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corporation stocks, a kind of investment which the company announced in annual reports and public statements that it did not hold. Then Mr. Perkins's connection with a banking house enabled the company, between December 31, 1903, and January 2, 1904, to juggle investments in such a way as to conceal its participation in $800,000 of Mercantile Marine underwriting, and to falsify its sworn report to the insurance department. The Equitable Society utilized similarly its connection with Kuhn, Loeb and Co. by arranging year's-end loans to office boys and clerks of the banking house, in order to facilitate the doctoring of its sworn reports. In these and some other transactions the insurance magnates probably laid themselves open to criminal prosecution,- even in New York, "the city of refuge for the criminal rich." Yet so firmly were they entrenched financially, legally, and politically that they would probably be in full control to-day, if internal dissensions had not revealed enough of their wrong-doing to make public investigation inevitable.

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For several months the large companies, with singular obtuseness, showed no appreciation of the situation. They had weathered other storms, and believed that this one would soon blow over and be forgotten. With effrontery that now seems incredible, the Mutual and the New York Life sought to utilize the early disclosures concerning the Equitable for the purpose of making a raid upon the business of that company. Even within the Equitable Society, the most dangerous of the Wall Street directors hoped to oust the Alexander management, and bring the organization under their absolute control. Only when startling revelations had raised popular indignation to a pitch that made further trifling dangerous, did the offenders begin to see the error of their ways. And then, of course, they professed complete change of heart,

and assured the public that all abuses would be speedily righted. The matter, they said, was one which called for little or no legislative interference; life insurance, like trusts or the tariff, should be reformed by its friends.

The advertised process of reform began in the Equitable Society. Realizing that his position was no longer tenable, Mr. James H. Hyde sold his controlling interest in the stock ($51,000 out of $100,000) to Mr. Thomas F. Ryan for the sum of $2,500,000. At the same time, and virtually as a part of the transaction, Mr. Paul Morton was made president of the society. Mr. Ryan then placed his stock for a period of five years in the control of three trustees who are empowered to select directors, twenty-four according to their own views, and twenty-eight after ascertaining the wishes of policy-holders. Under this arrangement some good men have been placed upon the board of directors; but the plan is hardly more than a makeshift, and cannot be considered a permanent solution of the difficulties attending stock ownership of insurance companies. It is stated that Mr. Ryan has agreed to sell his stock to the society for the price which he paid plus interest at four per cent, but no movement has yet been made in this direction. Meanwhile, under the new management, various economies have been effected, and certain abuses have come to an end, at least, for the present. Among other things, the cash balances kept with subsidiary banks and trust companies have been greatly reduced. With these changes the process of reform is now declared to be complete.

Unfortunately there are the best of reasons for believing that the present position of the Equitable Society is far from satisfactory. The first of these is found in the history and present affiliations of Mr. Ryan himself. He has testified that in his purchase of the Equitable stock he was actuated by purely altruistic motives; but his past record in American Tobacco, in New York traction enterprises, in Con

solidated Gas, and in city and state politics, proves that he is not in the habit of combining altruism with business. It so happens, moreover, that in his relation to the Washington Life Insurance Company he has demonstrated precisely what his notions of philanthropy are, at least as applied to the business of life insurance. That company having become embarrassed, Mr. Ryan acquired one third of its stock in 1904, and was made a member of the executive committee. Prior to that time the company had invested mainly in real estate and mortgages; but under its new management large purchases of securities were begun, and, curiously enough, forty per cent of them were made through the brokerage firm of which Mr. Ryan's sons were members. Then, too, by a similar coincidence, many of the securities bought were those of the American Tobacco Company and other concerns in which Mr. Ryan and his associates were interested. Finally, the insurance company transferred its bank accounts to institutions controlled by Mr. Ryan and his friends. On December 21, 1902, it had but $232,000 in office and in banks; but in January, 1905, its deposits in the Morton Trust Company, controlled by the new managers, amounted to $1,157,000. These performances are enough to show that, whatever his success in other lines of philanthropy, Mr. Ryan is almost the last man whom one would entrust with the control of an insurance company, large or small.

