^^ gain and loss statements from year to year, that is as
^^ed to the department. In regard to this I would direct
^^^1 attention to the years, 1897, 1898 and 1899. Our pres-
A^ctuary states that he cannot in any way reconcile the
^^^^s for those years with the mortality records of the society.
S"7
Digitized by
Google
Testimony of Edivard W. Scott
MR. HUGHES: Then follow the table of net profits as per
published gain and loss exhibit figures. You say as per pub-
lished gain and loss exhibit figures — where are those published?
THE WITNESS: They are published in the Wisconsin re-
ports and in Connecticut.
MR. HUGHES: In Connecticut and Wisconsin. I will read
this in evidence as Exhibit 709.
Q. Now in your first column you say surplus interest, etc.
What is covered by etc. — profits on sales* as securities and
profits on sales of real estate? A. Yes.
Q. Did the gains that come in by marking up the values of
real estate entries in that column — I mean the book values,
I do not mean market values — I mean A. Possibly, to
some extent.
Q. And in this statement of surplus interest, etc., have you
included all profits on sales of real estate? A. Yes, sir.
Q. And on sales of securities ? A. Yes, sir.
Q. Have you taken a profit on the enhancement of values of
real estate? A. I cannot say as to those years, Mr. Hughes,
but I have a statement here.
Q. That is, the enhancement in value has appeared in an
enlargement of book value?
MR. GILBERT: Yes.
MR. HUGHES: Why it has not appeared in enlargement of
book value, you have not taken it in this column.
MR. GILBERT: We were not taking any enhanced value.
5128
Digitized by
Google
Testimony of Edzvard W. Scott
Q. Now in the year 1904, it appears that your gain on surplus
interest, etc., was $357,792. How much of that was profits on
sales? A. $135,000.
Q. Was that a profit on sales of securities? A. Partly.
Q. To what extent? A. $31,403.66.
Q. That is exclusive of interest earned? A. Yes, sir.
Q. To what extent was it a profit on sales of real estate?
A. $98,012.
Q. And you have a gain on mortality of $32,131, and losses
on your loadings and surrenders, as stated? A. Yes, sir.
Q. So that your gain of $1 16,567 was attributable, made pos-
sible solely by your profits on sales.
Q. In 1903 it appears that the gains on mortality were $193,000,
and $173,000 in 1902, and $55,000 in 1901. A. Yes, sir, fluc-
tuations.
Q. And then $64,000 in 1900, and $329,000 in 1899, and $39,000
in 1898. A. Those are the figures, Mr. Hughes.
Q. What is the reason for that extraordinary fluctuation? A.
Those are the figures that our actuary cannot reconcile with the
records of the company.
Q. Where does he get them ? A. He found them there.
MR. GILBERT : From the gain and loss exhibits.
Q. You get them from the published statement. What do the
records of your company show? If you were to substitute for
these the records of your company, what would the records show ?
MR. GILBERT: The loss in mortality
Q. How is it accounted for that the published gain and loss
exhibits do not correspond with the record of the company ? A. I
do not know, unless the error was made by Mr. Moires predecessor.
5129
Digitized by
Google
Testimony of Henry Moir
Q. Who was he? A. M. L. Mortimer.
Q. Was he employed by your company in 1898 and 1899? A.
Yes, sir, up to December, 1900.
Q. It appears in 1898 that the gain on mortality is stated to
be $339,662. What do the books of the company show to be the
loss on mortality in that year ?
MR. HUGHES: The statement made by Actuary Moir is
that he has not figured it for the calendar year, but that, taking it
according to the rate there should have been a loss on mortality
that year instead of a gain. So instead of there being a surplus of
$408,905 net that year, there should have been a loss that year.
THE WITNESS : The profit must have been somewhere else.
Q. Yes, there was not any other place for it, was there? A. I
mean on the loadings.
MR. HUGHES : You mean the loadings are not according to
your books there?
MR. MOIR : I have not been able to verify that, either.
MR. HUGHES : I think it would be well for the company to
submit a gain and loss exhibit comparable to this, which would be
according to its book. Is that possible ?
MR. MOIR : It is not possible to have that done.
HENRY MOIR, called as a witness, being duly sworn, testi-
fied as follows :
BY MR. HUGHES :
Q. You are actuary of the Provident Savings Life Insurance
Society? A. I am.
5130
Digitized by
Google
Testimony of Henry Moir
Q. How long have you been actuary? X. Four and one-half
years.
Q- Since 1900? A. Since 1901.
