment

office
of

and/or

DSI

is

Trust

service

agree

the
to

and

VCA-7

extent

needed

Funds
the

space

and

each

companys

holds

principal

for Managers

separate

provide

conduct

and

into

of

other

interests

resources
business.1

in each

of

VCA-7

Each entity utilizes the support services of Mutual Benefit
Life to different degrees on
cost reimbursement
basis
In the
case of
as to the fair basis for allocating
cost
disagreement
auditors
such basis shall be fixed by the entitys independent
Any employee of Mutual Benefit Life while performing services for
entity shall report and be responsible
solely to the
any such
Each
officers and directors of the entity utilizing the services
its own officers
and related facilities and has
entity maintains
contractual
sufficient staff and resources to meet its respective
obligations

FREEDMAN

LEvy

SIM0NDs

KR0LL

Rehabilitation

16 1991

On July
Order

Order

the

Insurance

New

of

action

the

books

any nature

directs
Life

of

Mutual

and

to

take

such

removing

the

cause

and

Life

2.2

The

Order

grants

the

all of

the

and

The

Order

business

see

surrenders

to conduct
he

as

conditions

deem

may

that

Mutual

contemplates

have

and

paragraph

paragraph

Benefit

of

deposit

personal

property
The

made

Order

Benefit
toward

appropriate

15

in order to

enable
is

The

declaration

of

insolvency

paragraph

authorize

demutualize

Life

restrains

business

2A11

causes

the business of Mutual

in

not

or

and

of

paragraph

continue

does

certificates

all real

of

control

assets contracts

accounts

steps

and

possession

rehabilitation

paragraph

necessary

to

of

Benefit

Benefit

the Rehabilitator

the Commissioner
Mutual

other funds

or

an

of

bank

records

Jersey entered

Rehabilitator

paragraph

business and

funds securities
of

as

Jersey

appointing

immediate exclusive

Rehabilitator

to

Court of New

Superior

copy enclosed

Rehabilitator

title

the

Order

Order

in

policy

loans

and

Benefit

Life

Mutual

be

deemed

16 emphasis

added

and

control

of

Rehabilitator

to

reorganize

or liquidate

Mutual

to paragraphs

continue

not

the

references

will

are to

transfer
Benefit

paragraphs

of

Life

the

Order

FREEDMAN

LEVY

Order

does not

address

conducts

through

subsidiaries

such

advisers

principal

The
Life

SIMONDS

ROLL

investment

as

serving

investment

The

companies

the businesses

and

Order

does

that

Mutual

the

businesses

of

underwriters

to

as

not

address

Benefit

Funds

the

Trust VCA-7 Markston

FISCO or DSI

or their advisory

underwriting

agreements

the

contemplates

Mutual

Life will continue

Managers

Benefit

business

of

VCA7

nonsecurities
continuation
variable

and

insurance
on

payments

annuities

business

of

15a

and

advisory

and

underwriting

any

agreements

Section

2a

direct

or

3A11
of

the

Act

of

indirect

here

the

Lifes
for

connection

in

the
with

Raised

of

termination

involved

company

Benefit

providing

that

15

Sections

the

by

accounts

separate

paragraph

for their automatic

the investment

from Mutual

it

Questions

that

Order

unaffected

distinguishes

related
of

Indeed

and

Act

the

Act3

require

agreements

provide

in

the

of

so

provides

event

defines

transfer

or

references
herein to sections
and rules thereunder

in

effect

substance

assignment

assignment

hypothecation

and

in

rules

to

include
contract

of

are

Each

to

sections

FREEDMAN

LEVY

ROLL

SIMON

by the

Es

assignor

outstanding

voting

assignor

Rule

2a6

result in

change

of

adviser

The

be

and

further
the

deemed
the

of

hypothecation

FISCO

that

that

Funds Managers

interestholder

actual

causes

arises

question

should

do
be

not

deemed

underwriting

We

believe

also

to

each

and

of

new

do

not

that

an assignment

for purposes

of

of

indirect

an

or

the

Rehabilitator

Markston

FISCO and

transfer

agreements

underwriting

of

VCA-7

management
agreements

of

to

or

or
to

Markston
terminate

so

believe

as

should

be

required

to

solicit

agreements

the

constitute

agreements

an investment

parent

control

does not

of

or management

the appointment

Our

We

that

the

of

whether under all of the circumstances

Trust

approval

transaction

is not

and

the assignors
holder

constitute

to

of

security

b2

advisory

of

change

DSI

control

Life the indirect

Benefit

would

in

provides

arises whether

question

result

by

l5a4 or

for Mutual

DSI

securities

actual

block

controlling

underwriter

or principal

Section

of

of

or

View

an
to

that

of

assignment

cause

even

them

if

the

of

appointment

each

the

Rehabilitator

the

advisory

to

terminate

appointment

of

and

the

FREEDMAN

LEvY

SIM0NDS

KR0LL

Rehabilitator

could

be

of

the

interestholders
vote

on

new

we

including

thereunder

should

interruption

from the

The

the

to

date

the

of

and

Order
the

gives

4See

adoption

of

within

as

the

and

advisory

have

all

of

continued

required

to

underwriting

of

the

parties

in

force

without

Order

that
We

the

request

staff has provided
such

assurance

on

for View

the Rehabilitator
literal terms of

described

Rehabilitator

SEC Release
No
Rule 2a-6

of

be

below

appointment

assignment

The

should

for No Assignment

The
an

the

this regard.4

Basis

Basis

assignment the

an

agreements

formally noted

in

such

companies

obligations

deemed

Commission has

basis set out

that

the

be

noaction assurances

constitute

underwriting

believe

agreements

to

investment

and

advisory

Instead

deemed

in

above

title

IC10809

to

Aug

does
Section

appoints

the

not

2a4
Rehabilitator
assets

and

proposing

the

business

1979

constitute

FREEDMAN

LEvY

of

contracts
not

SIMONDS

KR0LL

Mutual

constitute

agreements

Section

2a

hypothecation

of

Markston
or

Mutual

insurance

law8

and
its

hypothecation

the

advisory

of

Section

an

Benefit

Life

right

by court order7
transfer

by

subsidiaries

as

through

controlling

transfer

or

neither

However

literally transferred

that

holds.6

it

assets

and

The

contracts

to the New

hypothecation

by

Jersey
Mutual

assignors

also contemplates
of

underwriting

2a4

pursuant
or

does

however

and

assignor.5

title to the business

not

2a

appointment

assignment

contractual

any

obtained

or

by

nor Mutual

Life

Section
or

contemplates

Benefit

Life

of

The

literal terms

contract

hypothecated

Benefit

the

FISCO DSI

Rehabilitator
of

assignment

an

within

Life

Benefit

assignment

through

block

the

of

transfer

assignors

the proscriptions
in
contained
5Likewise
against
assignment
Section
intended
15
were
to
make
clear
that
the management
is personal
it cannot
contract
that
be
assigned and that you
cannot turn over the management
of other peoples money to someone
else
Investment
Trusts
and
Investment
on
Companies
Hearing
S.3580
Before
Subcomm of the Senate
Comm on Banking
and
Commerce 76th Cong 3d Sess 1940
statement of David Schenker
Chief Counsel
SEC emphasis added
60n

the

corporations

the
contrary
partnerships

Order directly enjoins
all persons
associations
and all other entities

wherever
located from transferring selling
contracts
or assigning
cancelling
any
nature of Mutual Benefit
paragraph

12

7See

infra note

16

8See

infra note

27

and

accompanying

text

terminating
of

any

LEvY

FREEDMAN

SIMONDS

KROLL

outstanding

Life

mutual

owned

securities

voting

by

life insurance

its

policyholders.9

not

transfer

or

hypothecate

that

they

or

hold

securities

The

of

any

FISCO

of

appointment

constitute

Mutual

an

of

the

that

the

Benefit

continues
literally
the

of

Life

to

did

policies

did not transfer

outstanding

voting

holds

it

Rehabilitator

within

and

block

Benefit

DSI

or

the

assignment

owned

policyholders

block

controlling

Markston

is

controlling

Furthermore

hypothecate

The

Mutual

assignor

company

by

be

the

therefore

literal

terms

does

not

Section

of

2a
In economic
does

not

constitute

Congress
under

the

manner

and

federal

an assignment

the

courts

securities

consistent

The

reality the appointment

with

preamble

economic

to the

apply

unless the

courts

order

to

9Policyholders

dividends
N.J
See 18 Appleman
at

147-8

1945

should

avoid

have

be

the Rehabilitator

by

established

the

that

applied

Act

definitions

in

flexible

reality

definitions

definitions
in

contemplated

have
laws

of

in

context

wooden

and

Section

states

otherwise

requires

The

results

have

unrealistic

that

the

and
receive
right to vote
and
17B18-46
S17B18-l3
West 1985
Insurance Law and Practice
10046 at 98 10059
See also paragraph
of the Order
statutory

Stats Ann

10

FREEDMAN

LEvy

KR0LL

SIM0NDS

such

interpreted
Congress

intended

federal

securities

analytical
when

The
reality

laws
that

should

Commission
in

its

include

to

approach

definitions

also

courts

to

have

to economic

has

exclude

which

under

fashioned

the

flexible

for determining

reality

2a-6

falls within

the definition

The

nevertheless

would

be

underwriting

agreements

concept

of

economic

2a4

by

adopting

that

provides

transaction

assignment under Section

deemed

not

if

result

Section

of

Rule
of

the

recognized

administration

not

intended

that

apply

Rule

does

and

looks

between

distinguish

The

definitional

transaction

to

language

to

in
in

terminate

economic

change

of

2a

advisory

reality
actual

that

control

and
the
or

management

See e.g United Housing Foundation Inc
Forman 431
U.S 837 848 1975 Exchange National Bank of Chicago
Touche
Co 544 F.2d 1126 1138 2d Cir 1976 Intl Bhd of
Ross
Teamsters
Daniel 439 U.S 551 1979
11The

rationale

Commission
follows

in

proposing

Rule

2a6

explained

its

as

2a

The

term assignment is defined in section
of the Act
to include any direct or indirect transfer of
control
ling block of the assignors outstanding
voting securities by
holder
of
the assignor
From time to time an
security
investment adviser or principal underwriter to an investment
company may be involved in certain transactions
particular
of
structure
which
ly modifications
corporate
may be
considered
to involve
direct
indirect
transfer
or
of
block of the investment advisers voting
securi
controlling
would
not
affect
the
actual
ties but which
control
or
of the investment adviser
Absent proposed rule
management
transaction
2a6 such
might be viewed
as
an assignment

continued..
10

FREEDMAN

LEVY

SIM0NDS

KR0LL

Assuming
could

2a4
in

the

appointment

does not

actual

The

the

control

2a6

Rule

appointment

appointment

of

change

in actual

control

On the

contrary

the

the

of

or

assignment

of

in economic

management

defines
the

the

under

Section

FISCO

Markston

or

2a

of

Section

not

resulted

in any

FISCO

or

DSI.13

and

the

board

Rehabilitator

or management

has

of

partners

.continued

of

Rehabilitator

reality--result

scope

Rehabilitator

managing

the

of

appointment

definition

Accordingly

exclude

the

the

in

change

DSI.12

to

within

fall

that

arguendo

Markston

of

Markston

2a

within
the meaning of section
for purposes
of
the investment advisory
contract
nating
automatically
with the investment company
underwriting contract

termi
or

an

such
transaction
would not contain any of the
elements which
considered
to be
Congress would have
trafficking in investment advisory or underwriting contracts
in the actual
control or
Moreover where there is no change
of the investment adviser or principal
underwriter
management
and hence the actual management of the investment company
result of the transaction
the transaction
would not
as
with the Congressional concerns
embodied
appear to conflict
in the Act
SEC Release No IC10809 Aug
1979 propos
of
Rule 2a-6
ing the adoption
emphasis added footnote

