"The money value of intimate relations between a majority of the directors of a life-insurance company and a trust company may be easily comprehended. These relations are at the beginning based on the needs of the insurance company, which needs it is hard to define and limit, and accordingly hard to say just where the provision for them becomes more of an advantage to the trust company than to the insurance company. Standards will differ, and change, too. But here, let us say, is a great insurance company with over $50,000,000 of assets which it has collected from its policy-holders, and which are needed for carrying out their contracts, and which safety requires shall be held in sound investments. Such an insurance company has to have a large and active bank account. It must deposit checks and all forms of paper promises or orders for collection, and for the payment of expenses and claims must have a large sum of ready money. This is the absolute need; but the directors are not bound by any legal requirements to limit their deposits to just what will reasonably suffice as a margin to pay current claims and expenses, nor are they required to patronize any particular banks. They conclude, let us say, that 'it will be safer' to take some banking institution for such depository which they 'know about,' and of which, perchance, some of them are directors, or in which, at all events, they are stockholders. If no such trust company is at hand, it is very easy to start one, and easy for the directors of the insurance company to be in 'on the ground floor.' The insurance company then begins to bestow its patronage. The trust company, which is thus supplied with funds, begins to feel the effects of this attention; by the use of its big deposits large dividends are earned. A 'boom' begins, and the director who 'had the sagacity' to invest in the stock of the trust company when it was around about par, sees his holdings advance by rapid strides until he is offered perhaps ten times as much for his stock as its par value. He has seen this stock advance in value in proportion to the amount of funds of the insurance company which the trust company had at its command. It has been worth much to him 'to be on the inside,' and will be worth much in the future for him to be on the inside if any new trust company is to be a depository; the bigger the deposit, the more it will be worth to him."
"The money value of intimate relations between a majority of the directors of a life-insurance company and a trust company may be easily comprehended. These relations are at the beginning based on the needs of the insurance company, which needs it is hard to define and limit, and accordingly hard to say just where the provision for them becomes more of an advantage to the trust company than to the insurance company. Standards will differ, and change, too. But here, let us say, is a great insurance company with over $50,000,000 of assets which it has collected from its policy-holders, and which are needed for carrying out their contracts, and which safety requires shall be held in sound investments. Such an insurance company has to have a large and active bank account. It must deposit checks and all forms of paper promises or orders for collection, and for the payment of expenses and claims must have a large sum of ready money. This is the absolute need; but the directors are not bound by any legal requirements to limit their deposits to just what will reasonably suffice as a margin to pay current claims and expenses, nor are they required to patronize any particular banks. They conclude, let us say, that 'it will be safer' to take some banking institution for such depository which they 'know about,' and of which, perchance, some of them are directors, or in which, at all events, they are stockholders. If no such trust company is at hand, it is very easy to start one, and easy for the directors of the insurance company to be in 'on the ground floor.' The insurance company then begins to bestow its patronage. The trust company, which is thus supplied with funds, begins to feel the effects of this attention; by the use of its big deposits large dividends are earned. A 'boom' begins, and the director who 'had the sagacity' to invest in the stock of the trust company when it was around about par, sees his holdings advance by rapid strides until he is offered perhaps ten times as much for his stock as its par value. He has seen this stock advance in value in proportion to the amount of funds of the insurance company which the trust company had at its command. It has been worth much to him 'to be on the inside,' and will be worth much in the future for him to be on the inside if any new trust company is to be a depository; the bigger the deposit, the more it will be worth to him."
All thinking people, after reading these extracts from Insurance Commissioner Cutting's report, will ask: "Whyhave we never heard of this before?" I can only answer that he found it impossible to get any part of the warning contained in it before the people. It should be remembered that the insurance companies annually spend millions of dollars with the daily, weekly, and monthly press—and it is unnecessary for me to say more. My own advertisement calling attention to the life-insurance chapters in the last issue ofEverybody's Magazinewas refused by some of the leading dailies of New York, Boston, Cleveland, and Pittsburg. When I called on the managing editor of one of Pittsburg's leading dailies for an explanation of the publication's declination, he said: "Don't mention me or you'll get me into trouble. Our copy for the advertisement was a day late and the insurance combine had time to get in its work. The local managers sent a representative to all the papers warning them not to run your stuff, under penalty of losing the big full-page annual from each of the three big companies, as well as the numerous fliers through the year." One hears of the sagacious ostrich which, when pursued by an enemy, hides its head in the sand. The ostrich is wise in comparison with the "System's" votaries in the year 1904.
