# Appendix — American Insurance v. Lucas > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_0027%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1941 - **Citation:** 314 U.S. 575 ## Text INDEXES I. Index of Witnesses and Exhibits (Chronologically as to appearance in transcript)— Pages II. Alphabetical Index of Witnesses— ee oe ~ eee ys ee. 4+ * hehe LO GT DAS Sa SS ee a. 3 4 ae ao & Pages XXVII to XXXI Ill. Alphabetical Index of Plaintiff Insurance Companies— Pages XXXIII to XXXVIII IV. Exhibits (Chronologically as to dates thereof)— Pages XXXIX to LXI istrict Court of the United States FOR THE WESTERN DISTRICT OF MISSOURI. CENTRAL DIVISION. IN EQUITY. No. 270 (and other pending cases 270 to 426 excepting those dismissed). AMERICAN INSURANCE COMPANY, A CORPORATION, PLAINTIFF, VS. RAY B. LUCAS (SUCCESSOR IN OFFICE TO R. E. O’MALLEY, SUCCESSOR IN OFFICE TO JOSEPH B. THOMPSON), SUPER- INTENDENT OF THE INSURANCE DEPARTMENT OF THE STATE OF MISSOURI, AND ROY McKITTRICK (SUCCESSOR IN OFFICE TO STRATTON SHARTEL), ATTORNEY GENERAL OF THE STATE OF MISSOURI, DEFENDANTS. INDEX I (Chronologically As to Appearance in Transcript.) Vol. Page Caption I 1 Appearance of parties I 1 Colloquy between counsel as to the introduction of ' . ony .- DEFENDANTS’ EVIDENCE RUSSELL D. HOBBS, Secretary Subscribers Actuarial Committee Exhibit 1—List of cases pending...........- ..-------------------- - ERNEST A. HENNE, Chairman Subscribers Actuarial Committee and Vice President Continental Insurance Group Exhibit 2—Memorandum Agreement (settlement agreement) dated 18th day of May, 1935, between R. Emmet O'Malley and Charles R. Street_______— II INDEX I Exhibit 3—Decree dated February 1, 1936, entered in each cause Exhibit 4—Declaration of Trust dated February 4, 1936, executed by Charles R. Street and Robert J. Folonie Exhibit 5—Check of Continental Insurance Compens, dated May 2, 1935, = to Chas. R. Street, Chairman, for $15,000.00... a Exhibit 6—Letter from Mr. Cian, Feeddent, Con- tinental Insurance Company, to Mr. Henne, Vice President, dated April 16, 1936 Exhibit 7—Letter from Mr. Jones to Mr. ‘Galea President, Continental Insurance Company, dated April 20, 1936 Exhibit 8—Memorandum of C. R. ‘Street, adtvecees to the Governing Committee, dated September 25, 1936 Exhibit 9—Inter-office communication ‘in, ‘Bert R. Jones, Assistant Auditor, and William H. _— Auditor, dated October 29, 1936... WALTER D. WILLIAMS, former President of Security Insurance Company and East and West Insurance Company; member of Subscribers Actuarial Committee Exhibit 10—Letter from C. R. Street to Walter D. Williams, dated March 17, 1936... Exhibit 11—Letter from C. R. Street to Walter D. Williams, dated March 17, 1936... Exhibit 12—Check issued by Seourlty Susans o- pany, dated March 23, 1936, payable to C. R. Street, agent, amount $2,960.75... weeks Exhibit 13—Check issued w East ond West Sueenee Company, dated March 23, 1936, — to C. R. Street, Agent, amount $1,302.56. Exhibit 14—Letter from Mr. C. R. Owen | to “Mr. Powrie, dated November 9, 1936... plagion Vol. page 696, Exhibit 311—Copy of letter from C. R. Street to Mr. Jessup, dated April 4, 1936... Exhibit 312—Copy of letter fom ry Qn to “Mr. Gardner, dated April 4, 1930_______.__.__.._......... APRIL 6, 1936 Exhibit 313—Copy of letter from Mr. Jessup to Mr. Gardner, dated April 6, 1936 APRIL 8, 1936 Exhibit 22—Extract from Minutes of Meeting of Ac- tuarial Committee, dated April 8, 1936 Exhibit 308—Check of Merchants Fire Insurance Com- pany, dated April 8, 1936, to C. R. Street, Agent, amount $669.40 Exhibit 309—Remittance Advice, dated April 8, 1936, to C. R. Street, Agent, amount $669.40 Exhibit 314—Copy of letter from Mr. Gardner to Mr. Jessup, dated April 8, 1936 APRIL 9, 1936 Exhibit 315—Copy of letter from Mr. Jessup to Mr. Gardner, dated April 9, 1936 Vol. III Ill III Ill Page 143 149 184 325 302 185 159 160 308 303 304 305 105 300 301 306 1p RED et Ain tr tne EM Be INDEX IV APRIL 13, 1936 Exhibit 231—Receipt from Mr. Street to Mr. Dominick, dated April 13, 1936... APRIL 15, 1936 Exhibit 197—Check of Lincoln Fire Insurance Com- pany, dated besa 15, 1936, to C. R. _— — for $694.52.. na APRIL 16, 1936 Exhibit 6—Letter from Mr. Culver, President, Con- tinental Insurance Company, to Mr. — Vice President, dated April 16, 1936... a EE APRIL 20, 1936 Exhibit 7—Letter from Mr. Jones to Mr. Culver, President Continental Insurance Company, dated April 20, 1936... Exhibit 203—Letter from Mr. Jones to Mr. steanecnaiin dated April 20, 1936... pee. om int APRIL 27, 1926 Exhibit 30—Letter from Charles R. Street to Mr. A. F. Powrie, dated April 27, 1936... APRIL 29, 1936 Exhibit 31—Letter from Mr. Powrie to C. R. Street, dated April 29, 1936, transmitting check, for $5,425.59 Exhibit 3la—Check of Fire Association of Philadelphia, dated April 29, 1936, to C. R. Street, amount $2,929.90 Exhibit 31b—Check of Lumbermen’s Insurance Com- pany, dated —* 29, 1936, to C. R. Street, amount cb 5. ae Exhibit 31c—Check of The Reliance Insurance Com- pany, dated April 29, 1936, to C. R. Street, for $794.78 Exhibit 3l1d—Check of The Reliance Insurance Com- pany, dated April 29, 1936, to C. R. Street, for $479.69 APRIL, 1936 Exhibit 302—Check of The Western Fire Insurance Company, dated a" 1936, ow * to C. R. Street, Agent, for $1,693.63... anu oath a JUNE 4, 1936 Exhibit 230—Letter from Mr. Dominick to Mr. Street, dated June 4, 1936. ee II II II Ill II 512 301 51 53 340 131 125 423 424 425 426 253 510 LVIII INDEX IV JUNE 5, 1936 Exhibit 23—Extract from Minutes of Meeting Ac- tuarial Committee, dated June 5, 1936 JUNE 8, 1936 Exhibit 232—Letter from Mr. Street to Mr. Dominick, dated June 8, 1936. JUNE 30, 1936 Exhibit 225b—Carbon copy of page from report of Mis- souri Impounded Premiums as of June 30, 1936... JUNE, 1936 Exhibit 79—Page 65 of the Journal of Standard Fire Insurance Company, dated June, 1936 JULY 10, 1936 Exhibit 225a—Carbon copy of letter from Claussen, Manager, to General Manager, London & Lancashire Insurance Company, dated July 10, 1936... JULY 24, 1936 Exhibit 225c—Memorandum letter from Home Office of London & Lancashire Insurance Company Manager, Chicago, dated July 24, 1936.00.00 SEPTEMBER 25, 1936 Exhibit 8—Memorandum of C. R. Street, addressed to the Governing Committee, dated September 25, 1936... OCTOBER 23, 1936 Exhibit 24—Extract from Minutes of —* of Ac- tuarial Committee, dated October 23, 1936... OCTOBER 29, 1936 Exhibit 9—Inter-Office communication between Bert R. Jones, Assistant Auditor, and William H. Emes, Auditor, dated October 29, 1936 NOVEMBER 9, 1936 Exhibit 14—Letter from C. R. Street to Mr. Powrie, dated November 9, 1936... : Exhibit 32—Letter from C. R. ‘Street i. - F Dende. dated November 9, 1936 (original of Exhibit 14)... NOVEMBER 19, 1936 Exhibit 211—Carbon copy of letter from chief ac- countant, Caledonian Insurance Company to Mr. Street, dated November 19, 1936..................... eee II Page 106 514 332 393 331 333 54 106 55 85 132 426 > > by a Investing Corp. check for $ID D AF Payable to C.K Stezet, Coen t 4 ae ene ee are Son (] LOCAL BANK —s Charge to GFE CHASE [] GHIcAGo [_] MONTREAL LJ] man V4) 0 me {.] RETURN Approved by. (} venue 16—Cz—0-38 FRANK M. SMALLEY—DIREcT 47 Q.77. The check was ordered by you and approved by whom? A. By a vice-president, Buddy, who was in the office at the time I had the telephonic conversation. It is our custom up there when any money is paid, some officer orders it and some other officer approves it and the cashier then draws the check. The Special Master: What is the object of having it approved by two officers? A. Why, I suppose a check, the same as we have an order that no check shall be drawn unless there are two officers’ names on them, with the exception of certain checks. The Special Master: What is the object of that? A. Protection. I sometimes wonder myself. The Special Master: What protection is it if the of- ficers don’t take any pains to find out what it is about? A. Well, we do. The Special Master: But not in this case? A. Well, is that a slam at me for not finding out? I told you I had perfect faith in Mr. Haid. The Special Master: It is a mere question. A. Yes, sir. The Special Master: It may be a slam; the Court will pass upon that. A. All right. The Special Master: But it is a question as to the fact. A. Yes, sir. The Special Master: Is the object of having two of- ficers pass it in order to get the judgment of two of- ficers as to whether it is a proper charge against the company? A. I suppose it is. The Special Master: That implies they will look into it? A. Well, it happened in this particular case, we are talking about this particular case, Mr. Buddy, as I recall it, was in the office at the time this particular request came in, and I told him to draw the card and I would order it and I told him of the conversation. He understood it and he O. K.’ed the card. The Special Master: All right. A. And the check was signed, might have been signed by any two of the officers. Now, don’t under- stand that all of our checks require two signatures. 48 FRANK M. SMALLEY—Drrect The dividend checks and salary checks only require one signature, but must have one imprinted signature. The Special Master: I understand that no check re- quires two signatures if it is a check that by an established practice is authorized in advance. It is only something that has to be authorized at the time that requires two signatures? A. The ordinary check for paying any kind of bills for goods or for assessments of bodies and that kind are signed by two officers. The Special Master: I understand. Q.78. (By Mr. Holman) I believe you testified you explained this conversation to Mr. Buddy? A. My rec- ollection is that he was in my office when it came in. If he was not, he came in very shortly afterwards, and | told him of the conversation. Z Q.79. Did you two discuss this ‘situation and whether or not you should pay the money? A. Why, I have no recollection of any conversation, what it par- senna was. We probably did. What we said, I don’t ow. Q.80. Have you ever talked to any person about the settlement of the Missouri rate cases? A. To any person? Q.81. Any person about the settlement who has told you that money was used in high political places in Missouri to obtain this settlement? A. No, sir. Q.82. You have never heard that discussed? A. No, sir. Q.83. Do you know anything about it? A. No, sir. _. @Q.84. Now, as I understand it, when you received this 11 per cent check that was a complete surprise to you? A. Yes, sir. Q.85. You had already sent the check to Mr. Haid payable to Mr. Street? A. Three or four days before. Q.86. Where is Mr. Buddy now? A. Mr. Buddy has been on his vacation. I think he got home last night. Q.87. Got home to Glens Falls last night? A. Yes, I think he did, either last night or yesterday noon, after- noon sometime. Q.88. Is there anyone else connected with your com- pany that knows anything about this situation? A. I don’t think so, not that I know of. Q.89. Or that knows anything about the matters I have inquired of you? A. No, I will say no. Frank M. SMALLEY—Cross Mr. Holman: That is all. Cross Examination by Mr. Bullitt. XQ.90. Mr. Smalley, the reason you have two of- ficers to sign the authorization for issuing checks is that at least two officers will know that certain moneys are going to be paid out, isn’t that it? A. Well, it is be- cause the by-laws of the company call for it. XQ.91. The reason for that is that there will be at least two men will know certain checks are being paid out, and one man doesn’t have complete control of pay- ing money out? A. I would assume that is the reason the by-laws were passed. XQ.92. At the time that you gave this 5 per cent check of $2,877.38 to the order of C. R. Street, Agent, you knew that you had a suit out in Missouri in connec- tion with this rate controversy, didn’t you? You knew you had a suit out there? A. Yes. XQ.93. You knew that the court had impounded $57,000.00 of your funds, didn’t you? A. Well, I assume those figures are correct, yes. The Special Master: No, he asked you, did you know that that much was impounded? XQ.94. (By Mr. Bullitt) Didn’t you know that you had impounded in the court out there some $57,400.00 of the premiums that you had collected from the policy- holders which the court impounded? You knew they had that impounded fund? A. I knew, if those figures are correct. I assume they are. XQ.95. Well, you knew? A. All right, yes, put it that way, because I imagine those figures—you said $57,- 000.00, and I don’t know whether it is $57,000.00 or $53,- 000.00, or whatever it is. XQ.96. All right, now, you also received back, didn’t you, some $28,750.00? A. Whatever it is, 50 per cent. XQ.97. That is $28,750.00. A. That is for both companies. XQ.98. Then you later got 11 per cent, or $6,200.00 more? A. The dollars, I wouldn’t swear to, but the percentages, yes. XQ.99. It is so easy, look at it. Look at your own record. Didn’t you get something over $6,000.00 addi- tional back? A. $5,478.00, yes, all right. That is the 11 per cent of Missouri impounded premiums, April 30th, that is correct. XQ.100. That is right, then? 50 FRANK M. SMALLEY—Cross Mr. Berger: Just a minute, Mr. Bullitt; that is for the Glens Falls. The Commerce was $850.00. XQ.101. (By Mr. Bullitt) Then you got back out of that lawsuit altogether around $35,000.00, didn’t you? A. If those totals, those figures, yes, those two percents, 50 per cent and 11 per cent. XQ.102. When you paid out $2,877.38 to C. R. Street as agent, you did know that you had this other amount in controversy, didn’t you? A. What other amount? XQ.103. Why, this $57,500.00 of impounded funds, A. We knew the whole amount was in controversy. XQ.104. Well, I know; that is $57,500.00, isn’t it? A. All right, yes. XQ.105. You knew that, didn’t you? A. Yes, XQ.106. And so you did know that when you paid out $2,877.38 to Street as agent, it was on account of a lawsuit where you had $57,000.00 of your money tied up; didn’t you know that? A. Yes. XQ.107. That is right, so you did look into it when you paid this money out to the extent of knowing it was in a suit where you had $57,000.00 involved? A. Yes. XQ.108. You charged that $2,877.00 to legal ex- penses, didn’t you? A. Yes, sir. It shows on the record. XQ.109. Well, I say, and you did that at the time you gave the check? A. Yes, I think—the record says so = there. Q.110. Look at your own initials. A. Well, all right, yes, legal expenses; it is on the order. ‘ XQ.111. And at the time you did it, you paid it to legal expenses in a lawsuit where you had $57,000.00 of your money tied up? A. Yes, sir. XQ.112. So you did look into it and knew what you were paying the money for; it was for legal expenses in a