Nonetheless
abusive

omitted
it could
be argued that
in control
change
Mutual
Benefit
of
Life solely for purposes
to result in
in
would
not be
deemed
rehabilitation
change
subsidiaries
of
control
or management
of Markston
FISCO and DSI
Mutual Benefit Life that in turn would constitute
an assignment
of the advisory
and underwriting agreements

2Alternatively

or

management

13Cf

of

e.g Templeton

Letter
Jan
remained with

Investment

22

1986
control
same individual
11

at

Ltd

SEC No-Action

of

reorganization

Counsel
all times

FREEDMAN

of

SMoNDs

KR0LL

LEvY

of

directors

persons

as

to-day

control

prior to

continues

to
as

companies

FISCO

the

reside

The
change

of

the

in

present

of

each

the

same

Moreover

the

day-

FISCO

and

DSI

of

such

In

this

personnel
the

Order.4

advised

its

investment

intention

to

change

key

above

the

noted

Moreover

as

that

personnel

any

of

Markston

issuance

no

or

Order

the

of

require

consist

to

management

knows

it

in

Part

made

in

not resulted

in

changes

be

DSI.5

the Rehabilitator

appointment

of

actual

control

in

key

have

personnel

FISCO

operations

DSI

management

Markston

the

and

that

not

of

FISCO

companies

does

continue

DSI

did prior to

regard Markston

Order

of

issuance

the

of

it

and

or

management

also has
of

Mutual

Benefit

Life.6

4The
of the industry
and the Commission staff has
practice
in
to conclude that
transaction
does not result in
change
in
where
there
is
no
change
key
management
personnel
management
Life
of the
United
The Equitable
Assurance
See
Society
Letter
States SEC No-Action
Dec 12 1983 request represented
that the advisory
will continue
to be provided by the
services
staff and in the same manner L.F Rothschild
same professional
SEC No-Action
Letter
Jan 24 1983
Earnings and Liquidity
that
the
and
management
operating
personnel
request represented
Smith Barney
will remain the
Inc SEC NoAction Letter
Feb 161976 request represented that no change
Smith Barneys investment management
in personnel
or policy
of
will
result
department
been

e.g

Inc

Co

same

of Mutual
50f course subsequent changes in the circumstances
to
additional
court
Benefit
Life or its subsidiaries
pursuant
in
actual
orders or otherwise may eventually result in
change
control or management

of

6Recently the Commission did not deem the court appointment
trustee with full power duty and authority to manage and

administer

the

business

affairs

and

assets

of

an

investment

continued..
12

FREEDMAN

The

LEVY

SIMONDS

KR0LL

Order

specifically

authorizes

Benefit

Lifes

current management

conduct

Mutual

Benefit

16

the Rehabilitator

personnel

Lifes business

Indeed

to

keep

paragraph
although

Mutual

21

to

the Board

continued

constitute
transfer
of
and
advisory
underwriting
the meaning
of
Section
William Penn
agreements within
Interest Income Fund
File No 33-39645 Pre-Effective Amendment
No
at
filed on June 14 1991 to Registration
Statement
on
Form N14
Commission files show no shareholder vote in connection
with appointment
of trustee
The Commission has however
stated
in the past that
to
transferring actual control or management
receiver
would
constitute
SEC Release
No IC
an
assignment
11005
Jan
1980 emphasis added adoption of Rule 2a-6 see
also Waddell
Reed SEC No-Action Letter March 12 1976

company

to

2a4

it is unclear
In this context
what the Commission intended
the
term
receiver
The federal Bankruptcy
by
Code for example
envisions
well
as
as
liquidations
reorganizations
being
administered
trustee and not
receiver
by
See e.g 11
U.S.C 105
receivers commonly refer to persons
Indeed
assets
where
consolidating
party is incompetent to properly apply
them See Blacks Law Dictionary 4th ed 1957 The term is less
apt where as here there has been no insolvency and Mutual Benefit
Lifes corporate existence and activities continue in an effort to
it to
its
restore
and reinstate
former condition
of
successful
operation
see paragraph

1978

The New Jersey insurance law applicable here reflects
this
between rehabilitation and insolvency
same distinction
or liquida
tion
Chapter 32 of Title 17B of the New Jersey insurance laws is
entitled
Rehabilitation
and
N.J
Stats Ann
Liquidation
The action
insti
17B32-1 et seq West 1985 and 1991 Suppi.
tuted by the Commissioner of Insurance
is one of rehabilitation
not insolvency
See also
or liquidation
See infra footnote 27
16 of the Order
paragraph
the New
law distinguishes
Jersey insurance
from
receiver
Specifically while the word
receiver
is used
in several
sections
of
the New
generically
its
actual
law
meaning
receiver
liquidator
Jersey
may be
rehabilitator
or conservator
as
the context
N.J
may require
Stats Ann
The
emphasis
added
West 1985
of
rehabilitator therefore is distinguishable
appointment
from the
of
receiver
in
context
other than
appointment
In

addition

rehabilitator

17B321k

rehabilitation
13

FREEDMAN

LEvY

SIM0NDS

KR0LL

Directors

of

to-day
issuance

of

control

or

the

of

Rehabilitator
assets

has

paragraph

Jersey

and

possession
Benefit
as

Mutual

the

although

Life

mutual
Life

comprehensive

supervision

of

the

insurance

law.8

Jersey

Indeed
exercising

the

many

resigned
as

of

Commissioner

Order
control

for

the

did

it

actual

prior

day-

to

the

has
the

of

the same powers

over

of

been

Commissioner

Insurance
that

the

company

always

that

the

business

and

provides

purposes

insurance

Benefit

New

has

Order.7

Mutual

of

Life

continues

management

addition

In

Benefit

Mutual

as

of

rehabilitation

organized

in

New

subject

to

the

Insurance

under

Rehabilitator

were available

to

is

him prior

the
President
of
Mutual
Benefit
7Although
Life Henry
down
from that
he
has
stepped
position
to
be
agreed
consultant
for
employed as
period of up to six months see page
14 of
the Order
Furthermore he was succeeded
by Stephen
Kates resignation was the Senior
Carlotti who
prior to Mr
Executive
Vice
President
14
of
Chief
see page
and
Order
Operations Officer of Mutual Benefit Life since 1989
In addition
Mutual
Benefit Lifes Executive
Vice Presidents
Edward
Bull
Robert
and
Donald
Budwick
and
Senior
Vice
Sondergeld
Presidents
Donald
Hailer Jr and Charles
have
each
McCaig
Benefit Life for
agreed to remain with Mutual
of
period
up to
twelve months
see page 14 of the Order

Kates

8Mutuai Benefit Life has operated
and continues to operate
insurer pursuant to authority granted by the Commissioner of
Insurance
N.J Stats Ann S17B17ll.a and 17B1712.a
West
As
New Jersey insurer Mutual Benefit Life has been and
1985
continues to be required to abide by all applicable provisions of
the
New
which
insurance
is
administered
Jersey
law
by the
Commissioner of Insurance
N.J Stats Ann 17B17-13 and 17lCas