THE VULTURES FEEDING
Owing to the claims of other subjects on my space, I left the subject of life insurance for a few months. In the meantime President Alexander began his grapple with President Jimmy Hyde for the control of the millions of the Equitable Life—the historic entanglement which has had such dire consequences for all concerned. In the April, 1905, issue of The Critics I wrote as follows:
When first I touched on the subject of life insurance and called attention to the manner in which the three great companies were juggling with the immense funds entrusted to them by their policy-holders, the "System" raised a great outcry, declaring that I was unsettling the confidence of the people in a sacred institution. At this moment we have the chief officials of one of these huge organizations engaged in a desperate and disgraceful struggle among themselves forits control. All thought of the widow and the orphan, against whom they declared my hand had been raised, has been forgotten in the mad fight for supremacy over the accumulated millions in stocks, bonds, and in trust companies, from the secret manipulation of which the great private fortunes of successful underwriters are derived.
Before definitely grappling with the evils of the insurance trust, I hesitated a long time. I realized my words would cause terror or distrust among policy-holders and perhaps induce some misguided ones to abandon their insurance. After long consideration, however, I became convinced that what I had to say would in the long run benefit all policy-holders, insure the greater safety of their funds, reduce their annual premium-payments, and perhaps bring about the restitution of the vast amounts which in the past had been diverted from them to private individuals. The response to my criticism was a flood of abuse. Instead of meeting my charges, the big companies denounced me for a liar and a misrepresenter, and the insurance journals and subsidized press declared that the things I had charged were impossible. Now, the president of the Equitable Life Insurance Company is openly accusing a leading member of his board of trustees, who is one of the foremost votaries of the "System," of loading the company with twenty-two millions of securities, which, as a member of the finance committee of the corporation, he had purchased for himself in his capacity as head of a great banking-house. On the other hand, the president and his associates, who have hitherto swayed the destinies of the institution, are accused by the other party of conspiring to mutualize the institution, not for the benefit of the policy-holders, but to conceal the traces of past misdeeds. Before this chapter is in the hands of my readers the officers and directors of this great insurance company may be before the courts and a condition of affairs spread out for the public's gaze such as will make my charges seem, in comparison with the actual truth, as chestnut-burrs to porcupines' quills.
One result achieved so far is an awakening of the people's attention to the evils of present conditions; but let thembeware of the remedies suggested. The "System" is quick to adjust itself to storms it cannot control, and there are many signs abroad that it is trimming its sails to fly before the present blow, ready when it shall abate to switch back to its old course, and, under fresh canvas, make up for lost time. Already we have Senator Dryden, representing New Jersey and the Prudential Life Insurance Company in the United States Senate, introducing a bill for Federal supervision of life insurance, and the "System's" hirelings throughout the land are clamorously agitating the passage of some such measure. It behooves the public to scrutinize carefully the form of reform which these patriots approve. It may be taken for granted that they will initiate nothing that will interfere with their grip on the millions of the policy-holders or will divert fat pickings and commissions from their own pockets. Once I asked a leading votary of the "System":
"What would you do if by any chance the Government decided to get into the railway business, and took a railway or so to see how government control would work?"
"Oh," was the reply, "we'd manage that all right! As soon as we saw it coming, the stocks and bonds of the roads wanted would go up, so that by the time Uncle Sam got ready to buy, it would be the fattest sale we could possibly make. After that it would not be difficult to disgust the Government with its bargain, and before long the people would be glad to sell the property back to us, and we'd find a way to get it at slaughter prices."
The reformation of the big insurance companies is sadly needed, but reformation of a more drastic kind than they'll be willing to administer to themselves. To begin with, there should be a relentless probing of their stock transactions of the last fifteen years, followed by the passage of some simple laws regulating their investments. The relationship between these institutions and the "System" would then at once of necessity terminate, and we could say good-by to therégimeunder which the expenses of the Big Three have enormously increased and their dividends to policy-holders have steadily declined while during the same period the private fortunes of their officers and controllers have flourished amazingly.
I have been repeatedly asked to define the conditions that make it possible for these immense private fortunes to be gathered, within the law. An examination of the figures that follow will reveal the far-reaching possibilities that reside in the direction of the billion of assets of the great insurance companies.
The last issued New York report (1903) shows that the three leading companies had in uninvested funds, all told, $70,212,453. Of this sum total there was "deposited in trust companies and banks drawing interest"—at thecloseof the year:
Equitable$25,617,668Mutual22,439,396New York17,731,710$65,788,774
the balance, $4,423,679, being on deposit without interest.
The above aggregate represents 71.7 per cent. of the uninvested interest-bearing funds of twenty-eight companies—leaving but 28.3 per cent. for the remaining twenty-five (in which, by the way, is included $6,801,789 of the Prudential, as large in proportion as the funds of the Big Three, with which it is associated).
This sum, at the two-per-cent. interest allowed by the trust companies, returned to the insurance companies $1,315,775, while it earned for the trust companies in the different speculations in which they were engaged, from five to twenty per cent., or an annual profit of $1,973,663 to $11,184,079, over and above the interest paid the insurance companies for its use.