Q. What time of 1901 ? A. From the first of June.
Q- Did you make up the gain and loss exhibits from the year
1901 to the year 1904, inclusive, for the Massachusetts and Con-
necticut Department? A. The Massachusetts
Q- I mean the Connecticut and Wisconsin Departments ? A. I
did.
Q- Are they correct according to your books ? A. Yes, sir.
Q- Have you made an examination to ascertain the correctness
of these exhibits for earlier years ? A. I have had cause to ex-
anuTve the mortality very carefully in those earlier years.
Q- VV^hat y^rs? A. 1897, 1898 and 1899.
Q- W^hat do you find to be the result? A. I verified actually
from the books the mortality of one year, and found that the state-
'nents irx the records of the company were correct.
Q- "W^liat year was that? A. The year 1899, I think; it rnight
oe 1898. J checked up all three, more or less, but I verified one
completely.
Q' A.nd you found A. I found that the records of the
compaxiy were correct in the office of the company, but these
records a.re quite at variance with the other records.
*• ^ou mean the records in the office were correct for the year
you checked up? A. Yes.
'2- A^ecording to the mortality as you found it where?. A. In
^^^^rds of the company going down to the individual policies.
. jr* . ^ou checked the individual policies ? A. I began with the
mortar^^^ policies and checked up to the final statement of the
^i^y for one year.
Q. V
With " compared that with what entries in your book? A.
^e record that is given in the books of the mortality.
Digitized by VjOOQ 16
Testimony of Henry Moir
Q. And you found that to be correct? A. I found that to be
correct.
Q. But not in accordance with the statements made to the Wis-
consin and Connecticut Departments ? A. That is correct.
Q. How wide was the variance ? A. The variance was that in
that year the mortality was over one hundred per cent., whereas
it was shown in the Department of Wisconsin at about seventy-
two, I think, or seventy-five per cent.
Q. What is the explanation of that discrepancy? A. I cannot
give the explanation unless there was difficulty in making up the
gain and loss exhibit and it was
Q. Was not the rate of mortality and the record of your com-
pany for that year accessible ? A. Not to outsiders.
Q. No, not to outsiders but to the insiders, the man that made
up the exhibit? A. My impression is the exhibit was made up
before the mortality records were completed for the year.
Q. What was it made up from, then? A. The gain and loss
exhibit is called for about the middle of February, I think, and the
mortality records probably were not completed at the time the
exhibit was made.
Q. There are two years here with extraordinary gains for mor-
tality, 1898, $399,662, and 1899, $329,755. According to your
information both of those are inaccurate? A. Yes, as I imder-
stand it.
Q. Do you mean to say if you got the actual figures from your
records in lieu of these that are given in your gain and loss exhibit
that entire gain would be wiped out and a loss substituted? A.
Yes.
Q. Because the mortality rate was one hundred per cent, of the
expected in each of those years ? A. Yes.
Q. And the other items in the gain and loss exhibit showing
gains from surplus interest and from surrenders, lapses and
annuities and the loss on loadings you believe to be correct?
A. No, they cannot be correct, because the total gain is correct.
5132
Digitized by
Google
Testimony of Henry Moir
Q. The total gain is correct ? A. Yes. That cannot be wrong
because that has to agree with the assets of the company.
Q. Where do you understand that the gain which has to be
dropped from the item of mortality will reappear? A. It must
come in the loadmgs or profits from surrenders.
Q. The loadings have not exhibited such wide fluctuation ? A.
No, I cannot understand that.
Q. You do not really understand it? A. No.
Q. Can you make up a correct gain and loss exhibit from the
records? In other words can you distribute the surplus so we can
see how it is made up? A. I think not within anything like a
reasonable time. The trouble is a great many of these policies
have gone out and it would be very difficult to get the loadings
with anything like accuracy. As far as I can find there is no record
in the company showing how that statement was made up.
Q. What advantage was it to have that gain on mortality stated
as so much ? A. I can see no advantage ; it was rather the other
way, it is a disadvantage.
Q. You think it was merely a stupid blunder? A. I have no
means of knowing. I never personally met the former actuary
who made up that statement.
Q. Perhaps you could judge it better by looking at the work
than as a matter of personal acquaintance. A. There is no record
showing how they are made up. I have been unable to find such
a record.
Q. You were not the actuary in 1900? A. No.
Q. Your predecessor, the same one who made the exhibit for
1898 or 1899 was the actuary in 1900? A. No.
Q. Some one else ? A. No, he did not make up that statement.
Q. He did not make up that statement ? A. No.
Q. And the 1900 statement is correct? A. I have never veri-
fied it. I cannot say.