lawsuit? A. Right, yes, sir. Mr. Holman: At the time you had received this money, you had received 50 per cent? A. Yes. Mr. Holman: You had received the 50 per cent? XQ.113. (By Mr. Bullitt) So at the time you paid the $2,877.00 you had already received in that lawsuit some $28,000.00, didn’t you? A. Yes. XQ.114. So you were paying legal expenses in a suit that you had just recovered a whole lot of money in, that is right, isn’t it? A. Yes. XQ.115. All right. Now, you had met Mr. Street, hadn’t you, or had you ever met him? A. I met him Frank M. SMALLEY—RE-Dmect 51 once or twice in meetings in the years gone by. He wouldn’t know me if he met me on the street. XQ.116. Did you ever by telephone or telegraph or by letter or by personal talk ever employ Mr. Street or ask Mr. Street to do anything for you in connection with this Missouri rate litigation? A. No, sir. XQ.117. Did you ever know, see, write, telegraph, telephone or communicate in any way with Mr. Pender- ast? A. No, sir. - X%Q.118. Did you ever meet Mr. McCormack? A. No, sir. XQ.119. Did you ever write, telegraph, telephone or talk to Mr. McCormack in your life? A. No, sir. XQ.120. Did you know Mr. O’Malley, the Insurance Commissioner? A. Personally? XQ.121. Yes. A. No, sir. XQ.122. Did you ever write, telephone, telegraph or communicate with him in any way concerning the Missouri rate situation? A. No, sir. XQ.123. Did you ever authorize Mr. Street in any way to pay any money to Pendergast or O’Malley or Mc- Cormack or for any purpose whatever except as might be inferred from paying it to him for legal expenses? A. No, sir. Mr. Bullitt: That is all. Re-Direct Examination by Mr. Holman. RDQ.124. Did you authorize Mr. Folonie, an attor- ney in Chicago, to file that suit for you down there in Kansas City? A. I don’t know what you mean by “authority.” RDQ.125. Did you directiy contact him in any way? A. No, sir. RDQ.126. Then who did that for your company? A. I imagine the Subscribers’ Actuarial Bureau. RDQ.127._ And you knew that they were acting as your agent in doing that? A. The Subscribers’ Ac- tuarial Bureau? RDQ.128. Yes. A. Why, I suppose we did know it. We knew they represented all of the companies and we knew that they would look after our interests in the mat- ter of engaging counsel and that is all I can tell you. RDQ.129. You made no objection to that? A. No, we made no objections to it. RDQ.130. You made this check to C. R. Street, Agent? A. Yes, sir. FraANK M. SMALLEY—ReE-Cross RDQ.131. Whose agent? A. I don’t know. RDQ.132. He was your agent, wasn’t he? A. He might have been for the purpose of handling these legal affairs, yes. Mr. Holman: That is all. Re-Cross Examination by Mr. Bullitt. RXQ.133. To refresh your recollection, wasn’t this suit in your name, in the name of the Glens Falls In- surance Company, brought by the lawyers and then that the Western Inspection Bureau notified you that the suit had been brought and you acquiesced in it? Isn’t that really what happened? A. I don’t know whether it was the Western Inspection or our Subscribers’ Actuarial Bureau. Whatever bureau it was, we were probably in- formed and told our interests would be looked after and we acquiesced in it. Mr. Bullitt: That is all. (Witness excused.) Mr. Holman: In connection with the examination Ag witness we offer in evidence Defendants’ Ex- it 142. (Which said Defendants’ Exhibit 142, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) 53 March 20, 1936 Mr. Je D. Erskine, Secretary Insurance Executives Association, 116 John Street, New York City. S Dear Mr. Erskine: yo! In conformity with our telephone F conversation, we are enclosing herewith check for ik ; payable to C. PR. Street, Agent, which we understand represents the share of the Glens Falls and Commerce Insurance Companies in legal expenses in connettion with the Missouri Rate Littgetton metter. Yours very truly, RSB:DRS Vice President Enc. a Glens Falls Insurance Co. $2 4+40.%S 38453 ru 8471.32 Comnierce Insurance Co. ae Nae" aN, e Ar tr ge 54 H. F. WATERMAN—DIRECT H. F. WATERMAN, being produced, sworn and ex. amined as a witness on behalf of the defendants, testified as follows: Direct Examination by Judge Henson. Q.1. Mr. Waterman, what is your position with the Agricultural Insurance Company? A. I have the title of secretary. The Special Master: With which company? Judge Henson: Agricultural. The Special Master: I don’t remember that com- pany is one of the 137 companies. Mr. Berger: Yes. Judge Henson: At Watertown, New York. The Special Master: Go ahead, I don’t remember it. Q.2. (By Judge Henson) Where is the company’s home office? A. At Watertown, New York. Q.3. Was that its home office in 1935 and 1936 and ever since? A. Yes. Q.4. Were you secretary of this company in 1935 and 1936? A. Yes. Q.5. You knew you had a suit in the federal court in Kansas City involving rate litigation in the State of Missouri, did you? A. Yes, sir. Q.6. Who was acting for you in bringing and han- dling that suit? A. Well, the counsel for the Western Underwriters Association at that time, I think, was Hicks and Folonie under the direction of the Subscribers’ Ac- tuarial Committee. Q.7. You either authorized or acquiesced in the suit being brought in your company’s name? A. Yes. Q.8. You knew of its pendency all along then until it was settled? A. Yes. Q.9. Now, Mr. Waterman, when did you first hear that your suit had been settled? A. To the best of my recollection the first knowledge that I had of it was in the spring of 1935. I heard the report that there had been a compromise settlement reached. Q.10. Do you recall in a general way what the terms of the compromise were? A. Well, vaguely, yes, per- sonally I wasn’t particularly concerned. I was merely relieved to know that there was some possibility of end- ing the litigation. As I recall it, the agreement was that the policyholders were to receive 20 per cent and the companies were to receive 80 per cent. Q.11. Do you recall that of the 80 per cent the com- panies were to receive 50 per cent of the impoundments H. F. WaTerRMAN—Drrect 55 outright and 30 per cent was set aside in the hands cf trustees to pay expenses? A. Only vaguely, because that was a matter of accounting and didn’t come under my jurisdiction, but I had the impression that that was the fact. Q.12. Did you hear again from your lawsuit in February, early in February, 1936, that the court had made the order of distribution? A. That was my un- derstanding, that it had been approved by the court. Q.13._ And was the understanding at that time that the companies would get 50 per cent, the policyholders 20 per cent and that 30 per cent was set out in the hands of Street and Folonie as trustees to pay the expenses of the litigation, including the State of Missouri and your own companies, and if anything remained, it was to be re- turned to the companies? Do you remember that that substantially was the court decree? A. Well, I have no— I couldn’t swear that I knew that in those exact terms. I had a vague—I have a vague recollection that that was the manner in which the funds were to be distributed. Q.14. Now, Mr. Waterman, I will ask you whether your company afterwards received 50 per cent of all of its impoundments in this case up to May 1, 1935? A. That is my recollection, yes. Q.15. And your company accepted it? A. Yes, sir, I suppose so. Q.16. I will ask you then if it isn’t a fact that in March after this settlement in February, if your company didn’t receive 11 per cent from Street and Folonie, Trus- tees, out of the 30 per cent fund? A. We received a remittance, I think, sometime in March, but just what percentage that was of our impounded premiums, I am not able to state. (Instruments, handed to the reporter, were marked for identification as ‘Defendants’ Exhibits 143, 144 and 145, EFM.”’) Q.17. I show you Defendants’ Exhibit 143 and I now introd»:ce it and offer it in evidence, and will ask you what that is. A. That is a check— Q.18. (Interrupting) That is a photostat of your check? A. Yes, that is the check which I signed pur- — to a telephone conversation from Mr. Erskine’s of- ce. (Which said Defendants’ Exhibit 143, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) Exhibih Jo Agricultaral, 100 Jong ee ee . : 7 AT 21 1078 Pay To THE : ea ry) $2449 5; Exhibit 2 AGRICULTURAL INSURANCE COMPANY H. F. WaTreRMAN—DIRECT 57 Q.19. Who is the other name on that? A. H. W. Tomlinson, our treasurer. Q.20. This check is for $2,049.89? A. Yes. Q.21. Who was it that requested that check? A. Mr. e. Q.22. Is he from Mr. Haid’s office? A. He is Mr. Haid’s assistant. Q.23. Did Mr. Erskine call on you up there at Water- town? A. No, Mr. Erskine telephoned to our office. Q.24. What did he say? A. He first talked to one of our vice-presidents and he didn’t know anything about the Missouri situation. It was out of his jurisdiction, so he had Mr. Erskine talk to me. Mr. Erskine said he wanted us to send this check payable to the order of Mr. Street as agent. Q.25. Did he give you the figures or the percentage? A. He gave me the figures. There was nothing said about percentage. Q.26. That was $2,049.89? A. Well, that is probably true. I couldn’t swear to that. Q.27. Anyway, you intended to write the check for the figure he stated. What else did he say about it? A. I naturally asked him what it was for and he said, as I recall, that it was for some legal expenses in con- nection with the Missouri rate case. Q.28. Did you ask him for anything more definitely as to what the expenses were? A. Yes, but I didn’t get any satisfaction. Q.29. His answers were evasive? A. He merely said that he didn’t know. That is my recollection. Q.30. Then he wasn’t able to tell you anything more definitely than he wanted it for legal expenses? A. Apparently not. Q.31. You knew at the time, didn’t you, that this 30 per cent had been set out for that purpose and was in the hands of trustees? A. Well, vaguely. As I said before, I wasn’t familiar with the details because it was an accounting matter. Q.32. Didn’t it occur to you then that this 30 per cent would have been the source for legal expenses? A. Possibly, but I don’t— Q.33. (Interrupting) But you wrote the check any- way? A. I had the check issued, yes. Q.34. Did you talk the matter over with any of your associates? A. With Mr. Wallace, our vice-president, who had the first conversation with Mr. Erskine. 58 H. F. WATERMAN—DIRECT Q.35. What did Mr. Wallace think about it? A. He didn’t know anything about it. He professed not to know anything about the case. Q.36. Then how did it come that you sent the check? A. Because Mr. Erskine assured me that it was in order to do so. Q.37. You sent it then on his representation, al- though he wasn’t able to tell you very much about it? A. t is true. Q.38. Did you express some doubts about it in the telephone conversation? A. I can’t recall. Q.39. I see the check is made to C. R. Street, Agent? A. Yes, sir. Q.40. Was that the way Mr. Erskine asked it to be made? A. That is my recollection, yes. Q.41. You knew Mr. Street? A. Slightly. I had come in contact with him several times. Q.42. You knew he was chairman of the Subscrib- ers’ Actuarial Committee, which was handling the liti- gation? A. Yes. Q.43. And why did you send the check to Mr. Street? A. At Mr. Erskine’s request. Q.44. You not only made the check payable to Mr. gta but you sent it to Mr. Street, didn’t you? A. es. Q.45. I show you Exhibit 145 and will ask you if that is a carbon copy of the letter you sent to Mr. Street in which you enclosed the check, and I now introduce Exhibit 145. A. I think it is, yes. (Which said Defendants’ Exhibit 145, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) Exhibit 2 59 C/ March 21, 1936 Mr. Chas. R. Street, Mgr. Great American Insurance Co. 310 S. Michigan Ave. Chicago, Ills. Dear Sir: We are in receipt this morning of telephone communication from Mr. Haid's office in New York, and Mr. Erskine has asked us to send to either yourself or to Mr. Falomie our check for $20).9.89 in payment of some extraordinary expenses 4ncurred in connection with the Missouri case. We beg to transmit the check, here- with, together with a receipt, and trust thet we shall have some explanation as to the reason for j this disbursement. Yours very truly HFW 3 JC Secretary 60 H. F. WaTteRMAN—DIRECT Q.46. Did you hear from Mr. Street that you re. call? A. Mr. Street returned the receipts which | sent with the check. Q.47. You asked for a receipt from him? A. We usu- ally do if it is a check which is sent out for anything in the way of expenses. Q.48. Now, I show you Defendants’ Exhibit 144, and we you if that is Mr. Street’s reply to your letter? . Yes. ' Judge Henson: I now introduce Exhibit 144. A. That seems to be, yes. Q.49. That is it? A. Yes. (Which said Defendants’ Exhibit 144, so offered evidence, having been aay duly marked, is words and figures as follows: ) in in 61 conte Great American waster DEPARTMENT CastTrecr ye Or oe nm are OE Var Carsoent reat Orrice GOR 788 cuicaso New Pork ater CHICAGO) Merch 23, 1934. Deer Mr. Wetermen: j I om returning receift for check enclosed in your letter of the Ret. It de © leug story but one told in deteil to « few in Mew York, el ef the "big boys” whe could be gotten together during the winter vecetion season - Messrs. Euv'th, Warner, Koop, Sturm end Heid. Sill tell you all about it et White Sulphur. Pith best regerds, I remain Yours very truly, _ 62 H. F. WatERMAN—DIRECT Q.50. Now, I will ask you whether or not he re. turned the receipt with the letter as it purports to be? A. Yes, he did. There was a receipt returned which | have seen. I — Mr. Street sent it. Q.51. Now, . Street says in this letter: “It is q long story.” This letter is addressed to you, Mr. Water- man. He says, “It is a long story, but one told in de- tail to a few in New York, all the ‘big boys’ who could be gotten together during the winter vacation season Messrs. Kurth, Warner, Koop, Sturm and Haid.” Did you understand and recognize them as the “big boys’? A, I accepted Mr. Street’s designation of them being the “big boys.” The Special Master: You knew who they were? A. I knew they were presidents or managers of companies, New York. The Special Master: Of certain big companies? A. Yes, sir. Q.52. (By Judge Henson) And with this assurance were you satisfied to let Mr. Street go ahead with the check and use it? A. Why we have always had the greatest amount of confidence in Mr. Street’s ability to handle this litigation and other affairs of the company in connection with the Subscribers’ Committee. Q.53. That was really the reason you didn’t hesi- tate to make the check to Mr. Street and send it to him? A. Yes, sir. Q.54. It says in the letter further: ‘Will tell you all about it at White Sulphur.” What did