Although opposition may yet develop among some of the new members of the board of directors, Mr. Ryan is now supreme in the affairs of the Equitable Society. In the president's chair he has placed a man who knew nothing about the business of life insurance, and came to New York wearing several ineffectual coats of whitewash, which failed to conceal his previous record as a violator of the Interstate Commerce Act. Conspicuous among the offenses of his railroad had been the granting of rebates to his own brothers, a fact that would indicate that VOL. 97 - NO. 5

Mr. Morton's ideas upon the application of altruism to the transportation industry exactly coincide with Mr. Ryan's notions about the relation of philanthropy to life insurance. Mr. Morton has made no radical change in the all-important executive committee of the Equitable Society, upon which he is content to sit with several of the directors who belonged to the notorious underwriting syndicates, which, more than anything else, led to the retirement of Messrs. Alexander and Hyde. He has not taken the first step to sever the Equitable's relations with the financial institutions which connected the society with Wall Street; but, on the contrary, has accepted positions on the boards of the Bank of Commerce and the Equitable Trust Company. Prominent on the executive committee of the Equitable Society are the presidents of these allied institutions; and over all hovers Mr. Paul Cravath, Mr. Ryan's personal counsel.

As this is written, Mr. Morton has appeared before a committee of the New York Legislature to protest against the passage of a bill prohibiting insurance companies from investing in corporation stocks or collateral trust bonds secured mainly by hypothecated stock. He stated that he accepted the conclusion of the Armstrong Committee that it is undesirable for insurance companies to "control or dominate" financial institutions, but pleaded that they be allowed to own stock in banks and trust companies up to the limit of twenty per cent of the total capital. Since the Equitable Society and the Mutual Life are heavily interested in the Bank of Commerce and some other financial institutions, Mr. Morton's proposal would hardly disturb existing conditions; and a little judicious redistribution of present holdings would be all that would be needed to keep the control of other concerns well in hand.1 In similar

1 In considering this point it is necessary to remember that the directors and officers of the companies also hold stock in the subsidiary Mr. Ryan, too, is interested in the Bank of Commerce.

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vein, he urged that, under some restrictions, insurance companies should be permitted to purchase collateral trust bonds, the favorite device by which magnates obtain irresponsible control of railway properties, and should not be forbidden to participate in underwriting syndicates. If his views should be accepted by the legislature, the proposed reform of the insurance laws would impair the usefulness of the Equitable Society to Mr. Ryan as little as the alleged reform of its management has done.

It is true, indeed, that the past year has seen the end of certain abuses and the introduction of important economies in administration; but, so far as Wall Street affiliations are concerned, the position of the Equitable Society is distinctly worse than before the late upheaval. President Alexander, whatever his faults, was the creature of no financial magnate; and, when compelled to choose, finally placed himself squarely between the society's millions and the speculative clique which sought to control them for personal ends. No similar obstacle stands in Mr. Ryan's way, unless, perchance, some of the new directors prove refractory. It is true that "mutualization" is contemplated, but this will merely eliminate stock control. The policy-holders may receive the right to elect directors, but the machinery of the company is now in Mr. Ryan's hands, and his influence will not necessarily be shaken. In the past, the mutual companies have been controlled absolutely by their officers; and the Equitable's present owner is perfectly aware of that fact. Mutualization, he doubtless expects, will simply relieve him of the necessity of keeping $2,500,000 tied up in $51,000 of securities that yield but $3,570 per year. Nothing but a radical change in the law relating to the election of directors in mutual companies, supplemented by a

1 When stock is purchased by an issue of collateral trust bonds, the magnates obtain the voting power which the stock confers upon its owner, in exchange for bonds which confer no voting power upon their holders.

general uprising of policy-holders, is likely to upset his plans.