5133
Digitized by
Google
Testimony of Henry Moir
Q. Well, it shows a very large gain from the mortality? A.
more nearly correct than the other.
Q. I am informed it was made up by consulting actuaries at
that time. Is that in accordance with your information? A. Yes.
Q. Who did make it up? A. I understand it was Mr. S. Her-
bert Wolf.
Q. For 1900? A. Yes.
THE CHAIRMAN : The Committee will now take an adjourn-
ment until 10.30 to-morrow morning. All witnesses who have
been subpoenaed and requested to be here this afternoon will be
present promptly at that hour.
Adjourned to December 15, 1905, at 10.30 A. M.
S134
Digitized by VjOOQ 16
ALDERMANIC CHAMBER,
City Hall, New York City.
December 15, 1905.
The Committee met pursuant to adjournment, Senator Arm-
strongr in the chair.
EI> Ward H. HARRIMAN resumed.
BY MR, HUGHES:
Q' ^Mlr. Harriman, when did you first learn of the purchase by
Mr. Rx^n of Mr. Hyde's stock? A. On my way from the Erie
^^^ry t:o my office on the morning of the day that the sale was
^^nsairixMted.
y* 1"liat was Friday? A. I think that was Friday.
^' 1"lie day that Mr. Morton became chairman of the Board?
^' ^^^hen did you first have any communication with Mr. Ryan
^l>e matter? A. On my arrival at the office I telephoned to
Mr J^
* "^i^^n and told him I had heard the rumor and asked him if it
was So.
^' ^A/hat did he say? A. That it was conditionally so, and that
^^i^ed very much to talk to me about it and wanted my help
^ ^^^"operation in carrying it through.
^* I^id he say what he wanted to carry through? A. He said
^^ ^^nted to see and talk to me about it.
^' ^e did not at that time give any particulars? A. He asked
txv^ ^ see him.
5135
Digitized by
Google
Testimony of Edward H. Harriman
Q. He said nothing further than what you have said ? A. Over
the telephone, no.
Q. And did you say anything more to him ? A. I told him that
I "would be very glad to see him.
Q. Did you at that time speak unfavorably of his plan? A.
My impression is that I criticised it and wanted to know what
it meant.
Q. Upon what ground did you criticise it — 1 mean so far as
your statement to him at the time was concerned? A. Well, it
was rather staggering to anybody that Ryan wanted to control the
Equitable or should have control of it.
Q. Did you tell him that? A. Practically that.
Q. In substance that ? A. In substance that.
Q. Is this what you have stated all that was said over the tele-
phone ? A. As I remember it, yes, sir.
Q. When did you next have any communication? A. About
ten or fifteen minutes after that, at his invitation, I went to his
office.
Q. The same day? A. Fifteen minutes afterwards.
Q. And who did you meet there? A. Mr. Ryan.
Q. What took place? A. He then went into a statement of
why he had engaged to buy the stock and stated to me that he
had made up his mind that now was the time for him to do some-
thing to make a name for himself.
Q. EHd he say what he had done in the direction of engaging
himself? A. Somewhat, yes, sir.
Q. Can you recall what he said in substance? A. Practically.
Q. What was it? A. That he had engaged to purchase Mr.
Hyde's stock provided he could get control of the — I could not
state — provided he could get his nominee elected chairman oi Mie
board and that the consummation of the purchase was predicated
upon that.
Q. That involved the placing in the hands of his nominee the
5136
Digitized by
Google
Testimony of Edward H. Harriman
'*^,
V
^^Tiations of those who were then in executive offices ? A. That
^^.^^^lat he stated.
^^^^ So that his nominee would have free hand in reorganizing?
Yes.
Q. What did he say about his desire to make a name for him-
self? A. That he had plenty of money, that he never had done
anything conspicuous and that now he thought there was an
opportunity for him to do something. That is in substance. I
rather questioned the motives.
Q. Did you tell him so ? A. Practically, yes, sir.
Q. What did you say to him in substance? A. Let me go back
^ minute. When I went in there he told me that he wanted my
'^^Ip, he wanted me to co-operate with him in solving the Equitable
difficulty. If I go back a minute more', too, he did say over the
telephone that I was the only man in New York whom he desired
to co-operate with and help him in that matter.
Q. Did he say why that was ? A. No, sir.
Q. Did he tell you what sort of help or co-operation he desired ?
A. Not specially, except that in the first instance he wanted my
aid in getting his nominee elected that day chairman of the board.