But who owns the trust companies? you ask. Some are owned jointly by the three great insurance corporations and their directors, others by the directors alone. The men who control the Big Three organize these flexible depositary institutions, allotting half or more of their stocks to themselves, the balance to the insurance companies, or keeping all the stock themselves, for the purpose of manipulating the stupendous sums in the treasuries of the insurance companies.The trust company is the irrigating canal of Wall Street, the insurance company the reservoir. For the development of the various schemes of consolidation, trustification, and amalgamation in which Wall Street profits are made, money is required in large quantities. When the soil is ready for the seed, when negotiations have been sufficiently matured, the trust company's sluice is tapped and the gold flows out. And gold which makes a $225 crop sprout, where previously only a $100 crop grew, is a valuable commodity, for the use of which large compensation is given the engineers. Thus the men who hold the treasury-keys of the Big Three, and who decide how the accumulated premiums of the policy-holders shall be used and where deposited, are actually the owners of these trust companies and of other corporations and trusts which borrow the money the trust companies have on deposit from the insurance companies.
The hackneyed defence of the insurance companies to this accusation is that great corporations, such as they are, must keep on hand, ready for emergencies, enormous amounts of cash. This is a futile argument, for in the nature of things the daily receipts of each of the Big Three are larger than the expenditures. We are also told "We keep large amounts, ready to take advantage of a sudden smash in the market." This sounds well, but cloaks one of the most vicious practices of these great institutions, and another of the insider's opportunities for private graft. It means that the officers of the great insurance corporations are ever ready for a stock gamble with the sacred funds of their policy-holders; that is, they admit their willingness to use the people's savings to make sure-thing gambling-profits from those unfortunates who must throw over their stocks and bonds because of the "System's" manipulations.
Imagine, my honest, old-fashioned reader, the millions of insurance funds used in this way! Let me give you a picture of how it is done. I have seen it worked a score of times. The stock-market is crashing, dropping tens of millions a minute, and business men are saying: "Oh, if we only had cash to buy, but we can not get it! The banks will not loan at any price. Rates have gone up to 100 to 150 percent. and no cash is in sight." No one has money but the big insurance companies and the "System's" votaries.
Suddenly mysterious buying appears—hundreds of thousands of shares of stock, and bonds in million blocks. The crash has been stayed; the panic is over; stocks are bounding upward again; millions are being made by the mysterious buyers with each tick of the clock, and presently it is common knowledge that all the insurance insiders have cleaned up millions, and—of course, the company has made something, but the biggest profits have been won by the men who, having previously personally loaded up, were able to throw the unlimited buying power of the policy-holders' millions into the gap. Talk of loaded dice, or any of the sure-thing gambling devices! They are lily-white business schemes compared with this method of plundering the people.
Again we are authoritatively informed that the great companies have so much cash on hand that it is impossible to find investments for it save at a low rate of interest. The fallacy here is obvious. If these institutions have grown so unwieldy that they cannot conduct their business as ably as the smaller companies, the latter are the ones to insure with, because, right along, they are deriving larger returns from their invested funds than the big companies. There are scores of ways, however, by which the sixty-five millions could be made to earn even larger dividends than do the funds in stocks and bonds. Let the Big Three offer the use of their big cash balances by public competition—under the most conservative conditions that can be prescribed. Instantly the net returns will double.
All insurance policy-holders are familiar with the specious circulars and letters presenting statements of business done and investments made, which are sent out from the head offices of the great companies at odd intervals on the plea: "We want our policy-holders to know everything we are doing at all times." The public is assured at other intervals that there can be no secret or inside deals in the affairs of insurance companies because of the close examinations they are subjected to by the Insurance Departments of the various States. The insurance officials say: "All our facts andfigures are vouched for by so many different sets of auditors and State Departments that they must be exact truths." To what extent is the public actually safeguarded by these investigations?
Some months ago I called attention to the fact that the directors of the New York Life Insurance Company had sold to themselves the stock of the New York Security & Trust Company at from three to four millions less than the property would have commanded from outsiders. Here is another transaction which requires explanation:
In 1901, ostensibly in order to maintain its position in the German states—I will explain later on what I mean by "ostensibly"—the insurance company disposed of its remaining holdings of stocks, the same having a book value of $2,965,000 and a market value of $5,471,000, as per report of 1900. These stocks, with possibly sales of some other securities, realized an actual profit of $5,839,087 instead of $3,075,392 as per the company'sswornreport to the several State Insurance Departments.
Rather a queer proceeding, you say. Why should it do such a thing? Had some one stolen the extra profit? Or what? This is what was done: The company had simply availed itself of the opportunity to conceal an actual cash profit of $2,763,715 in order that it might sequestrate assets to that amount unnoticed by its policy-holders or the departments. The sum so sequestrated was made up of balances due from agents—presumed, as in all such cases, to be amply secured by pledge of renewal contracts—to the amount of $1,919,734, and $843,891 charged off depreciation of real estate. (See Massachusetts Report, 1902, pages 158-159.)