you under- stand by “Will tell you all about it at White Sulphur.” A. I suppose he meant the subject of my letter. The Special Master: He was going to explain to you what the money was for? A. I suppose so. Q.55. (By Judge Henson) Now, then, did he ever explain that to you at White Sulphur or anywhere else? A. I don’t recall that I ever had a conversation with Mr. Street after that date. Q.56. Did you ever seek to contact him after that date to inquire more about “it,” that is, this settlement? A. No. One reason for that was that in the month fol- lowing that correspondence the semiannual meeting of the Western Underwriters Association was held at White Sulphur, but I did not attend that meeting as I had some business in the West and was out in the field at H. F. WaTrerMAN—DiReEct 63 that time, and I don’t recall that I ever saw Mr. Street again. - Q.57. Did you ever write him for an explanation? A. No, sir. Q.58. Didn’t it occur strange to you that he didn’t make an explanation at the time he wrote this letter, Exhibit 144? A. Knowing Mr. Street, I would say no. The Special Master: lain that a little more, will ou? : A. Mr. Street was not a man who explained things to people whom he thought didn’t have any business to know about them. The Special Master: You had a right to know what you paid out your money for. A. Yes, and he volunteered to tell me at some fu- ture date, but that date never eventuated. Apparently Mr. Street didn’t see fit to commit anything regarding that in correspondence. Q.59. (By Judge Henson) Have you any idea why he couldn’t have put this in correspondence? A. No, sir, I had no idea. Q.60. Have you ever talked to anyone who did talk to him at White Sulphur or elsewhere and to whom he explained the settlement? A. No, sir. Q.61. You never made any further effort then to find the details than what you have just said? A. No, sir. Q.62. Was this matter submitted to your board of directors? A. No, sir. Q.63. If I understood—I didn’t get that vice-presi- dent’s name. I would thank you to state that again, who that vice president was. A. A. C. Wallace. Q.64. Where is Mr. Wallace now? A. As far as I know, he is in Watertown. Q.65. Is it your idea that you have told substantially what Mr. Wallace knows about it? Judge Henson: I am asking that, gentlemen, so as to know whether I want to call him. A. Yes, Mr. Wallace’s involvement in the telephone conversation merely came about in this way: That Mr. Erskine first tried to contact Mr. Waite, our president, and he followed down the list of officers and Mr. Wal- lace, he got Mr. Wallace on the telephone, told him what he wanted, and Mr. Wallace said he didn’t know any- thing about it, but he would tell me about it. When he told me about it, I demanded a little more detail, so Mr. 64 H. F. WaTERMAN—DIRECT Wallace said, “I will get Erskine on the telephone and let you talk to him,” which he did. That is of Mr. Wal- lace’s connection with it. Q.66. When Mr. Erskine assured you this was go- ing to Mr. Street who would pay it out, that satisfied you? A. Yes, he represented that it was an emergency, that he wanted the check immediately, and that is why the matter was not held up until Mr. Waite’s return. Q.67. Did you ever ask Mr. Street or Mr. Erskine whether the fund that was set out for expenses had been exhausted so that he had to have this $2,000.00 check from you? A. No. Q.68. Did he tell you what the emergency was that they had to have this money? A. No, sir. Q.69. Did you ask him? A. Yes. Q.70. Did Mr. Erskine tell you? A. Simply told me that it was something in connection with the Mis- souri rate case. He apparently was not familiar with the circumstances. Q.71. Mr. Erskine really couldn’t satisfy your curi- osity at all, could he? A. No, sir. Q.72. And nobody else has, ever has? A. No. The Special Master: I understand that Mr. Erskine representing your executive association gave you to un- derstand it was an emergency and that they needed the money right away, but he couldn’t give the explanation? A. That is true. The Special Master: But to send it to Mr. Street? A. Yes, sir. The Special Master: And rather thar. take the chance on failing to send it, you sent it and waited for Mr. Street? A. Yes, sir. The Special Master: And Mr. Street told you that it was a long story that had been explained to a few of the “big boys” but he would explain it to you at White Sulphur? A. I assumed from that Mr. Street would make a report at White Sulphur. The Special Master: Did you feel from the letter he wrote you that he felt that the matter was confidential? A. That would be my impression. The Special Master: That is the impression you got, is it? A. Yes. Judge Henson: That is all. H. F. WaTtERMAN—CROSS 65 Cross Examination by Mr. Bullitt. XQ.73. Look at your letter to Mr. Street dated March 21, 1936, and tell us whether that refreshes your memory as to what Mr. Erskine said to you about the reason for asking for the $2,049.89 check? A. Well, I said in my letter it was a payment of some extraordi- expenses in connection with the Missouri case. I assumed that was legal expenses. XQ.74. You wrote that letter on the very same day, three years ago, that you talked to Mr. Erskine, didn’t you? A. I would judge so from this letter. That is the best of my recollection. XQ.75. You had this conversation fresh in your mind at that time, didn’t you? A. Yes. XQ.76. And you then said it was “extraordinary ex- penses.” You didn’t mention the word “emergency” in your letter, or was that just your inference? A. That was the inference that I got from Mr. Erskine’s conver- sation. XQ.77. Mr. Erskine never said anything about it being an emergency, did he? A. No, he merely said he wanted the check forwarded that day. XQ.78. You inferred there must be an emergency, is that it? A. Oh, yes. XQ.79. Now, I show you a voucher dated March 21, 1936, which has not been intrcduced in evidence and which I am now offering in evidence and ask you if that is the voucher, the receipt that you sent on to Mr. Street to be signed by him? A. Yes, sir. Mr. Bullitt: Mark that whatever the next num- ber is. Judge Henson: I will clear that, and now stipulate that Defendants’ Exhibit 143 shall include not only the check but the receipt. Mr. Bullitt: That is all right Judge Henson: That is just my oversight. Mr. Bullitt: That is all right. XQ.80. In that voucher which Mr. Street signed, you describe it as “legal expense.” Why did you have the words “legal expense” put in there? A. That is the only account we knew of that it could be charged to. XQ.81. What is that? A. That is the only account we thought it could be charged to. XQ.82. In whose handwriting, if you know, are the words “agent for companies” beneath the signature of Mr. Street? Did he put that in? A. I don’t know. 66 H. F. Waterman—Cross XQ.83. Is that the handwriting of any of your people? A. I don’t recognize it. XQ.84. Now, at the time that you sent this $2,049.89 to Mr. Street, you had some $40,000.00 of your premiums impounded in the hands of the court, hadn’t you? A, Yes, sir. XQ.85. That is right, isn’t it? A. Yes, sir. XQ.86. And you had already received back some- thing over $20,000.00 in cash from that fund, hadn't you? A. That is my understanding, yes. XQ.87. Then or about that time you got 11 per cent more, some $4,490.00 didn’t you? A. Mr. Erskine in his telephone conversation that day assured me that he would receive within a short time a check for forty-four hun- dred and some dollars. XQ.88. You did get it? A. I think we got it the following day. XQ.89. So that your company received nearly $25,- 000.00 out of that litigation? A. Yes. XQ.90. And you paid out this $2,000.00 on account of what you understood was legal expenses. Now, did you ever know Mr. T. J. Pendergast of Kansas City or Mr. A. L. McCormack of St. Louis or Mr. O’Malley, Superin- tendent of Insurance? A. I have met just casually Mr. McCormack at one time, but I never knew him. I merely met him. I think at the time I met him he was not in the local business. He was connected— XQ.91. (Interrupting) Did you ever know Pender- gast? A. No, I never knew Mr. Pendergast. XQ.92. Did you ever know O’Malley? A. I never did. XQ.93. Did you at any time by telephone, telegram, letter or personal conversation have any sort of com- munication with Mr. Pendergast or Mr. O’Malley or Mr. McCormack directly or indirectly concerning this Mis- souri rate litigation or its settlement? A. No, sir. XQ.94. Did you at any time by telephone, telegram, letter or personal conversation ask Mr. Street to do any- thing for you in connection with that litigation? A. No, sir. XQ.95. Did you ever ask in any way Mr. Street to commit bribery or to pay any money? A. No, sir. - XQ.96. To bring about this compromise? A. No, s " Mr, Bullitt: That is all. H. F. WATERMAN—ReE-DrIreEctT 67 Re-Direct Examination by Judge Henson. RDQ.97. You knew Mr. Street as chairman of the Actuarial Committee was really conducting the litigation, though? I believe you stated that? A. Yes, sir. RDQ.98. I believe you say that you had a receipt here to show this was legal expense because you didn’t know where else to put it? You just answered him that you didn’t know what else to charge it to? A. Our chief accountant asked me to what account he should charge this charge, and I suggested that he charge it to legal expense. I knew of no other place to charge it. RDQ.99. You hadn’t gotten that information, how- ever, from Mr. Erskine? A. Only by inference. RDQ.100. Now, you say in your letter to Mr. Street, Exhibit 145, you speak of this as being in payment of some extraordinary expenses. Where did you get the idea this was extraordinary expenses? A. Well, merely from the fact that we had presumed that all of the legal ex- had been taken care of through our assessments. The Special Master: In the rating bureau? A. ell, the Actuarial Bureau, the committee, and I supposed this was something which had come up since. That is why I used that word “extraordinary.” RDQ.101. Now, it being “extraordinary expenses,” something Mr. Erskine didn’t tell you or something which Mr. Street didn’t tell you, that is why you called for an explanation in your letter to Mr. Street? A. Right. RDQ.102. And Exhibit 144 is the only thing you got assurances? A. Yes. RDQ.103. Which, of course, you took to be some- thing extremely confidential or he would have written you about it? A. Well, I presume that would be the in- ference. Judge Henson: I believe that is all. The Special Master: Well, you say you presume that would be the inference; that could be the inference. Is that the impression you got at the time? A. That was my impression. Mr. Berger: Or another inference would be that it might be long and involved and couldn’t be covered by a letter; isn’t that right? A. Very true. Mr. Berger: That is all. Judge Henson: Just a word, Mr. Waterman. You don’t know of anyone else that could give us any further help, anyone else of your company? - 68 Joun Koentc—DrIrect A. No, sir, I do not. J Henson: And you have furnished all of the record that you have? A. Yes, sir. - Judge Henson: And it has been nied to and put in evidence? A. Yes, sir. Judge Henson: That is all. (Witness excused.) JOHN KOENIG, being produced, sworn and examined as : witness on behalf of the defendants, testified as Direct Examination by Senator Hollingsworth. Q.1. State your name, pleace. A. John Koenig. Q.2. Where do you reside, Mr. Koenig? A. In Rutherford, New Jersey. Q.3. What is your connection with the Royal Ex- change Assurance group? A. I am the branch secre- tary of the United States branches of the Royal oo Assurance of London and the State Assurance Com Ltd., of Liverpool, also secretary and treasurer the Provident Fire Insurance Company, a New Hampshire corporation. Q.4. What is the relationship of these insurance companies to each other? A. The Royal Exchange As- surance is the parent company and by stock ownership owns the State oo Company and the Provident Fire Insurance Compan The Special mg " We are not so much interested in the ownership as we are the management and the control. A. The United States manager and the assistant managers act for the foreign companies, the World Ex- change Assurance Company and the State Exchange, Ltd., and also serve as president and vice-president of the Provident Fire Insurance Company. The Special Master: Then they are under common management? A. They are under common management. Q.5. (By Senator Hollingsworth) And was that your connection with these companies in 1935 and 1936? A. My personal connection was, yes. Q.6. Were you familiar with the general nature of the Missouri rate litigation? A. In a general way, yes. ' Joun Koentc—Dtrect 69 Q.7. What agency handled that litigation for your company and the other companies? A. Well, I think most of the material came to us through the Subscribers’ Ac- tuarial Committee of Chicago. Q.8. Did you know that it had active charge of the direction? A. I did have that impression yes. Q.9. That is your impression. Now, did you re- ceive notice of the compromise agreement that was made in May, of 1935? A. We did. Q.10. How did you receive that? A. I believe it came to us through the Subscribers’ Actuarial Committee. Q.11. In the nature of a written communication of some kind? A. Yes. Q.12. And did you learn through that the terms of the settlement? A. I did. Q.13. That 20 per cent went to the policyholders? A. 20 per cent to the policyholders, yes. Q.14. 50 per cent outright to the companies? A. Yes. Q.15. 30 per cent was placed in the hands of Messrs. Folonie and Street? A. As trustees. Q.16. For what purpose? A. I haven’t the docu- ment here. Q.17. Well, your recollection? A. My recollection is for litigation expenses. Q.18. In payment of the expenses of the litigation? The Special Master: All kinds of expense? A. All kinds of expenses. The Special Master: Court costs, attorneys’ fees? A. That was my impression, for all expenses in- curred in connection with the suit. The Special Master: Whatever they were? A. Yes. Q.19. (By Senator Hollingsworth) Then you fur- ther understood if there was any overplus in this 30 per cent fund, it would come to the companies after pay- ment of expenses? A. At sometime, yes. Q.20. You knew about the rendition of the federal court decree after that which was in February of 1936? A. Yes, I did. Q.21. Did you receive a dividend from the 30 per cent fund at any time thereafter? A. I doubt that very much, although there is no definite information. We received funds returning specific payments we made in March, 1936. 