Q. Were you at that time a director of the society? A. No, sir.
Q. How could you aid him in that respect ? A. By influencing
the help of some of those who were directors.
Q. Through your relations with them ? A. Yes, sir.
Q. Now coming down, if you are through with what you desire
to go back to, to the time of your interview at his office on the
same day did anything further take place than you have stated —
What did you say to him with reference to his motives? A. That
if I was satisfied that he was acting from pure motives, from an
absolutely unselfish motive and as he had said in the interest of
the Equitable and the general situation, that I would heartily
co-operate with and help him. He told me how he wanted me to
help him that day in getting his nominee elected. Before 1 left
5137
Digitized by
Google
Testimony of Edward H. Harriman
the room I told him that I was not satisfied, but that I 'would
think it over.
Q. Did you tell him at that time that you wanted to share in the
purchase? A. No, sir.
Q. EKd you tell him that you desired any part of the stock?
A. No, sir.
Q. EKd you have any conversation at that time with reference
to your having any part of the stock ? A. No, sir.
Q. Did you have any conversation with him at that time with
regard to the stock being put in the hands of trustees ? A. No, sir.
Q. What was your next interview ? A. On I think the Monday
following.
Q. Before we go to that, did you assist him in having his
nominee elected ? A. Yes, sir.
Q. EKd you see members of the board in relation to that?
A. I communicated with one of them.
Q. To the end that Mr. Ryan's wishes should be carried out?
A. Yes.
Q. Why did you do that if you were not satisfied of the purity
of his motives ? A. I had told him I would think it over, and on
my way to the office I concluded that the man that he had named
would be a proper man and that it was proper for me to notify the
parties who were opposed that if I were in their place I would
vote for him ; and that is what I did.
Q. You understood that the election of Mr. Morton would fulfill
the condition prescribed by Mr. Ryan and that Mr. Ryan would
then take the Hyde stock ? A. Well, somewhat that, too, yes, but
I also thought that if Mr. Morton were chairman of the board and
would start to unravel the affairs of the Equitable and if Mr. Ryan
was sincere in his motives that a proper solution could finally be
arrived a.t.
Q. Then you did think at that time that Mr. Ryan was sincere
in his motives ? A. I did not ; I told him I was not satisfied.
S138
Digitized by
Google
\
Testimony of Edward H. Harritnan
Q. But after reflection you had changed your mind? A. I
'^ad a very sincere doubt in my mind.
CS - With that doubt how could you contribute your influence
^^ tilxe election of Mr. Morton, who was nominated by Mr. Ryan,
^^tL the election of whom would lead to Mr. Ryan's completion
^^ l"i is purchase ? A. It was one of those steps that men often
^^^ thinking Mr. Ryan was sincere and he wanted me to help
"^^"^^» I could influence him to do what was right.
C> , Did you believe at that time that Mr. Ryan would share
^'^^ X^urchase with you ? A. No, sir.
^!^ - Did that operate with you at all as a motive in contributing
'^ "^Ine election of Mr. Morton ? A. No, sir.
^^ . The next interview you say was held on Monday at Mr.
^^^Ti*s office? A. Yes; and there were things that preceded
THE CHAIRMAN:
^^. May I inquire when Mr. Harriman resigned from the
^oard of Trustees of the Equitable — ^was it before or after this ?
A. I resigned at the time that the Frick report was put in.
Q. That I know. A. And never attended a meeting after that.
Q. So that at the time you mentioned when you assisted in
Mr. Morton's election you were not a member ? A. My resigna-
tion was before the Board of Trustees.
BY MR. HUGHES:
Q. You had resigned, as I understand it, with the understand-
ing that it should take effect at once ? A. Absolutely.
Q. And that was at the meeting on June 2? A. Whatever day
Jt was the Frick report came in.
S'39
Digitized by
Google
Testimony of Edward H. Harriman
BY THE CHAIRMAN :
Q. When the Frick report was put in ? A. When the Frick
report was put in.
Q. Did the resignation take effect at once? A. I never at-
tended any other meeting; I presume it did; I don't know when
they acted upon it.
BY MR. HUGHES:
g. The minute of the society is as follows : "Mr. Harriman
tendered his resignation as a director of the society." A further
minute is as follows : "Mr. Harriman again tendered his resigna-
tion as director to take effect at once, and withdrew from the
meeting." Those are from the minutes of June 2. Who were
present at the interview on Monday at Mr. Ryan's office ? A. I
think you want to get this thing in order.