This illegal suppression of most important transactions, directly affecting, as will be seen later, the interests of policy-holders, would have remained a sealed book but for the careful audit of the Massachusetts Department, which revealed the fact, unnoticed by that of any other State (note in this one instance the boasted careful supervision and boasted double and triple auditing of all accounts before publication!), that the item "Agents' Balances," amounting in thepreceding year to $1,527,123, had disappeared altogether from assets. This led to a prompt request from the Massachusetts Department for explanation.
The honorable business men of the New York Life, who pay out so many hundreds of thousands of dollars each year advertising the fact that they are sitting up o' nights to find new ways to acquaint the policy-holders with the innermost secrets of the company, finding there was no avenue of escape from their dilemma, quickly realized that the Massachusetts Department meant to have the facts, and publish them, too. Their own "faked" report was already before the public in the published reports of two departments, those of Connecticut and New York.
There was but one course open to avert the terrific scandal that was inevitable upon publication of the Massachusetts Report, and that was to head off and forestall adverse comment and criticism, as far as possible, by making a clean breast of it. No time was lost in preparing a letter of explanation to the Department. This answered the purpose of the Department, which did not care to press the matter, having accomplished its main object.
Now for the moral, or the iniquity, rather, of the preceding, the wrong to policy-holders, which has been so completely ignored and passed over by the insurance press and all hands: Either the company had, as at least supposedly it has in all such cases, ample security for its advances to agents in the pledges of their renewal contracts, or it had not. On the former hypothesis, that $1,900,000-odd was a sound and valid asset, earning a good rate of interest. On the latter, the company simply squandered this amount of trust funds belonging to its trusting policy-holders in its mad rush for business at whatever cost; or—In either case the money has gone from sight so far as any sign or indication appears to the contrary since.
And before leaving this point, it may be well to ask, "Has the New York Life Insurance Company altogether discontinued these advances to agents?" If not, how and where are they accounted for? An answer may be found, possibly, in the comparatively meagre underwriting profits of the company, growing relatively smaller and beautifully less with each succeeding year. I say it may possibly be found here, because this is the only place the item could be buried; but I am reasonably sure that it is not buried here, and that these advances to agents are being continued on a scale as large as, or larger than ever, for the agents could not have been shut off and the business increased at one and the same time.
Again, during the last two months of 1904, or at a time when my story, "Frenzied Finance," began to get in its work all over the world, I received from many quarters information that the Big Three had instructed their leading agents to get in a great lot of new risks "at any cost," so that the total business for the year would show such increase as to discredit my claim that the policy-holders were getting "scared." I watched the game with much interest, knowing that bunco would out in time, by whomever worked. During these months I read from week to week of this great policy, or that record-breaking risk just landed by this or that agent. One in particular made me chuckle at its transparency. A certain friend of the New York Life, a Wall Street man, "has just taken out a $2,000,000 policy." About the same time I began to receive information of the remarkable offers that were being made to prospective customers, offers which probably meant an indirect rebate of perhaps the full first year's premium; and I got to thinking and reaching back into my memory-box, and I raked out a number of instances of the same kind of offers which had been made to me in the past, and I ruminated to myself how all this was possible; for even if the Big Three were bold enough to get around the law against such practices, it puzzled me how they could pay to their agent the big cash commissions that new business called for. Presently as I waited I read, as did the rest of the world, the big January full-page advertisements of the New York Life to its policy-holders, calling their attention to the increase of $15,000,000 new business over the year before. Then I took another think and did a little work, with the following result:
A JOLT FOR THE NEW YORK LIFE
The "Brown Book of Life Insurance Economics" shows that the sum laid by annually for future tontine or other dividends ranged in the ten years ending with 1903 from $2,936,026 to a minimum of $956,597, these amounts being savings after payment of dividends. In 1904, however, for the first time in the tontine history of the company—also the first year of maturity of non-forfeitable tontine contracts with their largely reduced dividends—the dividends paid and credited, $6,018,202, actually exceeded the year's earnings, as shown by the company's sworn statement, by $76,595.
I want to call policy-holders' attention right here to what this means to those who are now being beguiled into taking policies on the strength of "adjusted" estimates placed by the company in its agents' hands, showing dividend results ranging from fifteen to fifty per cent. higher than those of 1904, with, however, the saving (?) clause that, depending upon future unforeseeable conditions, the same "may be higher or may be lower." It may be added that, but for a profit realized from sale of securities, the company's gross surplus would have shown shrinkage.
In order to realize what such a showing means, let us make a comparison, using the figures of a well-known Western company (partly tontine, but operated on diametrically opposite lines from the New York Life), for the three years 1901-03, this company being barely four-tenths the size of the New York Life as regards outstanding business:
Comparison of Totals, Three Years, 1901-03
Dividendearnings.Dividends.Laid by forfuture dividends.New York Life$16,826,289$13,189,278$3,636,091Western Company17,788,82012,284,2555,504,565-$962,531+$905,023-$1,867,574
Dividendearnings.
Dividends.
Laid by forfuture dividends.