an

West 1985

14

FREEDMAN

to

LEvy

the

SIMONDs

KROLL

issuance

the

Conunissioner

and

temporary

extent

it appeared

restrictions

of

protection

the

or

Mutual

afforded

issuance
to

dispose

hearing
so

of

any

determination

subject

to the

oversight

other

arrangements22
any

real

specific

Life

that
the

been

had

of

things

valuation

consultative

by

permissible

Life

Benefit

reason

investment

of

investment

or

warranted

the

many

and

if

condi

portfolio

to

the

the Commissioner
in

of
of

the

Benefit

Life

it

by

the

operations
of

9N.J

Stats Ann

17B206

West 1985

20N.J

Stats Ann

l7Bl845

West 1985

2N.J

Stats Ann

l7Bl857 1858

22N.J

Stats Ann

S17B1864

23N.J

Stats Ann

17Bl92 West 1985
15

and

West 1985

Order
includ

to

provide

actuarial

1861

of

reinsurance

organization2

investment

the

Insurance

reserves2 and the ability

administrative

after

the policyholders

issuance
of

to

prior

Mutual

acquired

aspects

the

such restrictions.9

require

interest

prior to

reserves

Insurance

of

estate

changes
of

or

Order

reasonable

impose

by Mutual

surplus

Commissioner

of

Benefit

class

capital

or policyholders

Mutual

among

its

Moreover

type

the

of

giving due regard to policyholders

Order had the power

and

to

condition

the

required.2

ing

Life

by

the

addition

that

issuance

power

may be made

financial

Benefit

safety of the public

In

that

the

upon

the

the

had

to the Commissioner

tions generally
content

Prior to

Insurance

of

investments

of

Order

the

of

loss

West 1985

FREEDMAN

LEVY

SMoNDs

KR0LL

data

prevention
services

processing

the

sum

In

constitute

outstanding

Markston

FISCO

2a4

Assuming

Rehabilitator

in

or

could

direct
in

FISCO

DSI

or

Rehabilitator
Section

24N.J

or

DSI

indirect

any

change

the

constituted

in

of

key

the

fall within

of

Rule
the

not

advisory

or

block

of

actual

control

personnel

2a-6 the

of

Section
the

Section

not resulted
and
of

has

not

Markston

appointment

definition

Life

of

under

-- has

the

of

Benefit

terms

assignment

l7Bl843 West 1985
16

did

appointment

2a4

Stats Ann

the

Mutual

reality

management

under

of

literal

an

collection

contract.24

controlling

that

transfer

and

Rehabilitator

securities

within

Accordingly
not

of

-- in economic

or

does

or

arguendo
have

annuity

hypothecation

interests

the appointment

resulted

in

or

or

the

of

appointment

agreements
voting

insurance

any

transfer

underwriting

2a

of

independent

claims

accounting

of

the

assignment

FREEDMAN

LEvY

SIMONDS

KR0LL

Basis

for No

Shareholder

has provided

Congress
flexible manner

in

affect

adversely

Section
accordance
so

far

the

as

its

Section

which

interest

of

effects

can

to

the

the Act

present

eliminate

Indeed

as

such

25See

1b

control

need

shown

assignment

not

the

note

or

enumerated
interest

public

that

management
of

be interpreted
that

the

such

Act

exclude

11
17

transactions

the

and the
adverse

investment

of

security

to

in

and

in

holders

apply where

an

is

to

intended

above the Commission has adopted
to

that

interpreted

are to mitigate

declares

abuses

abuses.25

supra

interpreted

conditions

be

conditions

without the consent

is transferred

defining

the

the national

arise

did not

present

which

Section

assignment

2a6

and purposes

investors

Presumably

eliminate

shall

affect

when

or

shall be

Act

the

eliminate

adversely

the Act

investors

of

that

policy

that

mitigate

interest

feasible

as

companies

so

declares

with

Vote

that

do

Rule
not

FREEDMAN

LEvY

SIM0NDS

KR0LL

that

Assuming
be

deemed
be

abuses

that

The
was

constitute

to

should

the

Act

contracts

investment

company

sometimes

even

The

agreements

provide

the
of

remedies
these

took

the

Congress

appointment

abuses

of

purpose

of

associated
the

contrary

1b

shows

trafficking

the

present

place

without
the

advisory

on

that

in

the

and

changes

the consent
public
and

in

and

security

underwriting

their assignment

eliminate

Congress

advisory

frequent

that

to

not

eliminate

the

Rehabilitator

with

trafficking

appointment

removing

rehabilitation

the

of

the

abuses

and

cause

does
in

not

was

one

of

out

growing

present

any

conditions

was

made

that

of

On

the

for

the

agreements

Rehabilitator

have

made

necessary.27

of the
Securities
and
Commission on
Exchange
of Investment
Policy Implications
Company Growth H.R
2337 89th Cong 2d Sess 150
26Report

Public

No

does

of

termination
adopted

vote

knowledge

requirement
for

interestholder

no

1940 whereby

prior to

managements

could

practices

The
the

to

Section

of

the Rehabilitator

assignment

widespread

without

holders.26

the

history

the

with

of

assignment

intended

is

legislative

concerned

an

because

required

underwriting

the appointment

1966

the

Rep

rehabilitation process was commenced pursuant to Section
Title 17B of the New Jersey insurance
law with the
consent
the Board of Directors
of Mutual
Benefit Life
N.J
Stats Ann
See also paragraphs
and
West 1985
27The

32-6k

of
of

17B326k

continued..
18

FREEDMAN

LEvY

The

Rehabilitator

Jersey who
the

SMoNDs

KR0LL

is

of

of

the

appointment
chase

of

advisory

appointment

of

commission

or

person

there

or

contracts.28

the Rehabilitator
other

is

administration
control.3

pecuniary

to

in

all

27
.continued
of
the Order

commenced
otherwise

on
the
provided

Stats Ann
paragraph

in

has

to

that

any

been

In

no

be

assets

of

by the

the

of

pur

addition

the

finders

fee

individual

or

from

Superior

the

Court of

for

his

possession

partners

or

shareholders.29

Rehabilitator

managing

sale or

bond

into

coming

the

recouped

disadvantage

on his official

with

no

company

could

Jersey with

connection

generated

was appointed

the

In

New

New

of

the proper

also

or

has

not

or

key

directors

the

rehabilitation
was not
process
or
as
insolvency
deficiency
any
New Jersey insurance law
See N.J
and
through
West 1985 See also

Notably

basis
of
for by the

17B32-6a

10 of the Order

28See
Securities
Investment

Part
Exchange

supra
and

E.l.a

See
Commission

of
the
generally
Report
Investment
Trusts
and
1278-13 03
279 76th Cong
on

H.R Doc No
Companies
hereinafter SEC Report to Congress

29Such

existing

at

of
finders
recoupment
the time Section

1b

30N.J Stats Ann
one of the abuses
See generally
adopted

was

1089

gain

the

appointment

change

has

amount

any

responsible

of

The

resulted

1940

underwriting

Insurance

law of

Rehabilitator

companies

New Jersey and

the insurance

of

Life

the Rehabilitator

Moreover

Commissioner

Benefit

Mutual

particularly

investment

under

charged

supervision

the

is

10921093

l7B

fees was
one
was adopted

3215.d

West 1985

the

of

Selfdealing

1b

at
the time Section
existing
SEC Report to Congress at 1029-1031
13631366 and 19181936
19

abuses

Id
was
1086-

FREEDMAN

SIM0NDS

KROLL

LEvY

management

of

personnel

FISCO

Markston

Furthermore the appointment
no secret

to the

spread

its

to

publicity

current

holders

will

if

so

they

continue

unusual
is

included

in

requiring

31See

of

to

disclosing
the

of

the

the

investment
supplement
Interest-

appointment.32

right to

redeem

wide

and

prominent

Each

The

companies

interestholders

existing

to have

statement

agreements

Rehabilitator

further

given

is certainly

their interests

choose.33

underwriting

be

have

investment

appointment

prospectus

proxy

The

the

the

of

television

has distributed

companies
to

and

DSI.31

of the Rehabilitator

interestholders

radio

newspapers

or

would

be

approval

presented

by

still quite

fluid

the

proxy

statement

and

could

proxy material

addition

the

of

new

advisory

and

of

the

problematic

situation

revised

In

seeking

disclosure

the

appointment

disclosure

quickly

become

required

to

outdated

as

the

situation

of

the

appointment

develops
of

the

supra note

32See
file numbers
this letter

for the

investment

companies

supra

page

33The
Order
that
account
specifically
provides
separate
interestholders
continue
to have
the right to redeem
paragraph
Mutual Benefit Life is seeking confirmation that variable
life insurance policyholders
continue to have
right to redeem
The right of redemption with respect to shares of the Funds and the
Trust continues under the federal securities laws

15

20

FREEDMAN

LEVY

SIMONDs

KR0LL

Rehabilitator

as

agreements

that

could

technical

argument

Certainly the
difficult

for

personnel

of

agreements
difficult
negative
the

that

Markston

FISCO

and

themselves

have

not

vote

on new

of

another

requiring

confuse

interestholders

investment

mass

investment
consequences

with

investments

to

investment

programs

same and

the

where
it

would

be

may
of

consequences
vote

the

not

cause

new

advisory

with

FISCO

and

DSI

and

rehabilitation

of

agreements

adverse

cash

that

emphasize

new

for

further

redemption

proceeds

expense

ratios

of

precipitate

not

only

interestholders

the

disposition

21

could

also

immediate

higher

agreements

solicitation

could

consequences

also

which

the

could

process
of the

assignment

solicitation

proxy

include

generate

Markston

technical

but

companies
could

management

approve

companies

approval

redemptions

key

be

interestholders

the

in another

thereby

interestholder

the

agreements

completion

arguably result

the

the

such

will

removed

assuming

underwriting

highly

Finally

grasp

where

agreements

to be

remain

changed
to

is

assignment

where

grasp
DSI

interestholders

Rehabilitator

The

to

existing

interestholders

the

technical

any

the

termination

confuse

of

of

assignment

their

in

may

significance

for

subsequent

result

interestholders

Moreover
and

an

constituting

of

Such

portfolio

dislocation
for

the

of

remaining

FREEDMAN

LEvy

SIMONDS

KR0LL

shareholders

which

publicity
The

Mutual

investment

unfortunately precipitated
companies

redeem

respectfully

highly

technical

contribute

to

be

best

the

in

while

submit

mindful

that

under

interests

of

the
and

thoughtless

received

widespread

run on

the bank.34

their

uncertain

describing

and

underwriting

circumstances

redemptions

the

investment

the

Act

to

obligations

statement

advisory

needless

of

of

proxy

termination

could

agreements

Lifes situation

Benefit

that

here

would

companies

or

not

their

interestholders

In

to

sum

Congress

mitigate

interest

or

intended

eliminate

investors

of

conditions

Rehabilitator

interestholder

vote

should

which

none

of

the

abuses

there

has

been

no

of

presents

be

be

interpreted

adversely

Accordingly

the

appointment

to

even

in

affecting

the

that

the

assuming

constitutes

required

flexibly

an

the

assignment

present

that

the

Act

is

purchase

or

sale

of

no

situation
intended

to

eliminate

Notably

any

advisory

Newark
Star Ledger July
17 1991 at 34 col
that Samuel Fortunato Commissioner of Insurance
of New
recent spate of adverse publicity concerning
Jersey said that
the companys problems in commercial real estate had compounded
its
some
customers
and
run
of
problems
by frightening
fueling
34The

reported

redemptions
22

FREEDMAN

LEvy

SIMONDS

KROLL

or underwriting

agreement

in connection

Rehabilitator

Moreover

the appointment

has generated

that

recouped

fees

or

ment

companies

the

other

commissions
In

be

the Rehabilitator

addition

administration

proper

could

the

of

assets

Finally there has been adequate
of

Rehabilitator

the

solicitation
problematic
could

lead

to

the

given
to

mass

of

unusual

the appointment

of

circumstances

for

Life

Benefit

would

the

invest

responsible

Mutual

disclosure

appointment

highly

is

of

finders

no

from the

interestholders

the

the

regarding

with the appointment

Any

proxy

necessarily

be

presented

and

redemptions

Conclusion

For

the

Commission staff

This
the

letter

We

are

investment
and

should

grant

follows

up several

staff concerning

staff prior to

three

the

this

addressing

the

five

is

the

matter

issuance

companies
of

we

reasons

foregoing

of

this

the

respectfully

conversations
We

23

the

raised

we have

this matter

had with
with

the

of

the

Order

letter

funds

that

noaction relief requested

to

life insurance

mutual

submit

you

because

company

one

separate

offer their shares

account

exclusively

FREoMAN

to

LEvY

SIMONDS

KR0LL

life insurance

This
tives

of

letter
the

separate

company

is

based

note

that

independent

inquiry

could

modify

the

happy

to meet with you to answer

Order

we

involved

companies
We

what

on

accounts

We

questions

me

Diane

Ambler

firm if you

have

any

questions

or wish

Gary

GOC/cjc

Enclosures

cc

Heidi Stain
Michael

Esq
Wible

of

Representatives

call

of

have

the Superior

Please

Order
Six copies

understand

letter

Esq

24

or

to

from representa
not

Court of New

the companies

and

discuss

Richard
discuss

Cohen

conducted

any

Jersey

would

be

this matter

Choi
this

at

this

matter

16 1991
CHAMBERS OF

DGE PAUL

LEVY

DEL TUFO
ROBERT
Attorney General of New Jersey
for Plaintiff
Attorney
R.J Hughes Justice Complex
CN 112
08625
Trenton New Jersey
292-1506