Q. Chronological order? A. Chronological order.
Q. Is there a step lacking? A. Several steps.
Q. Won't you go right along? A. I will answer your ques-
tions or make a statement.
Q. Either way that you will prefer. A. I will lead then up to
the morning or afternoon of Monday. I telephoned Mr. Ryan
what I had done in regard to influencing the election of Mr.
Morton. He thanked me and told me he would like to c(3ni-
municate with me after the meeting of the board and would I be
in my office. So I waited there — and it had been my habit to go
out in the country where I live in the summer time. After tlic
meeting of the Board of Trustees and the election of Mr. Mor-
ton, Mr. Ryan called me up and told me then that he appreciated
my helping him in getting Mr. Morton in there ; that he wanted
me to continue and that he would do nothing further without
conferring with me and getting my consent — that is a very
SMO
Digitized by
Google
Testimony of / dward H, Harriman
strong statement — and wanted to know where he could reach me
that evening. I told him that I would not go out of town, as
I was accustomed, but would go to the Metropolitan Club and
wait until I heard from him. I went there, waited until about
eleven o'clock at night, when Mr. Cravath came up to see me
and then told me that Mr. Ryan had sent him; that he was
sorry that he had to act without letting me know ; told me what
he had done, and he wanted to inform me first. I resented such
treatment, and told Mr. Cravath that I was not in the habit of
being trifled with in that way, being deprived of going to my
home and staying in town in such a way, and that I considered
that an act of bad faith and an evidence of Mr. Ryan's intentions,
and said nothing more. I believe I turned my back on Cravath
and walked away. The next morning I had a telephone com-
munication with Mr. Ryan — either I asked for an explanation
or he called me up and told me he could explain it, and told me
he wanted me to meet Mr. Root in his office. I, of course, told
him I would be glad to do so, but I was going out in the country
%t day and would be back on Monday, and he asked me if I
Wou/d come to his office on Monday afternoon. I told him I
^^uld. That leads up to the Monday.
y* M/^hat did Mr. Cravath tell you had been done which he re-
S^^tteci the necessity of doing before you were conferred with?
^ ^ told me what they had determined to do in the event
^*^^ "Appointment of these trustees ; that Mr. Root had insisted
^<i its being done at once, and announced in the Now York
^pers, the morning papers, and that there was no time to
confer with me. Now, one minute. To which I dissented and
told him that Mr. Ryan had a telephone on his desk and there
was a telephone in the Metropolitan Qub, and there would not
have been five minutes lost by its announcement to me.
Q. When was that published in the papers, as to the selec-
tion of the trustees ? A. I think it was the next morning.
5MI
Digitized by
GoogI(
TesHfiiony of Edward H. Harriman
BY MR. ROGERS:
Q. That was Saturday morning, the loth? A. The 9th, I
think it was.
MR. ROGERS: The loth.
MR. HUGHES : Saturday was the loth.
THE WITNESS: Yes.
Q- The interview with Mr. Cravath was then on Friday night ?
A. Friday night.
Q. Prior to that interview you had no intimation from Mr.
Ryan that letters to trustees, inviting them to join, had been
sent ? A. No, sir. In fact, I want to say here that my mind has
not been on life insurance ; as you may imagine, I have only been
having my mind on what I was trying to do, and I have been
occupied with many other things. And I want you and this
committee, and everybody else, to understand that I have some-
thing else to do besides devoting my time to life insurance. My
recollection is I told Mr. Ryan so far as the Equitable was con-
cerned and my personal interest that I did not care anything
about it; that my affairs were much more important than the
Equitable in magnitude and to me of much more, of greater im-
portance ; that all I — the interest I had in it was to see that this
question was finally solved and the Equitable properly protected
and properly safeguarded. Those may not have been my words,
but those were in my mind. And when a man has some sixteen
thousand miles of railroad and thirty-five or forty steamships —
and with the daily questions coming up that do daily in those
matters — he has not much time to think about life insurance,
and I should not think Mr. Ryan would, either.
Digitized by VjOOQ 16
Testimony of Edward H. Harriman
Q. Then up to eleven o'clock on Friday night there had been
'Jothing said by you to Mr. Ryan as to any participation in his
purchase? A. No, sir. Mr. Ryan was very mysterious at my
^st interview with him on Friday as to the price. I asked him
^t^^t he paid for it, and he told me he was under promise not
t^ say anything more than he had told me ; and I did not know
^h^rx I went to see him on Monday what he had paid for it, ex-
^Pt the intimation was that it involved several millions of dol-
lars.
Q. On Friday had you any interview with him as to whether it