After mulling these over, I dug further in regard to the "prosperity" as shown by the business of 1904. The company boasts of its enormous volume of new business, $345,722,000, which is $15,000,000 in excess of the 1903 business. Here is the story: While this new business was being secured, the
Total terminations were$162,326,114Less those inevitable terminations by death or maturity of endowments26,767,873Waste by lapse, surrender, etc.$135,558,241And when we add the lapsed policies which continued in force, under the "extended-insurance" provision89,938,500We have the total waste of$225,496,741
and this, reduced to its actual significance, means that of the total actual terminations, 83.6 per cent. wasactual wasteand only 16.4 per cent. legitimate terminations, while the great bulk of the last item of $89,938,500, upon which premium payments have ceased, must run off the books in the near future; and this is what goes on from year to year, more than keeping pace with the boasted increase in volume of new business. The public never sees this side of the question.
When I got to this point in my deductions, I was brought face to face with the tremendous expense of acquiring new business. Then I saw the light—why it was necessary to wipe off the books nearly two millions of what were considered good assets, that is, pledges from agents of their renewal commissions against which advances had been made, and where the new business came from, and how it was possible to make rebates when the law says they shall not be made. An agent induces a friend to have a policy written, for which the agent practically pays the premium out of his commission, and thereupon has advanced to him large sums against the future premiums which are to be paid by the policy-holder, who has no intention of paying them, and allows his policy to lapse. Heavens! What a vista of plundering opportunities the bare thought opens up! Somebody has to pay.
THE MILLION-DOLLAR POLICY
In the May number I inserted the following letter:
Fort Worth, Texas, February 16, 1905.Thomas W. Lawson, Esq.,Boston, Mass.Dear Sir: I have read and will continue to read your articles on "Frenzied Finance," published inEverybody's Magazine, with a great deal of interest. I have noted especially your statements in reference to the big life-insurance companies, as I am a policy-holder in both the New York Life and the Equitable.Under the heading of "Lawson and His Critics," inEverybody'sfor January, you give your side as to the assertion on the part of the insurance companies that you have been refused life insurance, among other things publishing a fac-simile of a contract of life insurance between yourself and the Equitable Life Assurance Society for $1,000,000. On my first reading of your article, I was certainly impressed with the fact that you had $1,000,000 of insurance with this company. On a second reading, I note that you do not say in so many words that this is a policy in force, but you say: "Well, look at this reproduction of the document that is now in my possession and always has been since the date when it was delivered to me by one of the great representatives of the 'System,' The Equitable Life Assurance Society." This statement taken in connection with others, conveys the idea that you are insured in the company named.In conversation with a gentleman a few days since, who claims to know whereof he speaks, having gotten his information direct from New York, he stated that you had no policy in the Equitable Life Assurance Society for $1,000,000, or any other amount, and that the reproduction referred to above, was of asample copyof a policy, and not a real contract.As your editor states that you will answer any pertinent question, I will ask the following, trusting that you may consider it pertinent: Have you a valid subsisting policy in the Equitable Life Assurance Society for $1,000,000, the fac-simile of which appears inEverybody's Magazinefor January, 1905?Trusting you will favor me with a reply, I am,Very truly, ——
Fort Worth, Texas, February 16, 1905.
Thomas W. Lawson, Esq.,Boston, Mass.
Dear Sir: I have read and will continue to read your articles on "Frenzied Finance," published inEverybody's Magazine, with a great deal of interest. I have noted especially your statements in reference to the big life-insurance companies, as I am a policy-holder in both the New York Life and the Equitable.
Under the heading of "Lawson and His Critics," inEverybody'sfor January, you give your side as to the assertion on the part of the insurance companies that you have been refused life insurance, among other things publishing a fac-simile of a contract of life insurance between yourself and the Equitable Life Assurance Society for $1,000,000. On my first reading of your article, I was certainly impressed with the fact that you had $1,000,000 of insurance with this company. On a second reading, I note that you do not say in so many words that this is a policy in force, but you say: "Well, look at this reproduction of the document that is now in my possession and always has been since the date when it was delivered to me by one of the great representatives of the 'System,' The Equitable Life Assurance Society." This statement taken in connection with others, conveys the idea that you are insured in the company named.
In conversation with a gentleman a few days since, who claims to know whereof he speaks, having gotten his information direct from New York, he stated that you had no policy in the Equitable Life Assurance Society for $1,000,000, or any other amount, and that the reproduction referred to above, was of asample copyof a policy, and not a real contract.
As your editor states that you will answer any pertinent question, I will ask the following, trusting that you may consider it pertinent: Have you a valid subsisting policy in the Equitable Life Assurance Society for $1,000,000, the fac-simile of which appears inEverybody's Magazinefor January, 1905?