609

SUPERIOR
COURT OF NEW JERSEY
CHANCERY
DIVISION
MERCER COUNTY
GENERAL
PART
EQUITY
DOCKET NO C-91-00109

IN THE MATTER
OF THE
REHABILITATION
OF MUTUAL
BENEFIT LIFE INSURANCE
Mutual Insurance
COMPANY
of
New Jersey
Company

This
Del

Tufo

matter

Commissioner with
Insurance
counsel

Mutual

to

Benefit and
to

the

the

Jersey

New

consent

Esq

of

Mutual
of

it appearing

to
of

the

defendant

Mutual

17B32-6k

and

the

of

17B32-7a

directing

th

an

by
for

Insurance
Mutual

Benefit

for the

court

that

Robert
plaintiff

hereafter
Benefit

Life

by

defendants

and

Moore

for

rehabilitation

of

Swaine

delinquency

against

Court

attorney

Cravath

Commissioner

entry

the

defendant

N.J.S.A 17832-7a

commencement

to

to

opened

Commissioner of

Butler

Samuel

consented

of

hereafter

Company

an order pursuant

been

having

Fortunato

Action

CONSENT
ORDER TO SHOW CAUSE
WITH
TEMPORARY
RESTRAINTS

Genera

Attorney

Samuel

Civil

the

parties

proceedings

by

have
the

Benefit

pursuant

to

N.J.S.A

Order

pursuant

to

N.J.S.A

Commissioner

to

rehabilitate

said

and

defendant

the court

of

the

General

Attorney

to

counsel

and

the

in

court
oral

and

papers

this

for

matter

representations

defendant

for

Order

Consent

and

for

good

shown

cause

IT

IS

on

this

of_JL1L

day

1991

ORDERED

follows

as

consented

Having
Directors

of

in its existing
1991

the

effective
date

same

Rehabilitation

form

and

all subsequent

continue

with

Orders

of

this

his

successors

Mutual
the

in

of

office

Insurance

powers

set

forth

expressed

or

in

shall

Effective

at

Company

in

of

the

terms

of

Insurance
the

this Order

operations
and

the

Court
REHABILITATOR

N.J.S.A

are

Life

authority

of

Insurance

Benefit

Benefit

of.iL/

Life

successor

APPOINTED

to

Pursuant
Commissioner

as

Mutual

the472 noon

the .terms

COMMISSIONER

Fortunato

in

Board

on

Mutual Benefit

time

shall

17B32-6k

operations

at3toclock

consistent

company

all

cease

its

of

resolution

through

N.J.S.A

to

pursuant

REHABILITATION

COMMENCING

ORDER

to

the

considered

having

that

appearing
submitted

is herewith

Rehabilitation
and

further

it

of

hereby

17B32-15a
the

appointed

Company and
this

implied

Order

under

17B32-1 et

-2

State

the

are
with

Samuel
Jersey

and

Rehabilitator

of

of

New

vested
all

the

provisions

in addition
powers
of

and

N.J.S.A

Rehabilitator

The
person
in

to

the

accomplishing

Rehabilitator
to

subject

exercise

shall

serve

the

approval

all

of

pursuant

Compensation

of

Rehabilitator
of

out

paid

Rehabilitator
omissions

in

provided

that

and

without

intent
Deputy

All

of

the

powers

and

to

Order

this

be

to

the

exclusively

assets

have

no
with

such

or

acts

willful

of

of

costs

and

in connection
capacity

New

Jersey

Tort

acts

or

faith

criminal

or

the

court

assets

of

Mutual

to

be

an

thus

the

Deputy

in good

and

and

of

his

and

be

deemed

shall

not

Claims

Act

-3-

be

the

shall be

Rehabilitator

as Deputy

not

provisions

The

against

shall

Jersey

be

brought

funds

New

shall

Rehabilitator

Deputy

lawsuit

any

the

of

the

with

of

State

by

by

out

the

law

incurred

Commissioner

Rehabilitator

the

attorneys fees

the

Deputy

and

negligence

gross

of

The

set

for

undertaken

are

approval
paid

be

to

in

applicable

court

liability

omissions

and

entitled

Benefit

as

Deputy

vested

the

this

duties

his

The

be

shall

Mutual

personal

misconduct

expenses

shall

to

approval

the

him in his representative
subject

and

Rehabilitator

Rehabilitator

authorities

to
and

the

Rehabilitator

the

connection

Rehabilitator

of

pleasure

Rehabilitator

funds

shall

the

the

Order

this

Deputy

subject

the

at

the

Rehabilitator

of

directives

assist

to

other

or

consultant

appoint

may

Rehabilitator

as Deputy

serve

REHABILITATOR

DEPUTY

OF

APPOINTMENT

and

shall

Benefit

employee

of

to

the

subject

N.J.S.A 591-1

et

POSSESSION

take

to

title

the

to

business

action

books

funds

securities

of

nature

any

of

supplies

Mutual

Benefit

funds

and

17B32-l5c

the

filing

hereof

with

the

of

corporate

and

deeds

the

would

be

title

duly

with

imparted
filed

or

by

the

persons

or

entities

behalf

of

those

funds

within

10 days of
over

the
to

with

of

funds
shall

of

of

the

order

and

or

or

an

as

evidence

of

and

Except
notice

all other

of

or

accounting

Rehabilitator
those

case

notice

upon

property

file

the

Benefits

deeds

and

brokers

with

in the

same

of

or

jurisdictions

other

Order

and

the

the

Order turn

-4-

to

this

Court

recorder

assets

Rehabilitator

Pursuant

or

forthwith

this

of

located

this

with

property

Mutual

sale

that

in

and

which

impart

all agents

property

entry

the

bill

of

fixtures

such

of

this

deeds

shall

elsewhere

Benefit
or

of

causes

property

hereafter

are

and

or personal

including

in

of

deposit

furniture

of

hereby

of

recording

Clerk

located

holding

assets

or

recorder

Rehabilitator

Mutual

real

discovered

offices

recorded

indicated

all

jurisdiction

deed

by

provided

or property

the

is

property

otherwise

the

administrative

estate

where

of

control

certificates

and

located

is

assets contracts

Benefit including

wherever

and

and

possession

accounts

be

recorder

as

bank

OF TITLE

granted

hereby

the

may

copy

real

Mutual

of

which

certified

of

all

other

or

is

exclusive

and

records

office

N.J.S.A

immediate

NOTICE

RECORD

Rehabilitator

The
directed

ASSETS

OF

on
of

and

shall

funds

assets

REHABILITATORS
The
conducting

the

such

steps

as

the

toward

appropriate

made

to

business

to

and

protect

insurance

LTD

group

preserve

the

collectively

limited

to

overall

benefit

subject

to

of

to

immediately
begin

taking

deem

conditions

which

have

Commissioner

is

hereby

and

as he

designee

deem

may

existing

appropriate
health

group

insurance

disability

business

including

but

not

separate

subsidiary

for

the

to

this Court

by

to

may

long-term

Benefits

Mutual

approval

and

and

his

valuable

group

assets

transferring

or

steps

the

life insurance

directed

The

necessary

BUSINESS

Benefit

cause

necessary

such

to

Mutual

the

removing

take

of

Rehabilitator

rehabilitation

authorized

is hereby

Rehabilitator

begin

TO CONDUCT

AUTHORITY

creditors

and

policyolders

upon

the

return

date

OF

BANK

ACCOUNTS

of

this

name

the

Order
NAME

CHANGE

The
of

name

any

or assets

of

held

AND

Rehabilitator

Mutual
with

assets

necessary

rpm

for the

bank

any

and

such

proper

INJUNCTION

may

savings

may

to

his

own

funds

or

other

change

Benefits accounts

financial institution
other

WITHDRAWAL

and

withdraw

loan

association

such

funds

or

conduct

rehabilitation

AGAINST

the

CONDUCTING

any

or

other

accounts

institutions
of

take

property

lesser

and

action

BUSINESS

MAKING LEVIES
INTERFERING
WITH REHABILITATION
SUITS AGAINST
DISPOSING
OF ASSETS
AND PURSUING
THE REHABILITATOR
ESTATE AND REINSURERS
All
employees
any