70 Joun KoEen1Gc—D1rect Q.22. What was the first remittance that you re. ceived after the compromise? Do you have any records there before you that will refresh your recollection? A I have not. But in the case of the Royal Exchange, | recall that they received about $50,000.00 Home Owners’ Loan Bonds and a certain cash settlement from the cus- todian, and the other companies, the State Assurance Company and the Provident Fire Insurance Company received cash payments. Q.23. That came from the custodian? A. That came from the custodian. Q.24. Did you receive any money from the trustees out of the 30 per cent fund? A. I doubt that, from memory. Oh, excuse me. Q.25. I wish— A. (Interrupting) I have this letter here from Mr. Street. Q.26. What is the date of it? A. This is dated December 27, 1937, three there are, one for each com- pany, and they read, “Enclosed check or checks will pay 5% of your Missouri impounded premiums as of May 1, 1935. It is a part of the expense fund held by Street and Folonie as Trustees.” Mr. Berger: That is dated December 27, 1937? A. Yes. Q.27. (By Senator Hollingsworth) Well, did you prior to that time receive a 6 per cent distribution out of that 30 per cent fund? Mr. Berger: You are confusing here. (Whereupon, discussion was had off the record.) Mr. Berger: We will show by Mr. Folonie’s and Mr. Street’s books about all of those payments to this company. Senator Hollingsworth: Well, let’s mark this. (Said letter, handed to the reporter, was marked for identification as ‘Defendants’ Exhibit 146, EFM.”) Q.28. I hand you Defendants’ Exhibit 146, which I now introduce in evidence, a letter from Mr. C. R. Street dated March 31, 1936, in which he states, “I acknowledge the receipt of your check for $6,385.31, account Missouri litigation expense.” A. Right. Q.29. You had sent him a check, I presume, some- time shortly prior to that? A. Yes, there was a check issued. Q.30. Who caused that check to be issued? A. The assistant manager, Mr. Edward W. Elwell. JoHn Koentc—DrIrect The Special Master: Where is Mr. Elwell now? A. . Elwell is on vacation in England. The Special Master: England? A. Yes. Q.31. (By Senator Hollingsworth) About when will he return? A. I should think the forepart of September. Q.32. Did you receive any information as to how the check happened to be issued? Did Mr. Elwell dis- cuss the matter with you? A. Merely that within two days of the issuance we were in doubt at the time, or my assistant was in doubt at the time, and he was told it was legal expenses. Q.33. Do you know who told your assistant that? A. I don’t know. Q.34. Well, did you learn from your assistant or from any other person who made the call for the check? A. No, I don’t know that. Q.35. Now, you say that “we were in doubt.” I wish you would just tell us what conversation was had there between you men in regard to this check. A. At the time this payment was made I was in Florida and my assistant was asked to countersign this check. Q.36. You learned that from your assistant? A. I learned that from my assistant. Q.37. Did he tell you who had asked for the check? A. No, he wouldn’t know. You see, the company covers three floors. Q.38. Well, did you talk with your assistant after you came back? A. I did. Q.39. Give us all of the information that you got about the matter. A. That was to be prorated to legal expenses and the basis was the impounded premiums to April 30, 1935. Q.40. He didn’t tell you from whom he received the call for the check? A. No. Q.41. You have no information other than some doubt existed about the matter in your mind? A. For two days, it seems from this record. Q.42. For two days? A. Because the instruction then must have been to charge legal expenses. Q.43. Did you handle the matter? A. I handled it in that manner. Q.44. You say that for two days. Was that two days after you came back from Florida? A. No, I mean as far as the office routine was concerned. 72 JoHn Koentc—DIrect Q.45. It was held in your office for two days be. cause no one knew how to allocate it; is that right? A. That is the idea. The check had been issued and it was drawn to C. R. Street. Q.46. Agent? A. No, not with “Agent.” Q.47. Just C. R. Street and then was it mailed to Mr. Street promptly upon its being signed? A. Why, my impression is that a messenger received it. Q.48. That a messenger received it? A. Yes, or some representative. That is unknown to me. Q.49. How did you get that information that a mes- senger came for it? A. Naturally, of course, we had discussions when I returned. Q.50. What were the discussions? A. Simply that there was a check drawn in this Missouri litigation and they hadn’t been able to apply it until they made inquiry. Q.51. Did anyone tell you at that time that they had been told that it was for legal os gre anyone in your office? A. My assistant would have been told, because that is in his own handwriting, the memoran- dum, “legal expenses.” Q.52. Did your assistant tell you he had not known for two days how to handle the matter? A. He did. Q.53. And for that reason he had not made any en- try on his books whatever, is that right? A. He had to make an entry but left space for a description. The Special Master: He entered the amount and the date and the fact that the check was issued and to whom issued, but he did not make an entry of what it was for? A. Exactly. , The Special Master: That is what you mean, isn’t it? A. Yes, that is exactly it. Q.54. (By Senator Hollingsworth) All right, now, from whom did he receive information after that, if you know, from which he made the entry in regard to legal es? A. It must have come from Mr. Elwell. The Special Master: Do you know anything about it? A. I don’t know positively. Q.55. (By Senator Hollingsworth) Have you told us the extent of your knowledge concerning this matter? A. I have. The Special Master: Whg is your assistant, you say, Mr. Elwell? A. He is the United Stgtes Manager now. He was assistant manager at that time. f JoHn Koenic—Drrect 73 The Special Master: He was the one you say han- dled it, so far as you know? A. Yes, sir. The Special Master: He is in England? A. Yes, sir. Q.56. (By Senator Hollingsworth) Who is your as- sistant? A. Mr. Harry Halprin. The Special Master: Where is he? A. He is in the office. Senator Hollingsworth: That is all. Mr. Bullitt: You personally had really nothing to do with this transaction? A. No. Mr. Bullitt: That is all. (Witness excused.) Senator Hollingsworth: Defendants’ Exhibit 146 is offered in evidence in connection with the testimony of this witness. (Which said Defendants’ Exhibit 146, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) 74 Western ocerantment 0 SOUTH mCmroan avenue POST Orrice Box 7ee CHICAGO get or I acknowledge the receipt of your check for $6,365.31, Missouri ] -igetion expense. account Yours very truly, LauRENS R. BowpEN—DIRECT 75 LAURENS R. BOWDEN, being produced, sworn and ex- amined as a witness on behalf of the defendants, testified as follows: Direct Examination by Senator Hollingsworth. Q.1. State your name, please. A. Laurens R. Bow- den. Q@.2. Where do you reside? A. Reside here in New York City. Q.3. What is your connection with Bankers and Shippers Insurance Company group? A. I am first vice- president. Q.4. And that group consists of Bankers and Ship- pers Insurance Company, New Jersey Insurance Com- pany and Pacific Fire Insurance Company? A. The New Jersey is now the Jersey. The name has been changed. At least the Jersey is taking over the New Jersey. Q.5. When did that happen? A. That happened six or seven months ago. Q.6. But the companies as I have listed them were in existence in 1935 and 1936? A. Yes, and the Jersey is continuing the old New Jersey. Q.7. What was your connection with these com- panies in 1935 and 1936? A. I was first vice-president. Q.8. And as such were you the man in the office who had knowledge concerning the Missouri rate litiga- tion? A. I was. Q.9. You handled the matters that carne into the office in connection with it? A. As much as anybody in the office. Q.10. Of course, you knew of the settlement in 1935? A. Yes, I did. Q.11. And did you know of the terms of it? A. Yes, in a general way. Q.12. You knew that 20 per cent went to the policy- holders? A. Yes. Q.13. 50 per cent outright to the companies? A. Right. Q.14. And 30 per cent was set up in a trust fund for the payment of litigation expenses? A. I knew those terms Q.15. Now, what expenses did the 30 per cent fund cover? Was it litigation expenses? A. It was for litiga- tion expenses to cover, as I remember it, all expenses incurred by the state and by the companies. 76 Laurens R. Bowpen—Direct Q.16. In connection with the litigation? A. In con. nection with this matter. Q.17. At the time this compromise agreement was signed or about that time, did you receive any informa- tion in regard to the $100,000.00 fund being raised? 4. No, we did not. Q.18. After the compromise agreement you knew that a federal court decree was entered? A. Yes. Q.19. Then after that you received the greater part of the 50 per cent from the custodian, did you not? A. Right. Q.20. Then did you thereafter receive any part of the 30 per cent fund? A. Yes, we received 11 per cent and paid back 5 per cent. Q.21. From whom did you receive the check for |] per cent? A. I was given the check by Mr. Erskine of the Insurance Executives’ Association. He delivered the check to me personally. Q.22. At your office? A. At my office. Q.23. Now, at that time did you have a conversa- tion with Mr. Erskine? A. In a general way. I can't recollect the full conversation, but I had a general con- versation with him. Q.24. Well, at that time did he ask you for a 5 per a 5 per cent of the impounded premium? A. He did. Q.25. Tell us as fully as you can everything that he said to you? A. He said that he had a check for 11 per cent of the amount we had impounded. That was a re- turned expense check, but he still wanted another check given to him for 5 per cent. He wanted to trade the 11 per cent for a 5 per cent check, which would net us 6 per cent. I asked him in a general way what the 5 per cent was for, and as near as I can recollect he told me for further attorney fees. I don’t remember in detail at all, but whatever I asked him convinced me that it was all right for me to issue the check. Q.26. Well, did he tell you that the 30 per cent fund _ been exhausted? A. I don’t recall his telling me that. Q.27. Well, you knew that 30 per cent was there for the payment of expenses? A. Surely, I knew that. Q.28. Did you ask him why he was trading you, giving you 11 per cent and exacting from you 5 per cent instead of simply giving you a straight 6 per cent check? LAuRENS R. BowpEN—DIRECT 77 A. I don’t recall asking him anything specifically like that, and I think our conversation was more general. Q.29. Did the thought occur to you that that was an unusual way and a cumbersome way of handling it? A. I don’t think it did. Q.30. It never occurred to you in any way? A. I don’t think it did. Q.31. Did he tell you to whom the check should be made? A. Yes, he did. Q.32. To whom? A. He gave me the option of making the check to Mr. Street or to Mr. Folonie as agent. Q.33. As agent? A. As agent. Q.34. Agent for whom? A. Well, agent. Q.35. Well, for whom? A. I don’t think I went into it very far. It didn’t make a tremendous impression on me. Q.36. You selected R. J. Folonie, agent? A. I se- lected Mr. Folonie. Q.37. And why did you select Folonie instead of Street? A. Because Folonie has been our attorney for a number of years in other matters. I knew him very well. I didn’t know Mr. Street at all, never knew him. Q.38. And you made it then to Mr. Folonie, Agent? A. I made it to Mr. Folonie. Q.39. Mr. Erskine is secretary to Mr. Haid? A. Yes, I understand. Q.40. Of Mr. Haid’s Association of Insurance Executives? A. Yes. (Photostatic copies of checks, handed to the reporter, were marked for identification as ‘Defendants’ Exhibits 147, 148 and 149, EFM.”’) Q.41. What did Mr. Erskine say to you about im- mediate need for the check? A. I don’t think he said anything about it. Well, wait a minute, perhaps I mis- = you. He wanted the check right away that y. Q.42. He wanted it right away? A. He wanted it right away. Q.43. You issued checks or caused checks to be is- sued for all three of your companies? A. I did. Q.44. For the respective amounts of their 5 per cent? A. For the 5 per cent. Q.45. Now, I show you Defendants’ Exhibit 147, 148 and 149, which I now offer in evidence. Please state 78 LaurRENS R. BowpDEN—DIRECT if those are photostatic copies of the checks. A. They are photostatic copies of the checks that I issued and signed. That is my signature. Q.46. They are dated March 24, 1936, all of them? Yes. A. (Which said Defendants’ Exhibits 147, 148 and 149, so offered in evidence, having been previously duly marked, are in words and figures as follows: ) ’ vd ® @a2 ‘ > Lim Lie’ a ae Iginls ¥~ ene LIMMIS © . 8 Toe New Youu Pacer Company +. © 8nOGnOwas No._14545 New Woo ) ef, “" $3 oare ENTRY NO. ow a Bd New Jersey Insurance Cor any REQUEST FOR — 4¢ Il Li 10 THE OROER OF AMOUNT sLHOZ ZZ. * 6-9 re 4 IN PAYMENT OF: (nite 3 Wy POLICY NO. COMMISSION NET s PREM oa AGENTS WC euium iy meant BALANCE a DEPT. OATE a4 ; a QUESTED By Z e° ENTRY NO __. 1A PPROVED BY__ W = He mt Se SM AG ane oy ;. 