Trusting you will favor me with a reply, I am,
Very truly, ——
I answered:
Since the chapter which contained the fac-simile of the million-dollar policy was published I have received many letters similar to the above, but have not answered any because I wished to see how far the insurance people would goin this matter. Finding I did not reply to the different attempts they made in their subsidized journals to draw me out, they grew bolder, until the use of this million-dollar policy has become the chief defence of the Big Three companies. I want my readers to think this point over and weigh its significance carefully. In a previous chapter I called attention to the fact that there is nothing to protect the policy-holder from being robbed of the amounts he has invested to insure his family from poverty after his death but the honesty of the men who really control the big insurance companies as absolutely as any of their policy-holders do their personal affairs. If these men are honest, policy-holders in their companies may rest easy for the time being; but if they are dishonest, the policy-holders should call them to account, for these men have it absolutely in their power to make way with the funds of the companies they manage until there will not be a dollar left for policy-holders.
Therefore the one thing for policy-holders to settle, the one vital thing is, Are these men honest, or are they tricksters and liars?
To settle this point they must be weighed in the same way that all other men and women in this world are weighed—by the simple, ordinary standards: Do they lie? Do they trick? Do they cheat?
When I made my charges in my first chapters against the votaries of the "System" who controlled the insurance companies, they met my specific charges as dishonest men would meet them, not as honest men would. They impugned my motives, and specifically charged that my reason for attacking them was that I had been blacklisted by all insurance companies and could not get insurance from any of them.
While it was immaterial so far as my specific charges went whether this was so or not, it had a most decided bearing upon the question whether the officers and controllers of the Big Three insurance companies were honest or dishonest men. Therefore I picked up their accusation and began a line of argument to prove they were tricksters and absolutely devoid of honor.
I showed, by reproducing the personal letters of PresidentMcCall, of the New York Life, to my office and to my house, reënforced by his special agent's letter, and these reënforced by his Boston agent's letter, that I had been continuously and urgently importuned to take insurance during the time he said I was blacklisted. The insurance people met this by the excuse that these were not personal letters, but mere advertisements.
I then reproduced the million-dollar policy, hoping to drag from the Big Three a specific charge that this, too, was an advertisement.
Of course, I did not pretend that the policy in question was in force, that is, that I was insured in the Equitable Life Assurance Society for one million dollars. This would have been too childish; first, because every insurance policy, particularly the very large ones, is as much a matter of record, to be got at by any one in the insurance business, as are real-estate records; and, next, because that which I printed had the signature punched out, which made it obvious that it was not in force. My object was to lead the Equitable into the positive statement that it was an ordinary advertisement, when I would have reproduced the proposition that accompanied it and which the Equitable made in probably the most elaborate set of documents ever assembled by an insurance company for the purpose of inducing one of the "best risks" in America to take out a "great big policy." These constitute the complete argument which was made by the Equitable Life Assurance Society to persuade me to take a million dollars' worth of insurance. They are engrossed upon parchment and bound in a specially gotten-up morocco cover, and, I was told, cost the insurance company between four and five hundred dollars. They were presented to me as the result of my demanding that all the inducements they offered to come into their company should be put down on paper, so that there could be no mistaking them. The documents as engrossed and the terms of the contract were carefully copyrighted by the Equitable, and are now on my table before me as I write.
The question which the publication of the million-dollar policy was to settle was whether or not I had been importuned to take out great sums of insurance in the leading insurance company of America, and it proved exactly what I had contended—that I had been so importuned.
Up to and including my April, 1905, instalment I have made specific charges against the great insurance companies, the Mutual, the New York Life, and the Equitable:
1st. That the control of the officers of these great corporations over the billion dollars of their policy-holders' funds is as absolute and unrestricted for all practical purposes, as is their control of their own personal affairs, and is largely exercised for their personal enrichment.
2d. That the policy-holders have absolutely no voice in the management of these companies or the control of their funds, because of the manipulation of proxies in the New York Life and the Mutual and the control of the stock of the Equitable.
3d. That those who do control the big companies are votaries of the "System," and as such are subject to the "System's" orders as absolutely as is James Stillman, president of the "Standard Oil" National City Bank.
4th. That the insiders of these insurance companies, not one but several of them, have accumulated fortunes in the past few years, of from one to twenty millions, while at the same time premium-rates have advanced and dividends decreased.
5th. That under the present methods of conducting these great companies it is as inevitable as it was in the case of 520-per-cent. Miller or Mrs. Howe's Woman's Bank, that as soon as they can get no more insurance, the funds behind the old insurance will be dissipated and a crash take place such as the world has never known before.
6th. That the companies are "milked" in every direction, through the purchase and sale of real estate, through the loaning of their millions, and through the manipulation and investment of their funds.
7th. That they acquire new business at an expense and by methods which alone will in time wreck the companies.
8th. That in a single instance the New York Life sold securities for $5,839,087, but its statement under oath tothe State Insurance Departments showed receipts of only $3,075,392.
9th. That the New York Life sold the stock of the New York Security & Trust Company, which it held, to its insiders for over $4,000,000 less then they could have secured for it from others.