So long as the insurance disclosures were confined to the Equitable Society, the Mutual and the New York Life maintained an attitude of conscious virtue, and endeavored to draw business away from their rival. Last fall, when their managers were obliged to go before the Armstrong Committee, they set their publicity bureaus working over time in order to enlighten the public, and filled the newspapers with interesting reading matter, inserted at one dollar per line, assuring us that their records were beyond reproach. It took Mr. Hughes but a short time to expose the secrets of these whited sepulchres, and blast the reputations of their principal officers. The necessity of radical changes soon became evident; but the companies displayed no indecent haste in undertaking the work of reform. At length, however, Messrs. McCall and McCurdy resigned, and committees were appointed to clean and disinfect the premises.

The Mutual Life set its "housecleaners" at work late in October. Mr. W. H. Truesdale was chairman of the committee, and Mr. J. W. Auchincloss and Mr. Stuyvesant Fish were the other members. None of them had been identified actively with the previous management, but Mr. Fish was the only one who possessed the courage and independence needed for the task ahead of them.2 Plans were made for a thorough investigation of the company from top to bottom, an investigation that must necessarily have laid bare the shortcomings of the Wall Street directors under the old régime. Immediately a movement was started by Mr. George F. Baker and Henry H. Rogers, chairmen, respectively, of the finance and agency committees, to secure a new president for the company. The better ele

2 It should be pointed out in this connection that Mr. Truesdale is president of a railroad which numbers among its directors Mr. G. F. Baker, Mr. William Rockefeller, and Mr. James Stillman. Like the other anthracite coal roads, it is under very close Wall Street control.

ment in the directorate opposed precipitate action, but, through the methods of persuasion of which Mr. Rogers is a past master, were finally induced to give their consent. The choice fell upon Mr. Charles A. Peabody, law partner of the brother of Mr. G. F. Baker, counsel of the First National Bank, and director in various corporations. Without considering what other qualifications he may have possessed, it is evident that Mr. Peabody was utterly disqualified for the main work before him,investigating the very men who had placed him in office, and taking the Mutual Life Insurance Company out of Wall Street.

Before long it was apparent that some mysterious influence was interfering with the investigation by the "housecleaning" committee. Rumors were rife for a time; then Mr. Fish resigned from the committee, and, soon after, from the directorate of the company. Authenticated documents, now matters of record, enable us to determine the material facts in the episode.

Upon the basis of evidence easily obtainable, the Truesdale Committee recommended that suits be brought against various members of the Clan McCurdy to recover excessive salaries and commissions paid them without proper authority. But many dark places remained unexplored, some of the books and records had been destroyed, employees had been spirited out of the state, and the committee was obliged to ask the president to institute inquiries concerning various acts of officers, employees, and trustees, including particularly their relations with allied and subsidiary companies. Such information, it stated, would be absolutely necessary for the preparation of further suits that might need to be instituted. This was carrying the war into Africa, into the very heart of the Dark Continent; but it was the least that honest investigators could do.

The institution of suits against the McCurdys would have been a simple matter, except for the fact that such litigation

might bring out unpleasant information about men still on the board of directors. Mr. Rogers, for instance, was chairman of the agency committee which was supposed to supervise the scandalous contracts made with Robert H. McCurdy, Raymond and Co., and other agents. Mr. George F. Baker was chairman of the subcommittee which fixed the excessive salaries to which some of the suits would relate; and other directors might be involved in the illegal campaign contributions and even more serious matters. Accordingly Mr. Julian T. Davies, the Mutual's legal adviser, had from the start urged the Truesdale Committee to effect some compromise with the McCurdys, and thereby avoid litigation. After long delay, the board of directors decided to begin legal proceedings. If the suits are not compromised in the meantime, they in the congested New York courts, be brought to a conclusion in three or four years.