86 LAuRENS R. BowpDEN—DIRECT Q.55. Now, do either of those requisitions show the purpose for which the money is to be used, other than Mis- souri impoundings? A. No. Q.56. You notice those checks are dated March, 1936. I call your attention to the endorsement of them, “Pay to the order of C. R. Street, R. J. Folonie, agent.” Do you see that, all three of them? A. Yes, sir. Q.57. I call your attention to the “Paid” stamp of the bank. It shows that these checks were cleared in November, November 17, 1936. A. Yes, sir. Q.58. Did it come to your attention between March of 1936 and November of 1936 that these checks were still outstanding? A. It did not. Q.59. No one called that to your attention? A. Nobody. Q.60. Do you know of any reason now why those checks were held during that period of time? A. I haven’t the slightest idea. Q.61. Has it ever been called to your attention be- fore? A. Never had. It was called to my attention when we heard in the newspapers or we read in the newspapers of this scandal within three or four months, and we im- mediately went down in our files and got these checks up. Q.62. For the purpose of finding out what your files revealed? A. Exactly. Q.63. You then learned for the first time that these checks had not been cashed for some six months? A. Correct. Q.64. After their issuance. (Photostatic copy of record entry, handed to the re- porter, was marked for identif‘cation as “Defendants’ Ex- hibit 153, EFM.”’) Q.65. I hand you Defendants’ Exhibit 153, which I. now offer in evidence, and ask you to state if that is a photostatic copy from your records. A. It looks like our form, but these things do not come before me. I wouldn’t know anything about it. (Which said Defendants’ Exhibit 153, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) LAURENS R. BowpEN—DrIReEct 87 Defendants’ Exhibit No. D 153 is page from the rec- ords of PACIFIC FIRE INSURANCE COMPANY entitled “Missouri Impound Custodian,” showing, among other entries, March 24, 1936— “Legal fees R. J. Folonie $1,602.17” also an entry on March 25, 1936— “Refund—legal fees $3,524.78” Q.66. Well, you see here an entry on Defendants’ Exhibit 153, “R. J. Folonie, $1,602.17’? A. Yes. Q.67. Down here you see, “Refund legal fees, $3,- 524.78"? A. Yes. Q.68. Now, isn’t it a fact that these words “legal fees” were written in there at a time different from the regular entry? A. Not to the best of my knowledge. Q.69. Well, it is different writing is it not? A. It looks like it. Q.70. Written there at a different time or with a different pencil at least? A. It looks like it. Q.71. Do you have any explanation of the fact? A. I haven’t. Q.72. That the words “legal fees” apparently were written at a different time from the “R. J. Folonie, $1,- 602.17"? A. I haven’t any. Q.73. And down here, these words “legal fees’’ were written at a different time from the word “refund,” weren’t they? A. Apparently. Q.74. Do you have any expianation as to why that happened? A. I haven’t. Q.75. Now, your requisitions do not mention legal fees, do they? A. No, they do not. Q.76. That is typical of one, isn’t it? A. Typical? The Special Master: Tell him what you referred to. A. I am referring to Defendants’ Exhibit 152. Q.77. (By Senator Hollingsworth) That is typical for the other companies, isn’t it? A. Yes, it is our regular form. Q.78. And it doesn’t mention anything about what this check is for? A. No, it does not. Q.79. Well, when you went down following the newspaper story to see what your files revealed, did you come across this apparent peculiarity in your records showing the words “legal fees” to have been written at a different time? A. No, I did not. 88 LauRENS R. BowDEN—DIRECT Q.80. From the original entry? A. That is the first time it has been called to my attention. Q.81. -You have no explanation of it now? A. None. Q.82. But you will concede that it was written at a different time? A. I won’t concede that, no. Q.83. Well, it apparently is that way, isn’t it? A. Well, they look like different writing but perhaps it isn’t. I am not prepared to say. The Special Master: Let’s clear it up. Do you know any more about that than just what I can tell by looking at it? A. No. The Special Master: Well, I can see it. Q.84. (By Senator Hollingsworth) Then you have here on your books quite a number of other entries in regard to legal matters, with the exception of these two entries, the words “legal fees” that I have just shown you, haven’t you used the words “legal expense” = the way through? A. I haven’t any explanation for at. Q.85. But you do find a number of entries here in other matters where the words “legal expense” are used, do you not? A. Well, I can see where there could be some difference in the different entries there. We used the words “legal expense” in connection with losses, and a matter of this kind might be “legal fee,” might be something specific. Q.86. Did you understand that you were paying a specific legal fee at the time you issued the R. J. Folonie check? A. I did not. Q.87. When you made them to R. J. Folonie, Agent, you knew, did you not, that it was not a disburse- ment to Mr. Folonie for attorneys’ fees? A. Absolutely. Q.88. And you had no information whatever as to whorn the attorneys’ fees were to be paid? A. I did not. Q.89. Or legal fees. Did you ever at any time there- after talk to Mr. Folonie about the matter? A. I rever did. I haven’t seen him since that time or somevime before that. Q.90. Did you ever talk to Mr. Street about the matter? A. I never met Mr. Street. Q.91. Have you since that time talked to Mr. Er- skine about the matter? A. I never have talked to Mr. Erskine since that time. Q.92. Sir? A. Not since that time. LauRENS R. BowpEN—Cross 89 Q.93. Have you talked to Mr. Haid? A. I have not. Q.94. Did you attend a meeting of insurance exec- utives here in 1935? A. I did not. I presume you mean a meeting in regard to this case? Q.95. Yes. A. I did not. Q.96. Or the raising of any money in connection with it? A. I did not. Q.97. Did you attend any meeting of the insurance executives where a proposed settlement was discussed? A. I did not. We are not a member of the Insurance Executives’ Association. I didn’t or nobody in our outfit did. The Special Master: When Mr. Erskine called you then he didn’t call you as a representative of your com- pany? You didn’t belong to the association, is that right? A. Absolutely. The Special Master: You just knew who he was? A. I just knew who he was and knew him by repu- tation. Senator Hollingsworth: That is all. Cross Examination by Mr. Bullitt. XQ.98. Were any of your group members of the Subscribers’ Actuarial Committee or the Insurance Exec- utives’ Association? A. They were not. XQ.99. As far as you know, did Mr. Meserole or Mr. Matthews or Mr. Crapser know nothing about this situation? A. Only in a superficial way. None of us know anything about it. XQ.100. Did you ever know Mr. Pendergast, T. J. Pendergast, or Mr. A. L. McCormack or Mr. O’Malley? A. I never knew Mr. Pendergast and I never knew Mr. O’Malley. I did know Mr. McCormack. XQ.101. Did you ever by letter or telephone or tele- graph or by personal contact discuss in any way with Mr. Pendergast, Mr. O’Malley or Mr. McCormack the Missouri rate situation or the litigation or any settle- ment? A. I never did. XQ.102. As your checks to, Mr. Folonie were not cashed until November, 1936, did any of the money of any of your companies go to Mr. Pendergast or Mr. O’Malley or Mr. McCormack? The Special Master: Well, he doesn’t know that. A. Certainly not with my knowledge. Mr. Bullitt: Well, it couldn’t have gone, because it is already shown. 90 Laurens R. BowpEN—CROSS The Special Master: That is a good argument, but he is not a competent witness. Mr. Bullitt: Well, of course, he doesn’t know actually. XQ.103. Did any of your companies ever request Mr. Street to act for you in any way concerning the Missouri rate litigation? A. We never requested him in any way to act for us. XQ.104. Did any of your companies ever authorize or request Mr. Street to pay any money for bribery to induce anybody to settle this case? A. Absolutely not. XQ.105. You knew, didn’t you, that Mr. Folonie or his firm were acting for you as attorneys in the Missouri litigation? A. Yes, sir. XQ.106. What is the reason that you had these checks made to R. J. Folonie, Agent, instead of to C. R. Street? A. I just testified that I knew Mr. Folonie and had known him for some years. I did not know Mr. Street. The Special Master: And he also said that Mr. Fo- lonie was their attorney. Mr. Bullitt: Yes, I know. A. In other matters Mr. Folonie was our attorney. XQ.107. (By Mr. Bullitt) Just to clear up my own mind, because I am sort of ignorant about these things, look at Defendants’ Exhibit 153 that Mr. Hollingsworth has been examining you about. You have it in front ef you now, have you? A. I have. XQ.108. I notice that the heading of the column of the entry as a sample of $1,602.17 is “Cash Received.” You didn’t receive any $1,602.17, did you, from Mr. Fo- lonie? Explain that. I know the explanation, but I want you to give it. A. Really, I am not an accountant and you can confuse me very easily on it. I really don’t know. The Special Master: Do you know what happened? XQ.109. (By Mr. Bullitt) Well, you paid Mr. Fo- lonie as agent, a check of $1,602.17 dated March 24, 1936, marked Defendants’ Exhibit 147, didn’t you? A. Yes, sir. XQ.110. Then the Defendants’ Exhibit 153 is a pho- tostat of a page in your books, isn’t it? A. Yes, sir, apparently. XQ.111. And the entry that Mr. Hollingsworth has asked you about as having the words “legal fees” in- serted in it after the words “R. J. Folonie” were written, LauRENS R. BowpEN—CRrossS 91 is not on any sheet of paying out money, but on a sheet of cash received, isn’t it? Senator Hollingsworth: That is received on the gen- eral setup. Mr. Bullitt: How is that? Senator Hollingsworth: That was received on the general setup. They set up that Missouri impounding. (Whereupon, discussion was had off the record. ) A. There is probably a very clear, easy explana- tion of all these things. XQ.112. (By Mr. Bullitt) But you are not an ac- countant? A. I am not an accountant, and I don’t know anything about it. XQ.113. Let’s look at these three photostats headed “Memorandum of Receipt.” Are they the memorandums in your office of the receipt of the money that you got from the custodian? A. I am not prepared to say. I am not familiar enough with the bookkeeping in our office to tell just exactly what they do mean. XQ.114. I understand. Each one of those papers, however, described as a memorandum of receipt, shows that it comes “From R. J. Folonie,’”’ doesn’t it? A. That is the way it shows here. XQ.115. But you don’t know anything about that et all? A. I questioned something of this kind in my office yesterday about these checks and I thought the check for 11 per cent came from Folonie and Street, but our record shows it came from R. J. Folonie. The ex- planation of that was this: The general custom in our office when we enter a check, if it is in two or three names we enter just the first name. The Special Master: In other words, you just make a key but you don’t go ahead and make a full entry? A. We don’t make a full entry at all. We just make a reference to it. XQ.116. (By Mr. Bullitt) It is a fact, isn’t it, that when you got this request from Mr. Erskine to make a check for 5 per cent out of the 30 per cent you were going to receive a portion of, you made it to Mr. Folonie because he was your attorney? A. Yes, sir. XQ.117. And this was the case in which he was your attorney, and when you were asked to put up some money you paid it to your attorney at law who had charge of the case? Judge Henson: That is repetition. 92 Laurens R. BowDEN—CROSS A. No, I don’t think in that case I considered him our attorney. I considered he was our attorney before and I knew he was a lawyer and he was our attorney in the general case. XQ.118. (By Mr. Bullitt) When you got this money back, you paid it to him? A. We were very glad to get it back. Mr. Bullitt: That is all. The Special Master: Now, did you ever get your case instituted in the federal court? Your company did bring a suit in the federal court and you didn’t belong to the Executive Association, you didn’t know Mr. Street, you had no connection with the Actuarial Committee; what did your company ever do to get it started? Did somebody just take it upon themselves to bring a law- suit without your consent? A. No, I am not quite clear in this particular case, but there have been a number of companies where the Actuarial Committee acted, and when they asked if we would go along, it was the only practical thing for us to go. The Special Master: Did they ask you if you would go along? A. I presume they did. I can’t find anything in my file which would definitely say yes. The Special Master: But you knew you did have a lawsuit? A. We knew we had a lawsuit, certainly. XQ.119. (By Mr. Bullitt) Isn't this a fact that this suit was brought in the name of your companies out in Missouri, and that the Western Inspection Bureau wrote you and told you they had brought this suit and you just acquiesced? A. Not the Western. ‘ XQ.120. But the Missouri Inspection Bureau? A. 0. XQ.121. Are you a member of that? A. Yes, we are a member of the Missouri Inspection Bureau. . XQ.122. Isn’t it a fact the Missouri inspection Bu- reau notified you a suit had been brought in your name involving this sixteen and two-thirds percent rate in- crease, and with that knowledge you just acquiesced? A. I am not prepared to answer that question. The Special Master: All you know is that you knew you had a lawsuit? Harry HALpRIN—DrREctT 93 A. We knew we had a lawsuit and we followed along with the Actuarial Committee. It was the only practical way for us to do. Mr. Bullitt: That is all. Re-Direct Examination by Senator Hollingsworth. RDQ.123. When you received the 11 per cent you were glad to receive it and keep it? A. We certainly were. RDQ.124. And, of course, you kept the 50 per cent also received from the custodians? A. Yes, we got it and we didn’t get it. A lot of it went back to agents, etc. RDQ.125. You disbursed it out on your liability? A. Yes. We only got very little. (Witness excused.) HARRY HALPRIN, being produced, sworn and examined as a witness on behalf of the defendants, testified as follows: Direct Examination by Senator Hollingsworth. Q.1. State your name, please. A. Harry Halprin. Q.2. Mr. Halprin, what was your connection in 1935 and 1936 with the Royal Exchange Assurance group? A. Assistant secretary and assistant branch secretary. Q.3. And your superior officer was Mr.— A. (In- terrupting) John Koenig. Q.4. Do you recall that in March, 1936, you were — upon to issue a check to Mr. C. R. Street? A. I 0. Q.5. Did you issue the Royal Exchange Assurance check for both of your companies? A. Three of them. Q.6. Or three of them? A. Yes. (Photostatic copy of check, handed to the reporter, was marked for identification as ‘“Defendants’ Exhibit 154, EFM.”’) Q.7. I hand you Defendants’ Exhibit 154, which I now offer in evidence. Please state if that is a photostatic copy of a check and endorsements? A. It is. (Which said Defendants’ Exhibit 154, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) ~~ l i ‘ ' ata nae - a rane g Million treet at he tre 7 : Assistant oe Cis cq £- S > A 4 - Rowal Bxcha Tipe FRO su rieaws8t of Gendon. United States » Branch 24 on yNvg W VNOLLYN ssvit E86) G2 UV: Sono ouens)) ier too ayes ee NSWAN vaaan au | L Seas aa CouPrany Pom Peenais “ate Rhviegs 4G TRU Cit: —2SPHsot ex ) ) ; 3 ‘ y ! * - , , 7 Harry HALPRIN—DIRECT 95 Q.8. You countersigned, I believe, as braich secre- ? A. That is right, for the branch secretary. Q.9. For the sum of $6,385.31? A. That is right. Q.10. Does that represent 5 per cent of the im- pounded premiums of your group? A. It does. Q.11. In the Missouri rate litigation? A. That is right. . Q.12. At the time you issued that check who di- rected you to issue it? A. The assistant manager, Mr. E. E. Elwell. Q.13. What, if anything, did Mr. Elwell tell you about it? A. He didn’t say anything, just said it was in connection with Missouri. Q.14. Missouri what? A. The Missouri impounded premiums. Q.15. Was there a requisition for the check? A. I made the requisition. Q.16. Do you have it there with you? A. No, I have not. I think it is amongst the papers there. Q.17. Here is the file that was handed me. See if you find a requisition in it. A. It is part of a book, so I gue . it probably wasn’t photographed. Requisitions were made in the book. Q.18. Kept in permanent bound book? A. We still have that. I looked at it this morning. Q.19. You looked at it this morning? A. Yes. Q.20. What does it say on it? A. It just says, “Pay to C. R. Street” and the amount. Q.21. Pay to C. R. Street? A. That is right, and the amount, and I don’t know whether I initialed it or the cashier. Q.22. Well, is the purpose for which the check is issued on there? A. No. *% ‘. Q.23. Is it customary for you to put it on there? . No. Q.24. On your requisitions? A. No, we just say “As per statement” or something like that. Q.25. “As per statement’? A. That is right. Q.26. Well, of course, you attach the statement to the check requisition? A. Yes. Q.27.. Where you issue a check and don’t have any statement, don’t you write it on the requisition? A. No. Q.28. So if you issue a check without a requisition, you don’t have any record what it is for? A. We have to make an entry in the cash book so that is practically the entry. 