I have specifically charged other things, and will, as my story proceeds, make many more specific charges of as serious a nature; but the above suffice for my present argument, which is, that up to and including the April number I have made these accusations and that the only way they have been met is by underhand mud-slinging and by alleging that the incentive for my attack was that I could not secure insurance from any of the American companies; and I have met this with absolute proof, which must stand until it is disproved, that I have been during the past ten years importuned and urged by the large insurance companies of America to take out insurance.
Therefore I will leave the question of this million-dollar policy and other forms of importuning until the insurance companies offer something in rebuttal.
THE WAY OUT
The overhauling of the Equitable Life exposed conditions far worse than I had indicated to the public, and it seemed probable that the usual whitewashing process would be utilized to conceal the guilt of the rapacious criminals who had been untrue to the most sacred trust that can be imposed on man. Since that time, however, the Governor of the State of New York has appointed a committee to investigate the affairs of the Big Three corporations, and the resulting disclosures are the sensation of the hour as this book goes to press. In order to protect the interests of policy-holders, in case the authorities declined to act, I issued the following address in the July, 1905, number ofEverybody's:
TO THE POLICY-HOLDERS OF THE NEW YORK LIFE, MUTUAL, AND EQUITABLE INSURANCE COMPANIES
The time has come for you to act. When, less than a year ago, I began my story, "Frenzied Finance," I exposed the function of the three great life-insurance companies in the structure of the "System." I explained that they were controlled in the interests of great financiers and that their funds were juggled with to compass the huge plundering operations of Wall Street. At that time the New York Life, the Equitable, and the Mutual Life loomed before the American people as the greatest, most respected, and most venerable institutions in our broad land. To-day they stand for all that is tricky, fraudulent, and oppressive.
A great change to have been accomplished in less than twelve months!
My readers are by this time familiar with the condition of affairs in the Equitable. The greed, juggling, and grafting practised by its officers and controllers have been fully exposed through the press. I hope none of those who have followed the terrific arraignment of rottenness and rascality made through the Frick report are so foolish as to imagine that the evils described are confined to the Equitable. In my own opinion the Equitable is much less reprehensible than the New York Life, and when that institution and the Mutual are thoroughly shaken up, as they will be in the future, indubitable evidence of the same fashion of extravagance, trickery, and fraud will be found in plenty. Conditions in the three institutions are the same; though of late the New York Life has altered the character of most of its securities. Each has piled up an immense surplus which has been used through allied trust companies for stock juggling; each has paid extravagant commissions to agents; the funds of each have been managed to afford to high officials plentiful opportunities of graft; each has its real estate, fire insurance, low rent and loan favor graft; in each will be found the same type of syndicates as President Alexander and Vice-President Hyde used for their personal enrichment in the Equitable. To-day President John A. McCall of theNew York Life is credited with possessing a fortune of between ten and fifteen millions—a few brief years ago he was State Superintendent of Insurance in Albany. The chief associate in the management of the same corporation, George W. Perkins, J. Pierpont Morgan's partner, is another very rich man, whose wealth has been accumulated in a few short years. Do you imagine for a moment that such transactions as I set forth last year in connection with the New York Security and Trust Company, in which the interest of the New York Life was sold to a syndicate of its own directors for a sum far below the market value of the shares, were put through without the connivance of President McCall and Vice-President Perkins? Even if the New York Life, as its president explains, did make a large profit on the sale of the trust company's stock, he cannot deny that the syndicate paid far less than the then market value of the shares for the insurance company's holdings.
There is something particularly vile about the crimes of these high officials and distinguished gentlemen who have been waxing fat and luxurious on life-insurance graft. In a recent number of this magazine I drew a parallel between the confidence operator and the burglar to show that the latter despises the former for a sneak thief who takes no chances in his thieving operations. Infinitely more depraved than the sneak thief is the high-placed functionary, presiding over a great institution built up out of the savings of millions of people, paid an immense salary for his important services, trusted with vast funds because of his reputation for integrity and business sagacity—who yet uses his splendid place to line his own pocket. Of all fiduciary institutions, life insurance should be the most sacred. Its chief function is to care for the widow, the orphan, and the helpless. The millions of revenue paid annually into the life-insurance companies of this country represent the blood and tears and sweat of millions of Americans who thus provide for the care of their dear ones for the time when death shall have put an end to their own income-earning abilities. The administrator of a trust so solemn and exalted should devote himself to its safeguarding as a priest dedicates himself to the service of hisMaker. The responsibility conferred on him is the highest and holiest man can repose in his fellow-man. Remembering all this, consider again the revelations of greed and plunder in the Equitable; consider that millions upon millions of dollars have been filched and wasted; analyze the Frick report and the letter of President Alexander to the directors of the society, calling for Vice-President Hyde's removal from office. Think, ye farmers and laborers, of personal traveling expenses of $75,000 in a brief period, of salaries of $100,000 annually paid for a few hours of work per day; think of vast sums of your money used to provide expensive safe-deposit institutions with low-priced quarters so that the personal income of men already multimillionaires may wax still greater. Think of the great institution to whose hundreds of millions' income you contribute your hard-earned dollars, being farmed, milked, and squeezed by a pack of dissolute and greedy schemers and robbers more conscienceless and oppressive than any band of thugs in the country.