of

nature

Mutual

officers
Benefit

including

but

directors
and
not

all

other

limited

agents

and

or

entities

of

claimants

holders

of

policyholders

to

persons

or

plaintiffs

physicians
and

any

Mutual

Mutual

Deputy

or

other

having

and

enjoined

Benefit

medical

crossclaims

including

any

action

any

agencies

governmental

claims are hereby

of

in

petitioners

hospitals

Benefit

under

beneficiaries

contracts

annuity

against

Mutual

Benefit

claims

of

authorized

and

against

third party

from

restrained

unless

nature

any

counterclaims

any

providers

care

of

or phase

portion

the

by

the

business

Rehabilitator

or

Rehabilitator

action

at

Mutual

against

Commissioner
or

thereof

suit

law

Benefit
and

his

against

the

In

its

equity

in

successors

office

Rehabilitator

prosecuting

other

or

special

in receivership

estate

Deputy

further

or

or

proceeding
against

the

Rehabilitator

as

appointed

pursuant

to

above

paragraph

or

making
or estate

disbursing

or

property

Rehabilitator

executing

levy

any

upon

the

property

Benefit

of Mutual

selling

and

contract

health

bringing maintaining
any

Benefit

or

conducting
so

Mutual

disposing

of

of

nature

any

may direct

transferring wasting

or encumbering
of

in any

Mutual

in writing

or

in

any

manner

Benefit

until

or

otherwise
the

except

further

assets
as

the

of

the

order

court
interfering
or

any

successors

property
duties

and
as

in

assets

office
of

Rehabilitator

Mutual

in his

way

with

the

title

to

the

Benefit or in the discharge

of

his

thereof

possession

pursuant

to

of

or

Commissioner

this

Order

All

persons

or entities

hereby

restrained from

prosecuting

or indirect
of

reinsurer of

any

Mutual

this rehabilitation
or

distribution
reinsurer

of

from

terminating

Benefit

changing

coverage

contract

with

Mutual

Benefit

The

Rehabilitator

any contract
best

or

with

interests

of

reinsurer
the

other

person

whether

premiums
Mutual

Benefit

credit

or

his

set-off

account

premium

on

as

with
any

of

policy contract

or

claim

Mutua

cancelled

is hereby

under

each

extend

or

renew

or

reinsurance

policy

or

of

may

terminate

that

premium

or

is contrary

rescind
to

the

PREMIUMS

broker

finance

premium

company or

insured

responsible

shall

be

obligated

to

or

as

unearned
of

date

be

and

restrained

non-payment

or reinsurers

payment

and

any
for

of

enjoined

to

failing

from

result

the

the

shall

as

than

other

earned

reduced

reason

except

agent

premium

of

payment

be

Rehabilitator

partial

UNPAID

any

to

in rehabilitation

estate

Any

issued

policies

the

by

Rehabilitator

Deputy

of

any

cancelling

or

reinsurer

of

Benefit

reducing

any

CONTRACTS

shall not

reinsured
Mutual

AND

or by

further

Benefit

Mutual

recoverable

proceeding

on

such

with

are

Rehabilitator

against

reinsurance

POLICIES

amounts

the

maintaining or

actions

any

agreements

REINSURANCE
The

than

commencing

for proceeds

or other

or treaties

other

nature

any

direct

any

Benefit

Mutual

of

allowed

Benefit

the

shown

entry

in favor
for

contract bond

-7-

the
or

of

pay

on

of

this

such

unearned

the

for

any

the

unpaid

records

of

Order

No

person

against

portion

of

policy unless

the

contract

that
prior to the

cancelled

of

entry

this

ii the unearned
bond

contract
the

to

The

insured

of

entry
Rehabilitator

person

any part

to

person

such

or policy

Order

shall

also

Mutual

Benefit

shall

due

Mutual

Benefit

to

Mutual

be

refunded

the

any

to

that

or credited

recover

to

pay

any

the

from

such

time

as

insureds
earned

unpaid

shown

to

commission

represents

individual

the

on

was

cancelled

prior

and

group

obligated
at

the

have

premium

All

on

insureds assigns

unearned

an

of

and

premium

right

policy

Order

in fact

was

or

the

or

this

bond

of

premium

records

of

Benefit
POLICY

CONTINUATION

CONTRACT

10 All contracts

of coverage

shall

remain

in full

force

court

except

where

cancelled

similar

Notwithstanding

the

Mutual

Benefits

such

cancellations

are

policy

cancel

policy

according

to

each

above

any

The
where

further

Order

of

this

premium

or

for

normal

of

date

expiration

cancellations

initiated

shall

be

only

prospective

law

by

Rehabilitator

individual

Mutual

policy

allowable

such

Benefit

by

non-payment

the

upon

issued

until

effect
for

policyholders

individual
any

or

reasons

and

CANCELLATIONS

AND

shall

cancellation
or group

and

policy

have

the

is allowable
or

binder

where

to

according

by

each

right

to

law

and

by

TRUST

11 Al trust
are

party

make

to

permitted
until

frozen

hereby

further

of

Rehabilitator

Deputy

transactions

relating

INJUNCTION

wherever

which

such

no
with

this

court

deems

it

to

are

any

rights

to

and

from

interfering in

partnerships

associations

enjoined

and

concealing
disposing

of

restrained

or

assigning

to

any

and

Rehabilitator

to

approve

the

and

all

the

Those

persons

other

wasting

13 All
holders

secured

collateral

holders

priority or preferred

Benefit
from

including

taking

any

or

interests

Benefit and

are

destroying

of

of

Mutual

Benefit

CREDITORS

parties

pledgees

property

or assets

entity
to

action

causes

in any

whatsoever

hereby

disbursing

claiming

steps

the

transferring selling

persons

governmental

of

corporations

other

any

from

possession-

entities

BY SECURED
or

entities

conduct

assets contracts

creditors

persons

restrained

with

all

ACTIONS

other

Mutual

of

property

cancelling

AGAINST

or

certain

all

Rehabilitators

manner

and

court

funds records or other property of any nature
INJUNCTION

trust

the

and

enjoined

with

any

such

is

REHABILITATION

associations

from

terminating

respect

this

Benefit

Mutual

beneficiary

of

any

of

or

WITH

Order

assets

rehabilitation

trustee

is

trust

hereby

the

Benefit

unless

INTERFERING

mariner

title

or

Mutual

advisable

such

any

partnerships

in

that

further

located

interfering

of

AGAINST

12 Until
corporations

agreements

transactions

any

Order

AGREEMENTS

lien

secured
of

Mutual

are

hereby

enjoined

transfer

sell

encumber

attach

dispose

of

or

exercise

property

or assets

of

Mutual

APPOINTMENT

to

or

employ

compensation

of

accountants

actuaries

as

he

such

such

considers

this

conducting
assets

to

and

RESTRAINTS

ON POLICY

on

lapses

cash-outs

payment

of

these

restraints
to

payments

do

beneficiaries

pursuant

to

paid

LOANS

AND

of

out

fix

the

employees

other
and

personnel

expenses

of

Benefit

and

the

funds

and

of

on

or

policy

loans

variable

the

of

policies

under

payment

annuities

10

on

These

values

transfers

funds

and

the

except

as

this

court

however

of

regular

benefit

disability

policy

holders

annuity
or

or group

policy

surrender

kind

beneficiaries

existing

Mutual

any

of

beneficiaries

lending

redemptions

disbursement

policy

policy

on

cash

or

order

further

life group disability

any

SURRENDERS

deposits

group

with

to

Mutual

imposed

options

enjoin

restraints prohibit

connection

be

pension

the

not

health

pension

contracts

and

of

or periodicpayments

lifa insurance

beneficiaries

these

of

herein pending

provided

is

agents clerks

payment

conversions

benefits

any

Rehabilitator
and

compensation

hereby

loans

policy

withdrawal

surrenders

the

assistants

all

shall

15 Restraints are
funds

any

Benefit

of Mutual

Benefit

against

PERSONNEL

employ

possession

taking

proceeding

to

counsel

consultants

of

OTHER

continue

deputies

necessary

and

persons

AND

N.J.S.A 17932-17

to

in or

rights

Benefit

OF DEPUTIES

14 Pursuant
authorized

purported

form

any

or

disbursement

medical

insurance

FA85

Nor

shall

separate

accounts

restraints

shall

in

take

effect

immediately so that

not

actually

this

Order

been

mailed

shall

be

payments

requested

actually

mailed

be

honored

proper

and

in compliance

retain

his

full

voidable

to

be

and

hardship

may

be

at

other

to

the

of

the

date

those

checks

or

payments

however

to

administration
the

The

he

of

of

which

have

been

the

Order

will

are

shall

otherwise

as

The

determines

rehabilitation

imposed

the

otherwise

payments

any

or his deputy

the

restraints

or

of

other

Commissioner

challenge

17B32-25

which

discretion

the

law

relevant

entry
all

of

as

N.J.S.A

to

payments

the

have

will

as

Benefit

obligations

exceptions

paid

or

with

under

may pay

essential

checks

authority

transfers

Rehabilitator

restraints

that

provided

to

prior

the

by Mutual

which

payInents

to

subject
Any

Benefit

Mutual

by

or other

checks

any

estate

this paragraph....

by

Rehabilitator

or

Deputy

Rehabilitator
NOT

16 This
such

insolvency
Property

and

as

DECLARATION
Order

would

1730A-1 et

or

INSOLVENCY

shall

not

be

activate

the

provisions

Insurance

Liability

OF

the

Guaranty

provisions

of

deemed

declaration
of

the

New

of

Jersey

Association

Act N.J.S.A

similar Act

of

any

other

State
CAPTION

17 All further
bear

the

caption

and

FOR

PROCEEDINGS
filed

papers

in

these

proceedings

shall

beentitled

IN THE MATTER
OF THE
REHABILITATION
OF MUTUAL
BENEFIT LIFE INSURANCE
INSURANCE COMPANY

SUPERIOR
COURT OF NEW JERSEY
CHANCERY
DIVISION
MERCER COUNTY
GENERAL
EQUITYART
DOCKET
NO

11

APPLICATION

18
make
he

further

sees

The

FOR

Commissioner

RELIEF

Rehabilitator

or

for such

application

further

and

may

at

time

any

different

relief

as

fit
RETENTION

19 This
purposes

court

20 The
continue

to

from

policies

policies

JURISDICTION

shall

retain

and

POLICY

SALES

Commissioner

write

and

are

OF

to effectuate

necessary

FUTURE

to

FURTHER

after

the

WITH

date

allow

Order

this

Benefits agents

Mutual

individual

of

to

all

REINSURANCE

Benefit

reinsured

100%

enforce

may

Mutual

jurisdiction for

this

the

life

Order

insurance

provided

satisfaction

such

of

the

in

his

Commissioner
RETENTION

21 The

Commissioner

discretion

as

management

personnel

on

approval

this

upon

by

OF MANAGEMENT

may

be

Court

may
to

necessary

take

keep

such

Mutual

rehabilitation

the
the

return

date

steps

Benefits current
staff

of

this

subject

Order

and

to
it

is
CONTINUATION

22 Pending
the

Rehabilitator

provisions
the

Order

of

Mutual

and
to

the

shall

insurance

Show

Cause

OF

INDEMNICATION
date

return

continue
for
were

the

existing

those
the

of

persons

directors

Benefit

12

Order

to

Show

indemnification
who

as

officers

of

the
and

Cause
by-law
date

of

employees

ORDERED

FURTHER
interested

show

J.S.C at the Mercer

Levy

at/%OO a.m
not

shall

parties

the

on

be entered

the

containing

under

with

all

Honorable

the

1991

Paul

New

Jersey

why an Order

Commissioners power

of

other

should

provisions

following

all

the

and

Courthouse Trenon

County

.6Z1y ofd91

Rehabilitator

provided

defendant

before

cause

Continuing
as

the

that

the

and

powers

this Order

and

pursuant

to

Continuing

the

restraints

Approving

transfer

to

act

authority

statute
this

imposed

by

group

business

order

Benefits subsidiary

to Mutual
the

affidavits

Indemnification
Show

Cause

were

shall

Benefit

indemnification
from

years
expenses

arising

position

prior

rehabilitation
Mutual

the

the

the

date

the

l4A3-5

and

Executive

to

receive

Liability

forth

in

the

Order

of

the

date

officers

and

employees

as

period

of

of

be

entitled
exceed

period

not

to

Order

against

all

liabilities

of

the
of

date

their

holding

that

Mutual

with

the

of

Section

the

of

13

Mutual

Policy

and

into

provisions

of

three

such

ordered

provisions

to

any

is

the

Insurance

held

Benefit

incorporating
benefits

or having

to

Mutual

Benefit for

in accordance

Benefits bylaws

fully set

orders

rehabilitation

the

by reason
to

who

directors

by Mutual

as more

following

Persons

during

the

herewith and

submitted
Making

of

31

of

N.J.S.A

Benefits present

including

Company

Reimbursement
shall

not

be

amended

ii Retention

Of

Corporate

policy

Employment

of

positions

indicated

Commissioner

the

and

continued

in such

months

who

at

conditions

has

the

Mr

and

for

period

annual

rate

of

individuals

have

other

Hailer

of

to

up

twelve

12 months

forth

below

each

of

of

up

to

that

which

he

would

have

received

pursuant

the

Mutual

of

Directors

on June

year

of

two

service

service

as

and

an

Board

weeks

with

General
amount

office
base
the

Agent

equal

of

to

bonus

executive

salary
company

but

not

14

be

19

vice

be

up

to

to

be

$400000

exclusively

Subject

to

to

months

to

the

corporate

in monetary

equal

amount

resolution

of

i.e

for

--

1991

president

above

year

or

affiliate

including

fifty-two

52 weeks

any

26 weeks

of

or

or

for each

to exceed

twenty-six

agreed

aforesaid

the

of

and

to

agreed

termination

of

the

six

$500000

paid

sum

of

agrees

have

be

the

the

President

period

to

the

held

President

for

will

occupying

Vice

President

diem basis

on

the

Benefit

have

Bonus

discretion

Vice

officers

persons

who

Executive

as

resigned

Carlotti

period
set

Termination

Executive

Sondergeid

compensated

for

Rehabilitator

directs

Carlotti Senior

employed

employed

.which

Bull Executive Vice President
Hailer Jr Senior Vice President
Vice President
Budwick Executive
Senior
Vice President
McCaig