96 Harry HALPRIN—DIRECT Q.29. You say that Mr. Elwell told you nothing? A. That is right. Q.30. You didn’t know what it was for? A. Not at that date. Q.31. Well, did you make your book entry after the issuance of the check? A. That is right. Q.32. Did you make a full and complete book entry at that time? A. That is right, yes. Q.33. When was it that you learned anything about the purpose of the check? A. I never learned what the purpose was, but I did know how it was arrived at. That is all. I never did know. Q.34. Do you recall that Mr. Koenig came back from Florida about that time or shortly after the issuance of the check? A. Yes. Q.35. Do you recall he asked you or you asked him about the check? A. That is right. Q.36. What was said between you and Mr. Koenig? A. Well, he didn’t know what it was for. Q.37. He didn’t know? A. No, that is what I asked him and he said he didn’t know. Q.32. Why didn’t you ask Mr. Elwell? A. Well, I did. Q.39. You did? A. He didn’t say anything. Q.40. You asked Mr. Elwell and he didn’t say any- thing? A. That is right. Q.41. In other words, when you issued the check, if I understand you, Mr. Elwell didn’t tell you anything? A. That is right. Q.42. Mr. Koenig came back and he asked you what the check was for? A. That is right. You told him you didn’t know? A. That is Then you went to Mr. Elwell? A. No, I I went before. You went before? A. Yes. You mean before Mr. Koenig came back? A. You went back to Mr. Elwell to find out what it was about? A. That is right, after I issued the check. Q.48. And you said, “What is this for?” A. That is right. Q.49. What did he say? A. He said he didn’t know —I don’t know the exact words, but he said something like he would let me know. Harry HALPRIN—DIREcT 97 Q.50. He would let you know? A. That is right. Q.51. That is all the information he gave you? A. That is right. Q.52. Did you make an entry on your book? A. Yes. Q.53. Did your entry recite— A. (Interrupting) Well, I haven’t the amount, and knowing the setup of the figures I was able to dope out what that represented. Q.54. Well, it represented what? A. What? Q.55. 5 per cent of the premiums? A. That is right. , Q.56. But did you make your entry on the book as to what the check was for? A. Well, I set it up as legal expenses. Q.57. You didn’t know what it was? A. No. Q.58. You had asked Mr. Elwell? A. Well, then in the insurance business it couldn’t be anything else. Q.59. I know, but you asked Mr. Elwell? A. Yes. Well, after all, I have full authority. Q.60. Well, you asked Mr. Elwell, did you? A. Yes. -Q.61. Mr. Elwell was your superior officer, wasn’t he? A. Yes. Q.62. He told you he would tell you later? A. That is right. - Q63. Then you set it up as legal expense? A. That is right. Q.64. You didn’t know it was legal expense? A. No. Q.65. And, as a matter of fact, you had been so curious that you had asked and hadn’t gotten any in- formation? A. That is right. Q.66. But you set it up as legal expense? A. That is right. 2 Q.67. All right, show me the book where you made your first entry now, the page, the very first entry you made. A. I didn’t make it personally, but it is in here. Q.68. Well, you caused it to be made? A. Yes. Q.69. Where is the first entry? A. Right here (indicating). (Said ledger entry, handed to the reporter, was iFM”) for identification as ‘Defendants’ Exhibit 155, Q.70. I hand you Defendants’ Exhibit 155, which I now offer in evidence, and ask you to state if that page from your books entitled “First Disbursements, Royal Exchange Assurance” and under date of March 25th con- 98 Harry HALPRIN—DIRECT tains the entry that you made at that time. A. That is right. (Which said Defendants’ Exhibit 155, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) Defendants’ Exhibit No. D 155 is page from the rec- ords of ROYAL EXCHANGE ASSURANCE entitled “Dis- bursements” which, among other entries, shows on March 25, 1936, C. R. Street, Legal Expense R Mo Rate Litigation showing payment of check (Defendants’ Exhibit No. D 154) as divided between ROYAL EXCHANGE AS.- SURANCE, PROVIDENT FIRE INSURANCE COMPANY and STATE ASSURANCE COMPANY, LTD., in amount $6,385.31. Q.71. Now, that reads “C. R. Street, Legal Ex- pense”? A. Right. Q.72. “R. Mo.” A. Rate litigation. Q.73. What is this? A. That is another entry. Q.74. Then it is broken down here for the com- panies? A. That is right. This is the Royal over here (indicating). Q.75. Then the amounts are broken down and the check numbers are issued? A. Yes, sir. _ Q.76. At the time you made this entry you knew that or thought you would get information from Mr. El- well as to what it was for? A. That is right. Q.77. Why didn’t you wait until you got the infor- mation? A. Well, I didn’t have to wait because I could set it up myself. Q.78. Well, you thought you needed the informa- tion when you went to Mr. Elwell, didn’t you? A. At that time, yes. Q.79. Well, you went to Mr. Elwell and he told you he would tell you later? A. Yes. Q.80. Then you took it on yourself to set it up — you didn’t know what it was for? A. That is right. Q.81. Well, did Mr. Elwell ever tell you? A. No. Q.82. Did you ever go back to him? A. No. Q.83. And to this date you don’t know what it is for? A. I don’t know what it is. Q.84. You never knew either through Mr. Elwell or any other person? A. That is right. Harry HALPpRrIn—Cross 99 Q.85. Who called for the check? A. Mr. Elwell himself. Q.86. Mr. Elwell himself? A. By telephone. We are on a different floor. Q.87. And he telephoned down? A. Telephoned down. Q.88. Did Mr. Elwell tell you to whom he had talked? A. No. Q.89. Now, are these companies managed under the same office? A. ‘Yes, the same office. Q.90. It is all done by one bookkeeping operation? A. Yes. Mr. Berger: The entry he pointed out, pointed that out. A. Yes, it is one check and broken down. Q.91. (By Senator Hollingsworth) Let’s see, when Mr. Koenig came back he asked you about it? A. Yes. Q.92. What was it you told him? A. Well, I ex- plained to him we had a check and what I did and he seemed to be satisfied. : Q.93.. Well, did he tell you that Mr. Elwell had told you he would let you know later, or words to that effect? A. I probably mentioned that to him, but that is all. Q.94. And he seemed to be satisfied? A. That is right. He made a little entry on the sheet here and that was that. Q.95. Do you know whether Mr. Koenig went to Mr. Elwell? A. I do not. Senator Hollingsworth: That is all. Cross Examination by Mr. Bullitt. XQ.96. At the time that you sent these checks to Mr. Street— The Special Master: He didn’t do that. XQ.97. (By Mr. Bullitt) All right, at the time these checks were sent to Mr. Street for this 5 per cent, they were contemporaneously entered on your records of the different companies of your group for legal services or legal expense? A. That is right. ‘ = And Mr. Street acknowledged the receipt? . Yes, XQ.99. Of the check for $6,385.31 in a letter dated March 31, 1936? A. That is right. The Special Master: The question is in making those ‘entries, what does the man think happened? The question is, what did he know? ae 100 HERMAN L. WILKINS—DIRECT XQ.100. (By Mr. Bullitt) Do you know Mr. Pender- gast or Mr. O’Malley or Mr. McCormack? A. No, sir. XQ.101. Did you ever have any communication with them by telephone, telegram, letter or personal contact? A. No, none whatsoever. XQ.102. All you know is that you were asked by Mr. Elwell to pay this? A. Yes. XQ.103. He will be back the first of September, is that right? A. About that time. XQ.104. He is now in Europe? A. Yes. Mr. Bullitt: That is all. Senator Hollingsworth: When did he leave for Europe? A. June 30th. Senator Hollingsworth: You mean he sailed on June 30th? A. Yes, on June 30th. (Witness excused. ) HERMAN L. WILKINS, being produced, sworn and ex- amined as a witness on behalf of the defendants, testified as follows: Direct Examination by Mr. Holman. ‘i Q.1. State your name, please. A. Herman L. Wil- ns. Q.2. Mr. Wilkins, what official position do you hold with the Importers & Exporters? A. I am not with the Importers any more. Q.3. You were in 1935 and 1936? A. I was. Q.4. When did your connection end with them? A. April 30, 1937. Q.5. During the time you were with them did you have any knowledge or information regarding the Mis- souri rate litigation? A. Yes. Q.6. Did you handle that litigation in your office for that company? A. The records of it, yes. Q.7. Did you say what official position you held with them? A. No, I did not. Q.8. What was that? A. Secretary-treasurer. Q.9. Do you know who handled this litigation for all of the companies? A. Street and Folonie, or, pardon me, Hicks and Folonie. Q.10. Hicks and Folonie having been employed by the Subscribers’ Actuarial Committee? A. Yes, sir. HERMAN L. WILKINS—DIREcT 101 Q.11. You knew, of course, that Mr. Street was very active in handling this litigation? A. No, I did not. Q.12. You didn’t know that? A. No. Q.13. Did you know Mr. Street? A. No. Q.14. But the Subscribers’ Actuarial Committee handled this litigation as agent for the companies? A. That is correct. Q.15. And employed Hicks and Folonie and other attorneys to represent the company? A. That is right. Q.16. You knew that and understood it? A. Yes. Q.17. Made no objection to it? A. That is right. Q.18. Now, did it come to your knowledge that about May, 1935, an agreement had been entered into to settle this litigation? A. Yes. Q.19. Do you know the terms of that agreement in a general way? A. Only that it was to be—the im- pounded moneys were to be given 20 per cent to the policyholders, 50 per cent to the companies and 30 per cent to the trustees, Street and Folonie. Q.20. And this 30 per cent that was paid to the trustees was for the purpose of paying all expenses, in- cluding court costs and attorney fees and the balance, if any remaining, was to be distributed among the com- panies? A. That is the way I understood it. Q.21. That is right. Now, did you get that informa- tion through a letter or by talking with someone or reading about it? Mr. Holman: That makes no difference, I will with- draw that. A. I don’t just remember. Q.22. It makes no difference. Now, this settlement that was arranged was satisfactory to your company, that is, you made no objection? A. We made no ob- jection to it. Q.23. You understood that your case, along with all of hog rest of them, was being settled? A. That is right. Q.24. Did you become advised that in February, 1936, the federal court in Kansas City approved this settlement and entered this decree? A. Yes. (Photostatic copy of check, handed to the reporter, was marked for identification as ‘Defendants’ Exhibit 156, EFM.”’’) 102 HERMAN L. WILKINS—DIRECT Q.25. I hand you Defendants’ Exhibit 156, which I now offer in evidence, and will ask you to explain just what that is, if you know. A. It is a check of the Importers and Exporters Insurance Company drawn to the order of C. R. Street, Agent, for $2,482.25. (Which said Defendants’ Exhibit 156, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) $2,468.25 ure, sOur of eS att o HUNOEIOHY Sol AweNy, v Sfees r NUMBERS DUPLICATE OF WHICH 1S RENDERED oe! east > yvighw Ys 5 7 CITY Mariegae Bast “Or encase” 104 Herman L. WILKINS—DIRECT Q.26. You were one of the officers signing that check, were you not? A. That is right. Q.27. Can you explain to the Court how that check happened to be issued? A. Yes. Mr. Erskine of the Insurance Executive Association came to see me and had a check from Street and Folonie for 11 per cent. He asked me for a check for 5 per cent. Q.28. Is that all he said? A. I asked him what the check was for, the check that he requested, and he said he didn’t know, that the request had been passed on to him and he was just asked to get this check, so I told him I couldn’t issue a check without knowing what it was for. So he said, “Well, talk it over with your president and I will be back.” So I spoke to Mr. Valensi, and as the company had reinsured all of its outstanding liabilities as of January 1, 1932, with the American Equitable Assurance Company, and Mr. Valensi asked me to speak to Mr. Barry about it. Mr. Barry is of Carroon and Reynolds, Inc. The Special Master: Who are they? A. They are the managers for the American Equi- table Assurance Company. The Special Master: All right. A. So I spoke to Mr. Barry and he said, “Well, I will let you know about it.” The next I heard— Q.29. (By Mr. Holman, interrupting) Now, let me interrupt you. Do you know Mr. Barry’s initials? A. John R. The Special Master: Go ahead with your story. A. SoI think on the following day Mr. Barry called me and said, “It is all right to draw that check to the order of Mr. Street,” so I drew the check as requested by Mr. Erskine and gave it to Mr. Erskine, charging it to, as I recall, the Missouri impounded rate litigation case Q.30. (By Mr. Holman) You didn’t know what it was for but merely issued the check because Mr. Barry said so? A. That is right. Q.31. And Mr. Barry’s company was— The Special Master: The ultimate recipient of what- ever funds were impounded out there, that is the point. A. That is right. Q.32. (By Mr. Holman) They were interested more than your company was? A. That is right. The Special Master: He did whatever the ultimate owner wanted him to do? HERMAN L. Wi1LKins—Cross, RE-DIREcT 105 A. That is correct. Q.33. (By Mr. Holman) Now, you have told all you know about the Missouri rate litigation as concerned your company? A. That is correct. Q.34. Or all you know about it as concerns any other company? A. That is correct. Q.35. You have no other information regarding the settlement or what brought about the settlement? A. Only from what I have recently learned. Q.36. Read in the newspapers? A. That is right. Q.37. You knew nothing about that until recently? A. That is correct. Mr. Holman: I believe that is all. The Special Master: His explanation is entirely satisfactory. Cross Examination by Mr. Bullitt. XQ.38. Your impoundings were $49,000.00 and you got back around $30,000.00 and you paid out for these expenses about $2,400.00? A. That is right. XQ.39. That is all you know about it? A. Yes, sir. XQ.40. Did you ever know Mr. Pendergast, Mr. O’Malley or Mr. A. L. McCormack? A. No. XQ.41. Never had any communication of any kind with them? A. No, sir. Mr. Bullitt: That is all. The Special Master: This man didn’t have any oc- casion to know anything about it. He wasn’t interested. Re-Direct Examination by Mr. Holman. RDQ.42. You mentioned you received 11 per cent. Your company received 50 per cent prior to that time? A. The 11 per cent I mentioned was the check Mr. Erskine brought along with him. RDQ.43. Well, you had already received 50 per cent? A. From the custodian. Mr. Holman: That is all. (Witness excused. ) HARRY G. CASPER, being produced, sworn and ex- amined as a witness on behalf of the defendants, testified as follows: Direct Examination by Judge Henson. Q.1. State your name, please. A. Harry G. Casper. 