When I began to discuss inEverybody's Magazinethe subject of the three great life-insurance companies, I stated that there is actually nothing between the two million-odd policy-holders and the possibility of their being robbed of the billions of dollars of their accumulated savings but the devotion and the honesty of the men who are in control of these institutions.
You know what happened when I said this to you the first time—less than a year ago. The officers, trustees, and hirelings of these great companies laughed to scorn my statements and called me a liar and a scoundrel. They drew the attention of the whole world to the standing and wealth and honesty of the men who managed these great corporations, and proved by the most positive asseverations that nothing could be more preposterous than that any one of them could do wrong. But the great God, who seldom allows His children to remain long deceived to their undoing, heard these loud-mouthed protestations, and to-day the world is listening to exposures of low, mean thefts and contemptible crimes far worse than any to which I had pointed.
And from whom comes the proof of the treacheries and rascalities perpetrated within the Equitable? From the men who control and manage this great institution and its hundreds of millions of accumulations. When my accusations first appeared, these men saw the handwriting on the wall and some of them, bolder than others, determined to seize these vast hoards of the public's money and at the same time get possession of all evidence of past crimes so that they might be immune forever after from punishment and the necessity of making restitution. In the act of grabbing, however, the robbers fell out with one another, and, presto! they are in the public square where all men, women, and children, cats, dogs, and asses may see and hear as they gouge, bite, and accuse each other of the vilest crimes.
These are the men in whose custody even now are the accumulations on which you, Mr. Policy-holder, are depending to take care of your wife and little ones, should you die. On the honor and responsibility of men who in the past five years have "saved" out of salaries of $20,000 to $100,000, private fortunes of millions, you must absolutely rely for the safety of the billions of dollars of your savings. The future of the helpless beings whom your hard daily labors provide with a livelihood is in the hands of men who admit having expended $100,000 of your money to provide a lordly and regal entertainment for a set of extravagantly paid agents and solicitors who, spurred on by prodigal inducements, have piled up huge amounts of new business on the company's books. I have explained to you before what such business is worth, that the agent gets so large a commission that he is practically in a position to accept risks at far below their cost to the company, and that such business as this is seldom renewed. The same men have been paying personal secretaries, gardeners, and flunkies out of your earnings; they have been feasting and traveling in private cars with large parties of the New York flubstocracy at your expense; every possible extravagance they have been guilty of by means of the revenues some of you have worked fourteen to eighteen hours a day to gather in. Shame, I say, on such contemptible thievery.
I cannot resist the temptation to pull back the slide from one episode of the past. When my strictures on the three great life-insurance companies first appeared, one of the vice-presidents of the Equitable, Gage E. Tarbell, in writing to an inquiring policy-holder, said: "Pay no attention to Lawson; he is only a reckless stock gambler, and every sensible person knows that any man, no matter what his position might be, who would do anything to cause loss to the class of people we insure, must be a rascal." And this is the same man Tarbell, it is now admitted by all the Equitable officers and investigating committees, who, as soon as he saw the crisis coming in the affairs of the Equitable, had his pal, President Alexander, pay to him $135,000, which he claimed was due him for commission renewals, even though he was then in receipt of a salary of $60,000 per annum for his services. It is through the operations of this same Tarbell that the vast system of rebates, one of the chief evils of the present system of life insurance, came into being, and through his prodigality that the immense sum of $2,000,000 stands on the books of the company, representing advance commissions to the pampered agents.
The time has come for all you policy-holders to act, and there is but one way to act.
A thousand and one schemes are afloat to confuse and trick you at this period. The cry is—anything to hush things, to confine the fire to the Equitable, at any cost, even though it totally consumes the $400,000,000 of the people's savings in that institution. I told you at the beginning that the New York Life was worse, if anything, than the Equitable, and the Mutual Life just as bad. Therefore I unqualifiedly advise policy-holders to:
1. Pay up this year's premium—it will be the last to these plunderers.
2. Have nothing to do with any committee or scheme.
3. Write me, at once, your name, address, and the amount and character of your policy. I want nothing more from you, and under no consideration will I divulge your name without your further consent in writing.
I already have the names of thousands of policy-holders,but to make my plan instantly effective I must have scores of thousands.
My plan has for its aim and end, this and only this:
The absolute preservation of the face value of your policy.
The reduction of future premium payments to forty cents on the dollar on what you now pay.
The restitution of millions upon millions looted from the three great companies, or as much as can be collected after a careful examination of the books—and the punishment of the thieves.
Bear in mindthat I will not have any money connection with you in the working out of my plan. I pay my own expenses. I will not ask any reward or profit, money, office, or otherwise, nor will I under any circumstances accept any.