Mr

The

1991

Kates President

exclusively

respectively

And

at

as he

capacity

consultant

six

be

the

officers

will

20

March

by

Officers

corporate

Mr Kates
as

or terminated

following

Henry
Stephen
Edward
Donald
Robert
Charles
Donald

employed

dated

No. 7022-56-24

Policy

portion

the

of

authorized

base

for

salary

such

the

Sondergeld
otherwise

for

compensation

plan

annual

salary

the

base

Messrs

Carlotti Hailer

value

of

benefits

to

under

the

companys

unfunded

to

percent

an
To

amount

equal

receive

this

must be

conditions

following

incentive

any

for

monetary

entitled

be

to

regard

and

arrangement

compensation

without

individual

which

fifty

termination

and
would

they

deferred

50%

bonus

of

however

satisfied

officer
must continue
The
corporate
with
Mutual
Benefit
at the
employment
Commissioner
for
discretion of the
the
indicated
the
period
following
entry of the proposed Order
The

officer
shall not have
for cause
the
by

corporate

been
terminated
Commissioner and
That
acts

no
or

that

would

refusal
Section
It

the

Court

is

for

of

support

provided

copies

of

this

but

appropriate

FURTHER

ORDERED
to

Benefit

overnight

this

Order

and

Show

Cause

upon

of

mall

Kates

deferred

proofs

apply

to

in

the

Commissioner shall

the

are submitted

the

Cause

may

compensation

service

that

to

of

and

true

it is

conformed

Verified

Complaint

the

plaintiff

shall

be

made

upon

courier

within

two

days

of

the

of

this Order

or

Mutual
entry

it is

FURTHER
to

Show

companys

Henry

application

that

Order

that

unpaid

which

the

justify

earned

affidavits

of

31

been
found
of
the
individual

him pursuant
indemnify
of the by-laws

provided

supporting
by

to

further

$150000

amount

evidence
has
omissions
by

ORDERED

all other

that

service

creditors

15

of

notice

policyholders

subsidiaries

and
of

interested
form of

.the

Notice

be

shall

parties

which

accomplished

is appended

to

by

publishing

this Order

to

newspaper

of

the

date

of

this

Order

general

circulation

in

the

capital

city

of

each

Mutual

Benefit

does

business

well

as

in

the

Wall

The

York

Times The Star-Ledger

The

Times

of

Journal
and

The

New

Courier-Post
FURTHER

or

be

this

heard

on

the

Order

to

Show

accompanying
Attorney

brief

General

and

issues

and

state

that
be

to

any

considered

shall

Cause
this

counsel

person

file

Court

and

for

Mutual

on

who

comments be entertained

for written

objections

in

wishes

the

written
also

serve

Benefit

of

which
Street

Trenton

and

by

brIefs

16

is

this

Court

if

to object

return

date

of

objection

and

same

upon

the

later

than

not

/cJays before the return date of this Order
or

Cause

it is

ORDERED

with

as

in

Show

days

within

once

copy

No

this

objections
requirement

NOTICE
TO ALL POLICYHOLDERS
CREDITORS CLAIMANTS
SUBSIDIARIES
AND ALL
INTERESTED
PARTIES
REGARDING
MUTUAL
BENEFIT LIFE INSURANCE
COMPANY

OmR

On
the
Court
July 16
1991
of
New
Superior
entered
Jersey
Consent Order to Show Cause With Temporary
Restraints
In the Matter
of the Rehabilitation
of Mutual
Benefit
Life
Insurance
Company
Docket No C-91-00l09 against MUTUAL
BENEFIT
LIFE INSURANCE
COMPANY
MUTuAL BENEFIT
mutual
insurance
company having
principal
offices at 520 Broad Street Newark New Jersey
The

Order

to

Show

Cause

principally

provides

follows

as

The

New Jersey
Insurance
Commissioner
is appointed
as
who
is
immediately authorized
to
conduct
the
business of Mutual Benefit
and may appoint
Rehabilitator
Deputy
to perform these duties and functions
imposes temporary restraints
on policy
loans cash surrenders and other specific
of
categories
disbursements
authorizes
reinsurance
pre-arranged
for new
life
insurance business written by Mutual Benefit
authorizes
the

rehabilitator

to

Commissioner
as Rehabilitator
to
commence
measures subject
further court approval on the return date
to preserve the valuable
Benefit
group business of Mutual
but not limited tO the
including
transfer
of such
business
and
asset
reserves
to
corresponding
for the overall
separate subsidiary
benefit
of Mutual
creditors
and policyholders
continues
the indemnification
under
provisions
the
for officers
company
by-laws
directors
and
of
employees
Mutual
Benefit
the
pending
return
date
and imposes additional
interim relief to advance
the rehabilitation
process all as more
set
forth
in
particularly
the Order to Show Cause
The
Honorable
Paul
J.S.C has established
Levy
return date
at the Mercer
County Courthouse Trenton New
Jersey
at 900 a.m on the
1991
time the
day of
at which
defendant
and all other interested
parties shall show cause why an
Order should not be entered containing
the following
provisions

Rehabilitator
the Order to

Show

Cause

Continuing
Show

the

Continuing
with all of

Commissioners

and

Approving

Making

retention
senior

in

the

management
of

rehabilitation

as

to

act

and authority provided
powers
to
pursuant
statute

the

restraints

Cause

Benefits subsidiary
the State and

power

the

transfer
set forth

imposed

of the group
in supporting

by

the

as
under

Order to

business
to Mutual
affidavits
filed by

the following
orders to assure
the continued
discretion
of
the
of
certain
Rehabilitator
of
Mutual
Benefit
to
assist
in the
orderly

Mutual

Benefit

under

the

Rehabilitators

and to
obtain
rehabilitation proceedings

direction

the

consent

of

the

Board

to

the

retention of certain
Approving the
who
will remain employed with the
at
the
company
discretion
of the Rehabilitator
for up to twelve
months and who
will receive
certain
cÆmpensation and other benefits
as specified
in
June
prior
19 1991 resolution of- the Board
This
be
compensation will
that
the
due provided
officers
are
not
terminated
or cause and there is no evidence of conduct
that would
them from indemnification
disqualify
officers

Granting indemnification during the
rehabilitation
all liabilities
and
period
against
for
expenses
period of three years to the directors officers
and employees
at
Mutual Benefit arising by reason of those persons holding
or having
held any such position
that
Mutual
is ordered
prior to the date
into
rehabilitation
in
manner
consistent
with the
Mutuals
existing by-laws and consistent with N.J.S.A.14A3-5
POLICYHOLDERS
SUBSIDIARIES
CREDITORS
CLAIMANTS
AND OTHER
INTERESTED
PARTIES
who wish to object or be heard on the
issues to be considered
on the return date of the Order to Show
Cause
shall within
of the Order to Show
days from the date
Cause
file
written
objection and accompanying
brief with this
Court and also serve
same upon
Sharon
Ha1lnn Deputy
Attorney General
Richard
Justice
Hughes
Complex 01 117
Trenton New Jersey 08625 and
counsel
for defendant Samuel
Butler
cravath Swaine and Moore
Worldwide
Plaza 825
Eighth Avenue New Jersey 10019
No objections or comments
will be
entertained
by the Court if this requirement
for written objections
and briefs is not met

Esq

LAW

OFFICES

FREEDMAN LEvY KROLL SIM0NDs
WASHINGTON

SQUARE-

050 CONNECTICuT

WASHINGTON
202

AVEN

D.C.20036-5366
457-5100

GARY
COHEN
202457-5107

CABLE ATTORNEYS
TELECOPI ER 202-457-5151

August

23

1991

1940
1940
1940
1940

BY

HAND

Act/2a
Act/15a
Act/.5b
Act/Rule

2a-6

DELIVERY

Clifford
Kirsch Esq
Assistant Director
Office of Insurance
Products
Legal Compliance
Division
of Investment
Management
tJ.S
Securities and Exchange
Commission
450
5th Street N.W
Room 10167
Stop 10-6
D.C
20549
Washington

Re

Mutual Benefit Fund Benefit
Fund
File No 8112046 and No 236663
MBL Growth Fund Inc
Growth Fund
File No 8113593 and No 296199
MAP Government Fund Inc
MAP Fund
File No 8113548 and No 278975
The Specialty Managers Trust Managers
Trust
File No 8115629 and No 3323512
Mutual Benefit Variable Contract Account-7
File No 8113853 and No 286722
Markston Investment
Management
Markston
File No 80115894
Mutual Benefit Financial Service Company
File No 8018154 and No 815263
Directed
Services Inc
File No 80132675
and No 839104

VCA-7

FISCO

DSI

Dear

Mr Kirsch
We

are writing
to supplement
our letter to you dated August
to reflect
certain developments
since the appointment
of
Rehabilitator
for The Mutual
Benefit
Life
Insurance
Company
Mutual Benefit Life and to make certain additional points Our
letter requested on behalf of the abovenamed
companies that the
Commission staff furnish us with
letter stating that it will not
recommend
that the Commission take enforcement
action if Markston

1991

FREEDMAN

LEvy

KRQLL

SMoNDs

FISCO and DSI continue to perform under their respective
investment
and management
agreements including service
agreements
advisory
and principal underwriting agreements including distributors and
sales agreements without
further interestholder
vote under the
unusual
circumstances
described
in
our letter
We
are
highly
to conversations
with you and
supplementing
our letter pursuant
your staff
The Superior Court of New Jersey on August
1991 entered
Order
Rehabilitators
Continuing
Appointment
Continuing
Other
Relief
Restraints and Granting
the New Order
copy
of the New
Order permits payment
from
enclosed
Paragraph
and
withdrawal
invested
in
variable
life
insurance
of
funds
policies as well as variable annuities that have been maintained
and
other assets
and
liabilities
of
separately
apart from the
Mutual Benefit Life
The New Order therefore confirms the fact
as
noted
in
footnote
33
of
our
variable
life
that
letter
insurance policyholders
continue to have the right to redeem
an