106 Harry G. Casper—DIREcT Q.2. Mr. Casper, what is the name of your com- pany? A. The name presently is the Eagle Star In- surance Company, Ltd., having been shortened about eighteen months ago from the Eagle, Star & British Do- minions Insurance Company, Ltd. Q.3. Is the last name you gave just now the name of the company in 1935 and 1936? A. In 1935 and 1936 the name of the company was the Eagle, Star & British Dominions Insurance Company, Ltd. Q.4. What is your position with that company? A. Presently I am United States Manager. Q.5. What was your position in 1935 and 1936? A. In 1935 until July 1st I was assistant United States Mana- ger, thereafter United States Manager. Q.6. Now, Mr. Casper, your company in 1935 and 1936 and prior thereto had a suit in the federal district court, United States District Court at Kansas City, Mis- souri, I believe, involving the Missouri rate cases? A. Yes. Q.7. Who was handling that for you? A. The at- torneys were Hicks and Folonie. Q.8. And what particular committee was in charge of it? A. The Missouri committee of the Western Ac- tuarial Bureau. I would say I think, because that is my definite conviction at the moment. Q.9. And what connection did the Subscribers’ Ac- tuarial Committee have to do with it? . | EAGLE, STAR & BRITISH DOMINIONS INSURANCE CO,, Lod. 90 JOUN STREET - NEW YORK CITY Harry G. CasPpER—DIRECT 113 Q.35. Then you posted this voucher and that is in your handwriting, is it? A. It is not. Mr. McBride at that time, as the check shows, was chief accountant. Since that time he is United States branch secretary. I do not issue checks in any way, but they issue them upon my request or instructions, so I called Mr. Mc- Bride and told him I wanted the check for this and it was at that time the matter of how it was to be charged came up. McBride went back to his desk—no, McBride went out and brought me back the check with this voucher made out to this extent. Q.36. Just indicating? A. You notice this is a different writing than this (indicating). Q.37. The date, 3-24-38, and “C. R. Street, Agent,” and the number 45827 was all that was on this sheet? A. When he walked back into my office with the check which at that time was made out, but at that time he says, “I have to have this information, Mr. Casper,” so when he got that information he went back and filled this out and this is McBride’s handwriting. That is the handwriting of the cashier whose initials are there. Q.38. Now, the words here at the top of the ac- count, “Legal Expenses,” and down in the middle of it, “In connection with adjustment of Missouri impounded refund to 4-30-36,” that was all done under your super- vision, was it; that was put in there at your direction? A. Not as of a verbatim direction. It is the result of the conversation, Mr. McBride’s choice of words. The Special Master: That is the way he boiled down the information you gave him? A. That is the way he boiled down the information. Q.39. (By Judge Henson) Now, I show you Exhibit 159 which I now introduce in evidence. Mr. Bullitt: Did you offer that 158 in evidence? Judge Henson: Yes, I stated it along with the ques- tion to shorten it. Mr. Bullitt: All right. Judge Henson: Just to shorten this. Q.40. I show you Exhibit 159 which I now intro- duce in evidence and ask you what this page is. A. It is a photographic copy of a page out of our cash book. (Which said Defendants’ Exhibit 159, so offered in evidence, having been previously duly marked, is in words and figures as follows: ) 114 Harry G. CASPER—DIRECT ‘ Defendants’ Exhibit No. D 159 is page 252 of the cash book of EAGLE STAR AND BRITISH DOMINIONS INS. CO., LTD., month of March, 1936, which among other entries, shows check No. 45827, account “Legal Expense, payable to C. R. Street Agent. In connection 31,03 Adjustment of Missouri Imp. Refund to 4/30/36 1,028.57.” Q.41. And calling your attention to the sixth line here where the check is posted, and it is marked, “Legal, C. R. Street, Agent, in connection with adjustment of Missouri impoundment refund to 4-30-36,” and the amount, $1,028.57, in the two columns. Now, did you have anything to do with entering that? A. Absolutely not. Q.42. Who did that? A. The cashier. Q.43. Now, Mr. Casper, did Mr. Erskine tell you that this was for legal expense? A. He did. Q.44. Did you ask him what particular legal ex- pense it was? A. No. Q.45. You knew that the legal expenses were to be drawn out of this 30 per cent, the 30 per cent being a part of the 80 per cent? A. I am not prepared to admit I knew at that day. Q.46. You are not sure you knew at that day? A. I had known it prior to that time because we had the bulletin giving the original disposition saying that the 30 per cent— The Special Master: What you mean is you are not prepared to admit you had it in mind at that time? A. I am not prepared at that time to admit there was any memory of that thing in any way, shape, or form. Q.47. (By Judge Henson) So, of course, you had no idea about a possible double payment? A. None at all. Q.48. Did you ask Mr. Erskine for any particulars about the expense of it? A. None whatever. All ! asked was, is that a relative situation. Now, I am not trying to repeat the words—‘“Are we all doing it? Is this a requirement of them all?” May I digress a moment and say just this, that in view of events I am a whole lot dumber than I thought I ever was. The Special Master: You are a whole lot what? A. Whole lot dumber than I thought I was. Mr. Bullitt: He? Harry G. CaspER—Cross 115 The Special Master: “TI,” he said, in view of events. I presume he means subsequent events? A. Yes, sir. Q.49. (By Judge Henson) You had implicit con- fidence in Mr. Street? A. I disliked the man thoroughly, but I had perfect confidence in his integrity and ability. Q.50. That was what caused you to make the check to Mr. Street? A. Yes. Q.51. He could have gotten any other amount than this? A. Anything he would have asked for with the statement that it was relative. Q.52. Relative? A. And my confidence, of course, in Mr. Erskine and this office would be the same. The Special Master: He said it was relative. He means it was a prorata basis and applicable to all of the companies involved; that is what you mean? A. Yes, sir. Mr. Bullitt: He thought it was “relevant,” “rel- ative.” A. Let’s change it and say “proportionate.” Mr. Bullitt: Relative to the 11 per cent transaction. A. No, that use of the word “relative.” Mr. Bullitt: Relative as to the other companies. The Special Master: I understand him, that it ap- plied equally to all of the companies, according to their proportionate interest. A. We asked for no less and intended to do no more than our share always. Judge Henson: I believe that is all. Cross Examination by Mr. Bullitt. XQ.53. Did you, or, so far as you know, anybody else connected with your company have any personal ac- quaintance with Mr. T. J. Pendergast or Mr. O’Malley or Mr. A. L. McCormack? A. Mr. Pendergast and Mr. O’Malley I can only answer definitely for myself and say none whatever. I will answer somewhat more in- definitely for anyone else connected with the company and say I don’t think any person had. I think back in the past, fifteen, twenty years ago, I think I remember personally meeting Mr. McCormack at some agents’ meet- ing or something. XQ.54. Did you ever by telegram, telephone, letter or personal conversation have any communication with Pendergast or O’Malley or McCormack regarding this rate situation or the settlement of it? A. I did not. 116 Harry G. Casper—RE-DIRECT The Special Master: Mr. Casper, was there any romise that there would be an accounting given to you or what this was for? A. I don’t know that there was. I can’t remember that there was any accounting. The Special Master: That there would be any state- ment given. to you? A. I am prepared to answer that no, there wasn’t any. I didn’t even ask for it. The Special Master: ‘There never was any intima- ~ that you would get any detail more than you ever A. No. XQ.55. (By Mr. Bullitt) Did you or anybody con- nected with your company, so far as you know, ever ask Mr. Street to act for you in any way? A. No, in no way. We smaller companies do a great deal of following and very little leading, much to my discouragement some- times, and the matter was in the hands of trusted coun- sel with implicit faith in the integrity of the committee, so when the suit was started, when it was ended, when it was carried on and everything, we asked no questions whatever. Does that answer your question? XQ.56. Yes. Did you or your company ever au- thorize Mr. Street or anybody else to pay any money to Pendergast or anybody else so as to get a settlement of this kind? A. No. Mr. Bullitt: That is all. Re-Direct Examination by Judge Henson. RDQ.57. Mr. Casper, do you think of anyone else in your office that would know anything about this trans- action more than what you have detailed right here? A. There is no one else in the office that would know anywhere near as much, except in details. Mr. Mc- Bride would know more details because he handled the details. From what is called an executive viewpoint, there wouldn’t be anybody else in the office. RDQ.58. Mr. McBride only did the clerical? A. That is all. RDQ.59. He didn’t see Mr. Erskine, so far as you know? A. He saw him that day he came to my office. He was called in and stood there a moment while this matter was disposed of. RDQ.60. Now, these exhibits that are shown you, are they all that you know of in your office that relate Joun R. Barry—Drrect 117 to this transaction at all? A. Except the big file having to do with all of the bulletins, and does your question have in mind the matter of this getting information for this wrongful payment of money in fee? RDQ.61. Yes. A. Certainly there is no one in our office knows anything of that. Judge Henson: I believe that is all. (Witness excused.) JOHN R. BARRY, being produced, sworn and examined as a witness on behalf of the defendants, testified as follows: Direct Examination by Mr. Holman. Q.1. State your name, please. A. John R. Barry. Q.2. What official position do you hold with Corroon & Reynolds? A. Vice-president. Q.3. Just what is the nature of the business of Cor- roon & Reynolds? A. We are underwriting managers. Q.4. Just explain that a little further, if you please, for the record. A. Well, in the case of the company that is interested in this Missouri litigation, Importers & Exporters Insurance Company, I was not an officer nor were any of Corroon & Reynolds Company officers. We operated the company after they reinsured their entire portfolio under a sort of a general agency or underwrit- ing manager’s basis. Q.5. Something was mentioned here a minute ago about an equitable company. A. The American Equi- table. We reinsured their entire liability at the end of 1931. Q.6. With Corroon & Reynolds? A. With the American Equitable Assurance Company, Corroon and Reynolds being managers. The Special Master: They have to reinsure with the company. This is only a company that has the man- agement contract by which they do the underwriting for the company, but the company has to actually reinsure in order to comply with the insurance regulations? A. That is right. Q.7. (By Mr. ‘Holman) The American Equitable Company reinsured all of the risks of Importers & Ex- porters? A. Yes. ‘*" Q.8. You manage that American Equitable Com- pany? A. Yes, sir. . wt 118 JoHn R. Barry—DIReEctT The Special Master: And thereby you had the in. terest in the disposition of the impoundings for the com- panies that were reinsured? A. We had some interest in it. The Importers & Exporters had a big interest in it because up until the time they reinsured the business, whatever was coming from Missouri belonged to the Importers & Exporters, The Special Master: When did they reinsure? A. I think it was the end of 1931. I am not sure. The Special Master: Then in 1936 that would be probably all run out? A. In fact, the company left the state, I think, in 1932; wasn’t in the state, °32, ’33, 34 and °35, and hasn’t been in since, as a matter of fact. The Special Master: What I mean a five year policy would run off in six years? A. Oh, yes. The Special Master: At the end of the five years would be practically run off? A. Practically run off. The Special Master: All right, go ahead. Q.9. (By Mr. Holman) Do you recall that about March, 1936, Mr. H. L. Wilkins with the Importers & Exporters called you relative to the payment or the is- suance of a check to C. R. Street, Agent, presumably for certain expenses in connection with the Missouri rate litigation? A. Yes. Q.10. Just tell us all you know about that conversa- tion. A. Well, in that conversation Wilkins was the treasurer of the Importers & Exporters. I was not an officer of the company. A request had evidently been made to Wilkins to draw a check for 5 per cent of the impounded premiums of the Importers & Exporters. Wil- kins asked me what I thought about it, whether he should draw the check, and I said, “Well, I think you better draw the check. It is the request from Mr. Street who has been handling this matter for years, and if he wants 5 per cent, give it to him.” Q.11. Now, didn’t you take a day to investigate that before you told him that? A. No, I did not. Q.12. Then if he testified that he took the matter up with you and that you told him you would call him