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But far more important than the prosecution of a few scapegoats was the demand of the investigators that the searchlight be turned upon persons still connected with the company, as officers, employees, or trustees.1 This brought from President Peabody the suggestion that, while it was practicable for him to investigate all the employees, he believed that this course would accomplish "no good purpose," and might disturb or disorganize the force. Although he knew that the records and vouchers of the supply department were destroyed, that former employees had taken to flight, and that he was in charge of a concern generally

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1 The propriety both of the form and scope of this requisition is shown by the fact that it was substantially the same as the one used in the Equitable Society with apparent success.

2 It is now known that Andrew C. Fields, the chief of the fugitives, has been for some time in Texas, near the office of the general agent of the Mutual Life in that state. The present management, therefore, is fairly chargeable with the absence of this important witness needed by the investigating committee.

supposed to be honeycombed with the meanest kind of dishonesty, he declined to proceed unless the committee would bring specific charges against particular persons, a thing which could be done only after, and not before, such a general house-cleaning as it was proposed to begin. Then, so far as the trustees were concerned, Mr. Peabody flatly refused to make any inquiries, but suggested that the committee might do so.

Meanwhile, Mr. Peabody was conferring with the chairman of the committee, who, without authority, informed him that he need not comply with the committee's request for information. Mr. Truesdale also gave out to the press a clearly inspired statement that the officers of the company had done everything in their power to facilitate the work of the investigators. Moreover, the management began to solicit proxies from policy-holders for use at the approaching annual meeting of the company, and persuaded Mr. Auchincloss to become a member of the committee of three to hold the proxies as they might come in. From this arrangement the policy-holders and the public naturally inferred that the Mutual's management and the house-cleaning committee were working in perfect accord. To make assurance doubly sure, Mr. Peabody himself told the newspapers that he knew of no dissensions among the investigators, and that a complete examination was certain to be made.

Everything depended upon the action of Mr. Fish, and tremendous pressure was exerted to compel him to accede to a policy of masterly inaction. Tactics such as the Standard Oil magnates usually employ were brought to bear; and Mr. Harriman, their railroad manager, started a campaign to secure immediate control of the Illinois Central Railroad and oust Mr. Fish from its presidency. When the right moment came, Mr. Fish forced the hands of Messrs. Truesdale and Auchincloss. At a final meeting he proposed that, inasmuch as Mr. Peabody had refused to investigate the conduct of

the trustees, the committee should take him at his word and institute such an inquiry. When this motion was promptly negatived, he then proposed that the committee renew its original requisition upon the president, with which Mr. Peabody had been informed by Mr. Truesdale that he need not comply. Again Messrs. Truesdale and Auchincloss voted no; and Mr. Fish then tendered his resignation. Within an hour, in order to encourage other investigators of the Mutual Life's affairs, Mr. Peabody, as director of the Illinois Central, made a personal demand, supported by a written memorandum, for an investigation of President Fish's administration.

Subsequent events have merely made the situation clearer. Messrs. Truesdale and Auchincloss at once modified the requests made of President Peabody, eliminating all inconvenient questions about directors. Reform in the Mutual Life, according to Mr. Peabody's notions, is not going to begin at the top, but must be confined to clerks, janitors, and scrubwomen. These persons must remember that they are in charge of funds destined for widows and orphans, and need no longer expect to be furnished with wine, Persian rugs, and free telephone service at the expense of the company. Meanwhile, policy-holders are requested to send in proxies, valid for five years, to be voted by the present management in furtherance of insurance reform.

Following Mr. Fish's resignation, a number of the other directors, Mr. Mor ris of Philadelphia, Mr. Olcott of Albany, and Mr. Speyer of New York, severed their connection with the board, where it was evident that they could no longer be of service to the policy-holders, and their positions might be misunderstood. Some of the remaining directors are contemplating similar action, but the usual pressure is being exerted to keep them where they are. The Wall Street directors, of course, retain their posts upon the important committees, and seem convinced that the company cannot dispense with

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