2c

There
have
been
certain
in the
officers
of
Mutual
changes
Benefit Life as set out in footnote
17 of our letter
since we
submitted our letter
Mr Carlotti has resigned as President and
Chief Executive
to
Officer but continues to serve as consultant
Mutual Benefit Life
Mr Haller has resigned as Executive Vice
President but continues to perform the duties of such office in
the capacity
of consultant
to Mutual Benefit Life
Mr McCaig was
referred
to
in
the
Order
Executive
Vice
as
incorrectly
original
President
Mr McCaig has resigned as Senior Vice President and
Senior Administrative
Officer
Consistent with paragraph
of the
New Order Mutual Benefit Life has contracted
to sell what the New
Order refers to as its Group Business
Mr Bull who is in
of
the
is
to
become
associated with
Business
charge
Group
expected
the buyer upon consummation
of the sale
Our letter in footnote
15 states that subsequent changes in
circumstances
Benefit
Life
its
of
Mutual
or
subsidiaries
to
additional
action
court
or
pursuant
otherwise may eventually
result in
in actual
control
or management
We hereby
change
delete this footnote
from our letter
We understand
that any noaction
letter
issued
with
staff will state consistent
by the
traditional
staff
is
that
the
no-action
practice
position
conditioned
in our letter
on
facts and circumstances
as stated
As the staff is aware the rehabilitation of Mutual Benefit Life
is
and different
facts
and
circumstances
continuing
process
would
need
to be analyzed
to determine whether
they result in
noaction
in
actual
control
or
to
which
the
change
management
not
position may
apply
the

FREEDMAN

LEvY

SMONDS

KR0LL

in
we
submit that
the
staffs no-action
letter
with Siebel
Inc
dated
Capital Management
1991 further supports the textual statement accompanying
July
Our rationale is as follows
footnote
16 of our letter
First
the investment adviser SCMI had filed for Chapter 11 bankruptcy
in August 1990 as debtor
in possession
There is no recognition
in
in the
letter or staff noaction letter of
change
incoming
control
issue triggered
courts assumption of
by the bankruptcy
fact
could
have
the
adviser
or
that
the
over
jurisdiction
caused
of
the
investment
advisory
an
assignment
effectively
in October
1990 SCMIs principal investment
agreements
Second
and
SCMI
made representations that the
abruptly
resigned
manager
caused by the Chapter 11 filing made
instability of its operations
it
of
another
investment
see the
incapable
providing
manager
Still there is no indication that this further
incoming letter
in control
fact could have constituted
or an assignment
change
no-action
Finally the staff took
position with regard to SCMIs
entering into subinvestment advisory agreements pursuant to Rule
15a4 based on an analysis that there was no termination of the
SCMI agreements see SEC noaction letter

Finally

SCMI

connection

Consistent with the last paragraph
that you are informing the
we understand
Counsel of our letter

Please
firm if you

call me Diane
have any question

Ambler
or wish
Ver

Gary
GOC/cjc

Enclosures
New Order
Six copies

cc

of

letter

Heidi Stam Esq
Michael
Wible

Esq

on

page

or Richard
to discuss

trul

23

of

our

Divisions Office

ours

Cohen

letter
of

Chief

Choi at this
this matter

iLIi11

i34

THLI

EFIT

tiI_ITLIiL

-L-L2

P.03

LIF-E

t57

Si

P.3/i2

FILED
U6.7

ROBERT

DEL TUFO
of
General

Attorney
R.3 Hughes
CN 117

609

New

Jersey
Complex

Justice

New

Trenton

ftI

Jersey

0862

292-1506
for Plaintiff

Attorney

COLE SCHOTZ

BERNSTEIN

MEISEL
FORNAN
Professional
Corporation
25 Main Street
New Jersey 07602-0800
Hackensack