back later, he was in error? A. No, I wouldn’t say he was in error. I probably said, “I will call you back later,” because I wanted to sit down and figure out what the thing was all about. Joun R. Barry—DIrect 119 Q.13. Then if it wasn’t a day, you did take some period of time to think it over? A. Yes, but I can’t remember all of that detail. I may have said to Wilkins, “T will call you back.” I may have been busy at the moment. Q.14. Did you make any investigation as to what this money was for? A. No, I did not. Q.15. You have no idea what it was for? A. No, I had no idea what it was for. I assumed that Mr. Street handling this matter, if Mr. Street called for 5 per cent, an outstanding executive in the insurance business, who had had the full responsibility, if he called for 5 per cent, I couldn’t be asking him in detail what it was for, on the theory that when the matter was all wound up we would get an accounting from Mr. Street, or Folonie and Hicks, whoever it was, as to what had happened. Q.16. You knew at that time that Mr. Street had been representing as agent, with full responsibility re- garding this Missouri rate litigation? A. I didn’t know that definitely. I didn’t know much about it. We were in the state court. I assumed Mr. Street—I knew Mr. Street was chairman of the committee that was handling the litigation, and I assumed he had full responsibility and authority to act for the companies. Q.17. You didn’t call anyone up and make inquiry about it? A. No, I think, as I reflect on it, I think Mr. Haid called me up and said that the request had been made of the Importers & Exporters for the check, if they asked me about it, would I tell them to get the check over. I do remember that part. Q.18. Was that done before or after Mr. Wilkins took it up with you? A. I can’t remember that. I have tried to think whether it was before or after and that would be a perfectly natural request because the Importers at the time was practically dormant; I mean doing nothing. They just had a president and secretary there and no office organization of any kind. Q.19. Did you ask Mr. Haid what they wanted this money for? A. No, I did not. Q.20. He just called you up and said, “If the Im- porters & Exporters talk to you about this, you have them get out that check”? A. Well, “Will you please — him to send the check along?” Or words to that ect. 120 Joun R. Barry—Dr1rect Q.21. You just took that request as he said it and complied with it? A. Just as I get lots of requests in the business. Q.22. Isn’t it your practice in the business to in- vestigate what you are doing and know what you are paying out money for? A. I knew that the Importers & Exporters was paying 5 per cent in connection with matters that had been going on for years, and they were paying to Mr. C. R. Street, who was the chairman of that committee, and I don’t think there was anything illogical to say, “Go ahead and give it to them.” Q.23. Didn’t you know that prior to that time this case had been settled? A. No. Q.24. You didn’t know anything about that? A. No. Q.25. You didn’t know that at the time they re- quested this 5 per cent check they handed the Importers & Exporters a check for 11 per cent? A. I didn’t know whether they handed it to them at that time. Q.26. You knew they got it? A. I don’t know that they got it. I mean I was not an officer of the Im- porters & Exporters. Q.27. Well, but you were interested indirectly? A. Yes, but I don’t know whether they got it or not. The Special Master: Let’s see if I get it. Your own company was in the state court? A. All our companies. The Special Master: Your matters in the state court cases were not settled? A. As far as I know, they weren’t settled. I don’t think they are settled yet. The Special Master: And the only connection you had with any federal court was by reinsurance only? A. Was by reinsurance; the only reason I would be asked as to whether it was all right to give the check to Mr. Street was that the Importers had moved over into our office and Wilkins was a minor officer wanting to know whether it was all right to draw a check for 5 per cent. He probably asked me about any other number of items that Importers paid with no connection with this as to whether it was all right to pay it. Q.28. Was Mr. Haid in the practice of supervising the collection of funds in regard to litigation of insurance companies? A. No, not so far as I know, he wasn't, because we never had any other matter besides. this particular one. JoHN R. Barry—Cross 121 Q.29. Were you in 1935 or 1936 an officer of or interested in, either directly or indirectly, any company connected with the federal court rate litigation in Mis- souri? A. No, not that I know of at the moment. Q.30. Well, if you had been, you would know of it? A. I think I would, yes. Mr. Holman: I think that is all. Cross Examination by Mr. Bullitt. XQ.31. Do you or any member of your firm know Mr. Pendergast or Mr. O’Malley or Mr. A. L. McCormack? A. Well, I knew Mr. McCormack slightly because he was with Charles L. Crane & Company, agents out in St. Louis. Mr. O’Malley I knew slightly, having met him at an Insurance Commissioners’ Convention. Mr. Pendergast I did not have the privilege or honor, or what- ever you want to call it, of knowing. The Special Master: He was quite a colorful per- sonality. A. I understand so. XQ.32. (By Mr. Bullitt) Did you or any member of your firm have any communication by telephone, tele- gram, letter or personal contact with Pendergast, O’Malley or McCormack regarding the Missouri litigation or any settlement of it? A. No. XQ.33. Did you ever authorize Mr. Street to pay out any money to settle the litigation? A. No. Mr. Bullitt: That is all. The Special Master: That is all. We will adjourn to a quarter after one. (Witness excused.) Whereupon, the further taking of testimony in said case was adjourned until one-fifteen p. m. of said Wed- nesday, August 2, 1939. 122 Everett W. Nours—E—DIREcT AFTERNOON SESSION, WEDNESDAY, AuGuUST 2, 1939. Pursuant to adjournment as aforesaid, at one-fifteen o’clock p. m. of said Wednesday, August 2, 1939, came again the same parties, present and presiding as before, and the taking of testimony continued as follows: EVERETT W. NOURSE, being produced, sworn and ex- amined as a witness on behalf of the defendants, testified as follows: Direct Examination by Senator Hollingsworth. Q.1. State your name, please. cath Seeman —— neeailias (5 “Bree ei oD BER DY MES "32261936 | 7. ‘ -* ee al \vjeee ae Creer, seme =e en\s00 -- - - - 25 ct ~—— 7h" e . 4 : "3 ae Vi “so. *s ee se 2"$ ; ° ef _ S teas “ ‘Se Ta. eve ey! ee eee o ~~ es “e "on 4 see e eee eee ee ween 3° 2e° v . » *2 89, r + eee e@ 4 i“« 66 @¢ > a ’ ee © sou” : ] Paut B. Sommers—DIREcT 139 Q.57. (By Senator Hollingsworth) Now, can you tell me whether at the time you issued that check you had received the 11 per cent check? A. We either had or Mr. Haid assured us that the check was on its way to us, one or the other. Q.58. What, if anything, did he say to you about the urgency of a prompt remittance? A. I only recall, sir, that he said that on receipt or simultaneously with this check we were to issue our check for 5 per cent. I don’t know that he did say it was urgent, but that is all I can remember. The Special Master: Whatever he said, it resulted in your issuing the check forthwith? A. Yes, sir, forthwith. I can not recall. Q.59. (By Senator Hollingsworth) Now, I notice on the requisition it says, “In connection with Missouri impounded premiums”? A. Yes, sir. Q.60. Did Mr. Haid give you any information other than that it was funds to be used in connection with Missouri impounded premiums? A. No, sir. Q.61. Then he didn’t tell you the purpose of the check other than that? A. No, sir. Q.62. You didn’t know what its purpose was at all? A. No, sir. We were given to understand it was for legal expenses. Now, I can’t say that that was that day. I think maybe it was a day or two later that we were informed that it was for legal expenses. Q.63. You think it was a day or two later that you were informed it was for legal expenses? A. I can’t be sure. Mr. Bullitt: The witness didn’t say it was so. He said it might have been a day or two later. Q.64. (By Senator Hollingsworth) What causes you to have that impression? A. The reason I have that impression is that because the information came from Haid. That is the only reason I have it, and I maybe shouldn’t have such a reason, but— Q.65. (Interrupting) Well, if you had received the information from Mr. Haid at the time the check was drawn that it was for legal expense, wouldn’t you have put that on your memorandum? A. Yes, sir. Q.66. So you put it on the memorandum, the in- formation that you did get from Mr. Haid? A. Yes. Q.67. And that reads, “In connection with Missouri impounded premiums”? A. Yes, sir. 140 Paut B. SomMERS—DIRECT Q.68. You think that that was all of the information that you had at that time? A. That is all of the in- formation I had at that time. Q.69. Now, then, you have an impression now that it was for legal expenses that you later got that idea? A. Yes, sir, because my memo and my books show that it is entered for legal expenses, which was done. Q.70. The memo is a memo that you made in 1939? A. Yes, but from our records which you have a photo- static copy of— Q.71. (Interrupting) Now, you have here an entry on your books typewritten. I don’t know what that sheet is, headed, “The American Group.” What particular book of entry is that? A. That is our Western Department Account with the home office. Q.72. Would this entry on your Western Depart- ment account with your home office have been made contemporaneously or the same day as the issuance of the check or later? A. No, sir, it would have to be made a day or so later because we would have to notify the Western Department. Mr. Berger: That is the monthly statement? A. That would be the end of the month. They wouldn’t know until we notified them. Q.73. (By Senator Hollingsworth) Then do you think at sometime between the hour and day that you issued the check and the hour and day on which the entry was made in this book that you received additional information that it was legal expense? A. Yes, sir. Q.74. Do you recall the circumstances under which you got that additional information? A. I can not, sir. Q.75. You can’t recall that at all? A. No. Q.76. You can’t recall whether you made inquiry or whether Mr. Haid furnished it to you gratuitously? A. I can’t tell which. Q.77. If it came to you from Mr. Haid either at your seeking or gratuitously from him, it came by telephone? A. Yes, sir, because I am just assuming something when I say this, that I wanted to know what it was for and called to ask before I gave notice to our Western De- partment. That is my assumption. The Special Master: You don’t remember such 4 thing and that just occurs to you as a logical explanation? A. That is all. I only remember the one conversa- tion with Mr. Haid definitely where he said that either simultaneously— Paut B. SommMers—Cross 141 The Special Master: The mere fact that those entries ended up the way they did, suggests that you may have done that also, but you have no recollection of it? A. That is right, I have no recollection of it. Q.78. (By Senator Hollingsworth) Why did you pay out to Mr. Haid? A. I didn’t pay but 5 per cent. Mr. Bullitt: Mr. Street, you mean? Q.79. (By Senator Hollingsworth) I mean Mr. Street at Mr. Haid’s request, 5 per cent, when you didn’t know the exact purpose for which it was to be used? A. Why, I can explain it that when Mr. Street and Mr. Haid asked for 5 per cent, I think they could get 5 per cent from us tomorrow on any amount that they remitted to us, if— Q.80. (Interrupting) Regardless of the purpose? A. Oh, no, no, sir. Q.81. Well, not knowing for what it was to be ex- ed? A. Oh, I can’t answer that now. Senator Hollingsworth: I think that is all. Cross Examination by Mr. Bullitt. XQ.82. I notice that the check, Defendants’ Exhibit 162, was made to the order of C. R. Street for $9,719.03. Was anything said to you about making it out to his name individually or his name as agent or do you re- member anything about that? A. I can not remember. Now, wait, I can remember we were instructed to make it to Mr. Street, but I can’t remember whether it was agent or— XQ.83. (Interrupting) Did you or did anybody—oh, by the way, did that check for $9,719.02 represent 5 per cent of the impounded funds of the American Insurance Company only? A. No, sir. XQ.84. It included also the Columbia? A. Yes, sir. The Special Master: It was a check for the group? They make the distribution afterwards? A. Then the company pays the American. The Special Master: It is just charged back and forth, is what they do, and if there is a balance they make it good by check? A. In this case the Columbia made the check. XQ.85. (By Mr. Bullitt) And then the Columbia Fire Insurance reimbursed the American Insurance Com- pany for their share? A. For their share. XQ.86. Of $824.12, didn’t they? A. $824.12. 142 Paut B. SomMERS—CROSS XQ.87. And at the time that that reimbursement was made, I show you a voucher for that. Do you know in whose handwriting that voucher is and who authorized it? A. I would say that that is Mr. Vandenboom’s. XQ.88. Who is he? A. He was then chief ac- countant. XQ.89. And I notice— A. (Interrupting) This is our treasurer’s. XQ.90. And it says “5% legal fee, Missouri impounded premium.” Do you know where you got that information? A. I can not say. What date is that? XQ.91. It is paid March 23, 1936. A. It was on there at that time, so the information must have been given. XQ.92. I will show you 162— Senator Hollingsworth: You may let the record show, if there is no objection, that we have asked the — of Defendants’ Exhibit 163, and offer it in evi- ence. Mr. Bullitt: It is a part of that they are putting in there. (Said voucher, handed to the reporter, was marked for identification as “Defendants’ Exhibit 163,” which be- ing offered in evidence, is in words and figures as follows: ) ? Sey ww nO os Ol NO3HO 3NVIN 144 PauLt B. SOMMERS—CROSS XQ.93. Do you know Mr. T. J. Pendergast or— The Special Master: Let me make this suggestion, Mr. Bullitt: In view of the fact that these people live so far away from Missouri, unless there is evidence to the contrary I will always assume and find that the wit- nesses were not acquainted with T. J. Pendergast, R. Emmet O’Malley or with Mr. McCormack. There is no reason to assume that any of them are personally ac- quainted with them unless there is some evidence intro- duced to that effect. Mr. Bullitt: That will save time. The Special Master: A [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_0027%3A2. Public record. Not legal advice.