201

4893000

Special

Counsel

for Plaintiff

SUPERIOR COURT OF NEW JJRSEY
CHANCERY
DIVISION
MERCER COUNTY
GENERAL
PART
EQUITY
DOCXET NO
C-91-00109

IN THE MATTER OF THE
RHABXLITATION
OF MUTUAL

BENEFIT

COMPANY
Company

Civil

LIFE INSURANCE
Mutual
Insurance
of New Jersey

This

matter having

ORDER COt4TINUINGREXABILZTATORS
APPOINTMENT
RESTRAINr8

cozxux
ora REz.xP

GR.ANTXNG

been

opened
New

to

Tufo

Attorney

General

of

Assistant

Attorney

General

appearing

Samuel

Fortunto

Commissioner

Del

and

Michael

Cole

Meisel

the

attorney

of

Insurance

Schotz

Berngein

appearing

Court

the

return

date

of

Consent

to

Show

Cause

with

Teznporary

this

for

Dauber
plaintiff

Comnisaion.r or
Meisal

F0rian

Counsel

to

the

Courts July

16

199

Restraints

July

Special

on

Robert

by

Edward

Jersey

Rehabi..itator
Order

Action

16

iUG131
UG

TI-lU

tltJTI_1i-L

Court

having

er and

the

Life

Insurance

ested

parties

aining

the

cause

show

authority

to

Rehabilitator

provided

under

act

the

restraints

making

orders

the

set

Court

for

clarification

filed

iT

the

3uly

Order
the

Request

for

and

Response

to

idert

and

of

certain

retentiort

of

uubjecc

to

and

notice

by

16

Order

and

July

comments

and

requests

and

the

Corttmis

parties

Order

as

Court

bonuses

objections

interested

by

.6

to

pursuant
the

Business

ii the

and

duties

Order

16

the

termination

Report

Modifications
been

in

given

considered

having

Status

and

and

stetute

to

iuly

to

cont

indemnification

employees

forth

been

having

the

having

the

entl3red

powers

pursuant

by

the

officers

the

inter

Commissioners

the

Benefits Group

Mutual

and

officers

conditions

with

end

imposed

regarding

corporate

sioners

all

Commissioners submissions

in

publication

of

with

Mutual

all

and

not be

continuing

Order

16

July

transfer

tified

directors

as
the

the

continuing

ose

e1

defendant

Benefit

should

Order

an

why

provisions

certain

LIFE

that

di.rected

Mutual

Company

following

approving

BEPIEFIT

158

91

Benefit

15 .4E

Continuing
and

Objections

Restraints
cause

good

shown
on this

7ddy of Xugu 1991

ORDERED
The
with

all the

pursuant

ourt

to

Commissioners authority

powers
statute

and

duttee

stal1

provided

continue

to

under

until

act
the

as

Rehabilitator

July

Order

and

of

his

further

Order

UG

THU

II

IJ

L_

iS

F.5i

The

10

paragraphs
continued

Court

16

July

on

an

ll 13

the

The

restraints

loans

policy

loans

insurance
to

pay

shall

policies

The

in

as

15 which

allows

on

coperate

COLI

issued

this

used

are

due

become

the

restraints
loans

policy

to

life

orm

FASS

ofl

life

they

owned

on

of

are

automatic

to

policy form FA85 shall be deemed
loans

order

15

loans

stich

to

exception

paragraph

further

benefit

Mutual

prexniums

restraints

in

modified

apply

where

such

paragraph

not

under

renewal

all

and

terms are

following

policy

15

and

rtraint5

certain

basis pending

interlocutory

that

except

contained

order

in

under

refar to
insurance
or

its

successors
The

to

exception

paragraph

3.5

which

separate

accounts

in

annuities
allowing

shall

restraints

In

allows

Upayant

on

with

connection

be

deeaed

in

variable

life

those

variable

insurance

maintained

enefits

Mutual

other

to

of fUnds

annuities

and

which

have

apart

from

policies

separately

variable
refer

to

payment from and withdrawal

invested

been

the

and

assets

and

liabilities
The

Rehabilitator

is

authorized

continua

LJG11 THU
PU

for the

with

concerns

method

for

lieu of

more

formal

restrict

the

release
is

confidentiality

resolve

discovery

with

Sale

is

August

19

1991 which

interest

to

the

u1y 16 Order

briefs which viii

$80

Responses

the
on

Cause
be

Any

first Answer

Clerk

of

the

Superior

behalf

of

any

corporation

in the Superior Court of Naw

Jersey

attorney but motions
under
The

party

for

3eraay

fl42V

Cause

from

will

provide

and

paries

to respond

to

certifications

and

requiring

Court

in

the

elig.ble

should

appearances

the

by

Show

seeking

file responsive

action

entertai.ncd

approvcd

policyholders creditors

shall

deemed

is

counsel

contemplated

order to

objectors

Order to Show

currently

not

may request

Rehabilitators

an

the

to

they

seek

to

fee

does

shall

for notice

filing

meeting

ana

of

ray

that

negotiated

during the week

that

Rehabilitator

3ecrete

the
is

in

objectors

trade

Court and
as

discus6

to

to

the

If

interested

appropriate

with

issue

meet with

that

respect
If

forth

assure

concerns

this Court

in

to

objectors

Rehabilitator

the

The

procedures

information

other

those

wi.th

the

Contract of

boards

information

Bet

as

shall

sale

proposed

information

such

any

sharing

or

objectors

the

ay enter into

and

representatives

address
call

conference

final

OE

Courts approval

this

for

about

of

Group business

or his

maintained

proprietary

satisfactorily

to

to

counsel

of

representatives

the

subject

Rehabilitator

The

practical

sale of

sale

of

contract

other

L_IF
P./12

negotiations

parties

EaFIT

riI_lTIjL

1558

91

herein

4T

15

mro

payment

Of

amount

of

to

bs filed

file an

by

ev

may be

hso

121-2
ehabl1itator

is

authorLZd

to

continue

G131 THU

1.4E

BENEFIT

riI_ITUiL

L_IF

j55

PU

with

negotiations

other

remainder of Mutual
than
to

the

Group

further

Court

the

order

is

because

no

immediate

such

order

employees

of

Mutual

indemnification

by reason

before

July

16

the

on ru1y

16

1991

net

amended

be

continuing relief

and

is

to
The

dated

Rehabilitator

form

Commissioners August

2.991

shall

attached

position

Status

of

31

Report

Mutual

l4Az3

Benefits

20

the

present
Company

1991

which

Rehabilitator

Is

Interlocutory

Court

modify
as

The

of

by this

consideration

for

any such

March
by

and

to

expenses

set forth in this paragraph

further

entitled

including

Policy

and

and

Section

Mutual

of

terminated

or

Distribution

Hardship

with

1022S6-24

support

therefrom

held

provisions

benefits

be

liabilities

all

or having

the

to

of ticer5

shall

years

accordance

any of

the rehabilitation

during

against

No

The

subject

directors

three

Policy

demonstrated

was

the

Insurance

Liability

shall

policy

in

process

of ficer

corporate

were

incorporating

receive

Reimbursement

for certain

of their holding

1991

Benefits bylaws

Executive

be

cause

above

paragraph

harm

benefit

exceed

shall

arising

to

Benefit

to

indemnification

and

who

Show

subject

made at this time regarding

irreparable

by Mutual

not

period

being

in

bonusc

Persons

agreeents being
to

the

business other

that

0rder

an

by

or manage

in

p4rticipate

resulting

set forth

termination

proposed

an

.tith

approval

that

No

to

Benefits business

Bus.riess

after

patterned

insurers

the

Application

Exhibit
or

shall

to

the

otherwise

IJGj31

43

13

THI_t

BaNEFIT

FiLITIJiL

L..IPE

Si

notify

dissatisfied

is

Show

Cause

This
of

Of

County General

Equity

Past Docket No

must

be

filed

within

Rehabilitators decision

the

with paragraph

payable

to

be

directly

made

the

below

Clerk

the

of

with

the

that

Petition

and

Order

by

served
with

along

of

CName
Division

_-

fro

receipt

days

in

contemporaneously

the

court of

Superior

Benefit

C-SlOOlOS

30

thirty

and

Court

Mutual

of

Jersey Chancery

New

applicant
on

Review

iardship

Court

petition

accord

for

if the

decision

Rehai1itatiOn

re

Petition

Verified

file

Superior

Petitioneri
Larcer

may

In

captioned

that

distributions

Rehabilitators

the

applicant

Ce

Ins

Life

with

the

Application
to

for hardship

applicants

fee

filing

NJ

The

of

$235

f.lirtq shall

follows

as

Mon

Paul
Levy
Superior Court of New Jersey
5th
210 South Sroad Street

CN977
Trenton

NJ 08625

No

application

party

for relief

with

the

the

sought to the following

this

Div
New
20

designee

serve

party

any

shali

detailing

of the Rehabilitator

Pryor Waugh Asst Commissioner
Enforcement
and Conswer Protection

of

Jersey Department
West State Street

CN325
Trenton

writing

suh

the Rehabilitator

to

request

file or

address
Barbara

the

shall

Court unless

made

at

written

interest

in

first have
relief

Floor

Rehabilitator
within

thereof according

NJ

Insurance

of

9th

Floor

08625

shall

review

ten

10

days

to

the

terms of

of

the

request

the

and

ruLe

on

it

in

Rehabilitators

receipt

Order as

inodif ted

the July

16

riLJG131
17

by

this

or

subseqient

exercise

of

his

decision

to

satisfied

the

with

from
Show

captioned

In

Petition
Of

Rev

If

by

with

Review

30

decision and

served

below

with

the

filing

Court

of

NJ

along

of

Superior

the

Court as fol1cws

The

of

written

party

may seek

Petition

proposed

that

$135

Ins

Life

quity

mut be tilCd

RehaDi1itators

the

accord

Co

8uprior Court

petition

of
in

brief

arid

County .nora1

This

receipt

fee

his

interestis not

in

en.fit

Mercer

____

from

send

Petitioner

contemporaneously

the

Mon

Name

cicuiustartce

certifications

Xutua

of

-R

party

Verified

supporting

thirty

days

shall

decision

filing

by

factual

the

reasonable

the

in

interest

in

Division

C-91-00109

to

requesting

Rehabilitation

Chancery

Ro

party

the

Court

Cause

Jersey

within

L_IF

Court

Rehabj1.tator

Rehabilitators

the

re

of

applied

the

for Relief

Part Docket

as

requesting

this

to

Order

this

and

ii
review

Orders

expertise

request

the

HEFIT

16

Si

PJG

of

FIUTLIiL

49

THU

9.

with paragraph

payable

to the

filing shall be made

Clerk

directly

of

with

Paul

Levy
Court of New Jersey
Superior
-5th Floor
210 South
Broad Street
CN 977
Trenton NJ 08625
service
referred

in paragraphs

aron

upon
Hughes

to

..istict

tche1
Yorman

of the Petitions

Complex CN 117

isel
Court

Plaza

Trenton

25

New Jersey

Schotz
Main

Richard

08625

Bernstein

Street

documents

shall be made

Order

py torney

Cole
North

all supporting

of the within

and

Waflanan

and

P.O

and

Meie.l

and

Box

800

AUG 191
UG

91

ev Jersey
.0

counsel

1991

who

by

of

copy
of

1.

mail within

of

seven

shall be
or

Notice

of

July

the

Order

Hereafter the

Court

Rehabilitator

As

petitions

as

objections

by

are

pursuant

filed

to

filing

same

any

Counsel

will

be

they

shall

receive

notice

claims

have made

pursuant

to

to

and

on

on

creditàri

partiejb

same

as

manner

that

there

the Attorney

Maisel eàq

Michael

Show

General

and

AboveaJl

Cause whIch

reCOxd

considered

of

of

re1ted

anything

15-1a

Paul

the

hereo.u1

to paragraphs

thereafter
they

by

orders

Court

by

attached.hersto

considers

the State

his Special

filed

are

counsel

except

kncivn

all other

to

form

the

in

the

made

interested

other

16

this action

if

days

given

in

circulation

the

be

sha1l

before

appearance

general

the

issue

an

Order

or their counsel

subsidiaries

paragraph

to

within

the

objectors

within Order

the

newspapers

of

entered

regular

publishing

arties

the

on

policyholders

in

11

07602-0800

Service

Rehabilitator

notice

LIFE

1Oi

Hackensack

all

ENEF IT

t1UTUL

THLI

Levy

to

th6

1c

THj
91

16

NOTICE

TO

ALL

SU5SIIPRIES
REGARD

On

Cntinuing

the

EEHEFIT

P0LICiROLDERS

4D

MUTUAL

1991

August

order

40

tiLITLIL

CREITOR3

LIF-E

CLAXM.NZ5

ALL OTER ITERE$TEO
PMTIES
ENEFIT LIFE IN$UR.P.NCE
COMPANY

Superior

Rehab

Court

itetors

of New
ersey entered an
Appointment
Ctinuing

and
Relief
in
In
the
Granting Other
th
Rehabilitation
cf_1utual Eenefit Life Insurance Company Docket No
C-91-00109
MUTUMBEWEFIT
COMPAN MUTUAL
LIFE INSURANCE
egain5t
mutual insurance
BENEFIT
principal
company
having
520 Broad
Street Newark New Jerey

Restraints

iffi

Dhe

Order

The

principa.ly

provides

as follows

to act
Insurance
of New ersey shell continue
Mutual
Eenefic with all the rights and
duties
irt
the
16
Show
Cause
provided
Consent
Order
to
3uly
July L6
All of the restrein contained
Order
in the July 16 Order shell
to paragraph
continue
with three modifications
or clarifications
1.5
to
provide that
tomat policy loans to pay
premiums
are
not
restrained
policy form FA85 refers to
owned
life
insurance
Form
F85 or its
crporate
policies
iccessors
and
on
accounts reters
to
payTnent
separate
from and
withdrawal
of funds
invested
in
those
variable
payment
annuities
end
variable lift insurance
which
have
been
polic.ea
maintained
separately and apart from Mutual Eenef its other 6133StS
and Uabilitiee
as

Commissioner of

Rehabiliatcr

of

wl

ii

iii

Benefits
to sell Mutt1
may contthue
negotiations
will
and
meet with interested persons to discuss the
sele
If
the contract
proposed
of
sale is finalized as planned
the Aehabilitator
shall file en Order to Show Cause during
the week
of
to present
of sale to the
August
1991
the
final contract
Court end
is
further
interested parties
The Rehabilitator
authorized
continue
the
remainder Qf
to
negotiations
regarding
Mutual
Benefits business with resulting
to
subject
agreements
Court approval using
similar Order to Show Cause procedure

The

Rehabilitator

group business

No order is being made at this
bonuses
for certain corporate

termination
proposed
continues
to
Order
officers
indemnification to persons who were the directors
provide
and
Senef it on
1991 but the Court
employees of Mutual
July 1.6
stated that
this provision was subject
to further consideration
time regarding

officers

me

for persons
an
Court
further established
fUing
procedures
well
as
for
all
otherS
for Hardship
Distribution
as
App1.LCetin
-relief
for relief
to firs seek
to
file applications
seeking
Distrtbutionforms
from thaRehab-ilitator
for Hardship
Application
1-800-435-7887
end
the
be
completed
may
requested
by calling
address
listed
should
be
the
form
sent to
appropriate
application
Distribution
on
the
for
other
than
HardshiP
form
Applicants
Barbara
relief
should
send
their
to
Pryor Waugh
applications
nd Consumer
Assistant
Coissiorter Division of Enforcement
The

I_II

.3

THLI

tiI_ITI_IiL

BtlEF IT

12
12/12

pj

2E

27

protection

Street

9th

bew

Jersey

Tloor

CN

Departhent

325

Trenton

of
NJ

West
20
Insurance
IfreliS
0862S

Sata

for hardshiP
Rehabilitator iS unSatiSfactO the applicant
captioned
verifIed PQtition and order to stow cause
ay file
Ce.
Benefit Life
of Mutual
re Rehabi1itatiQ
Of
ccurt
superior
of
Petitioner
ardsip Review by Naie
EqiitY
.rAeral
Mercer County
Jersey CbancorY Divisiofl
for othe
applicant
unsatisfied
cket No C...9002.09
Show
cause
to
Verified Petition proposed order
relief xnay file
hIfl.r
captioned
brief
and
certifications
with
supporting
for R.li.f
Petiticfl
Mutual Benefit Life Ins Co.
of
Rehabilitation
NeW
Of
Jersey
8uporior Court
Review
by
Name of Petitioner
Part
Mercer County oeneral EcXuity
Division
Chancery
be i1ed wthin
Either typ of petition must
C9100109
doci3ion
RehabilitatorB
the
of
from receipt
days
thirty
Clerk of. the
the
to
fee.of
$135 payable
along vith the filing
vitith
directlY
The
of NJ
filing shall be made
superior Court
Court as follOWS

30

Mon

Paul
superior Court of New Jersey
-5th
210 South broad Street
CN
Trenton NJ 08625

Floor

Petition and
the
of
copies
the
filing
Contemporaneous
harOn i1
must be served upon
documents
supporting
Justice
Ccm3.aX CNl11
HugheS
ApUty ttorneY Ge.neTa Richard
Cole
MeiLd
Trenton New Jersey 08625 and
Main
25
North
Court Plaza
and Forman
with

e.

Schotz
Street

Bernstein tleisel
P.O Box 800 Hackensack

New

Jersey

076020800

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A0e9abb0f07206d61. Public record. Not legal advice.