that the Liberty National Bank be considered as the depository
for the active account of the company. Motion carried."
Q. Those instructions were carried out ? A. Yes, sir.
Q. Do you find any record of syndicate participation by the
Washington Life Insurance Company prior to January i, 1905?
A. No, sir.
Q. Have there been syndicate participations by that compan«
since that time ? A. Yes, sir.
Q. How many syndicates has the Washington Life Insurance
Company gone into since the first of January, 1905 ? A. Six.
Q. And these are the six indicated by the papers you have
given me (indicating)? A. Yes, sir.
Q. This sheet that you now hand me shows the participation
in the Imperial Japanese Government Sterling Loan Syndicate,
4i per cent. Government bonds, due 1925 ? A. Yes, sir.
MR. HUGHES : I oflFer that in evidence.
(Paper marked Exhibit No. 779.)
(Exhibit No. 779 will be found in the Book of Exhibits.)
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Q. What is the amount of the participation of the Washington
Life Insurance in that syndicate? A. It was ten thousand
pounds.
Q. Through whom was the allotment received? A. Kuhn,
Loeb & Company.
Q. What amount was paid on the subscription ? A. The first
installment — they allotted — ^the condition of the participation
was that the participants should subscribe to an equal amount.
Q. Is this the letter (handing paper) ? A. Yes, sir. We were
allotted half of the participation. The first installment was
twenty-five hundred dollars and we paid the balance of the sub-
scription price.
MR. HUGHES: I offer the letter in evidence.
(Paper marked Exhibit No. 780.)
Q. Now, did you accept that participation? A. Yes, sir.
Q. What payments were called? A. No payments were called
on account of the syndicate.
Q. No payments at all? A. No, sir.
Q. Did you withdraw your bonds? A. We took our bonds
tmd paid for them, yes, sir.
Q. What bonds did you take? A. We took twenty-five thou-
sand dollars New York Stock Exchange face, which was the
amount allotted to us under the subscription.
Q. Then you did not get the full allotment? A. We did not
get the full allotment, no.
Q. What did you pay for the twenty-five thousand? A. It
is stated there. The total sum of $21,885.93.
Q. You took those from the syndicate managers? A. Yes.
Q. Then ^subsequently did you get a profit from the syndicate
managers? A. Yes.
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Q. Is this the letter conveying it (handing paper)? A. Yes,
sir.
MR. HUGHES: I offer it in evidence.
(Paper marked Exhibit No. 781).
Q. I find in this statement, Exhibit No. 779 a reference to
one hundred thousand dollars paid April 26, 1905, to the Mor-
ton Trust Company? A. That was an additional purchase.
Q. That was an additional purchase of what? A. Of that
same bond. It had nothing to do with the syndicate.
Q. Then these purchases appear in your other sheets? A.
Yes.
Q. Why is it upon this list ? A. I do not know why Mr. Met-
calf put it there. That is not part of the syndicate.
MR. METCALF: No, but it is a part of the same account.
Q. Through whom did you buy these bonds? A. Morton
Trust Company, I think.
Q. At what price? A. At the subscription price.
Q. How did you happen to do that? A. They let us have
them. I do not remember the circumstances exactly.
Q. Is that at the same price at which they had subscribed for
the bonds to the syndicate? A. Yes, sir, so I understood.
Q. Then you sold out the $125,000? A. Yes, sir.
Q. On June 21 and 22, through Ryan & Kelly and realized
a profit of $5,335.92 on the bonds you had taken? A. Yes, sir.
Q. And your profit on the whole transaction wa's that $5,-
33592 plus the $1,257.70 you had received from Kuhn, Loeb
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& Company? A. Yes, sir, unless this is computed after set-
ting that profit against the original cost of the bonds.
Q. It may be that that is the case, as I do not see it carried
to the last column? A. Yes.
Q. So that the total profit was $5,335.92? A. Yes.
Q. The next syndicate is the Pennsylvania Railroad conver-
tibles. Is that a statement of it (handing paper)? A. Yes, sir.
MR. HUGHES: I ofl:er that in evidence.
(Paper marked Exhibit 782.)
(Exhibit 782 will be found in the book of exhibits.)
Q. From whom did you receive the participation ? A. Kuhn,
Loeb & Company.
Q. What was the amount of your subscription ? A. $50,000
I think, and then they allotted us $45,500 in bonds or allotted us
a participation of $45,500.
Q. And the correspondence relating to the matter is in this
file now handed jou (handing papers) ? A. Yes, sir.
MR. HUGHES : I offer them in evidence.
(Papers marked Exhibit 783, 784 and 785.)
Q. The third syndicate is Imperial Japanese Government
second series 4^ per cent. Is this a correct statement of it
(handing paper) ? A. Yes, sir.
MR. HUGHES : I offer it in evidence.
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Testimony of John Tatlock
(Paper marked Exhibit 786.)
(Exhibit 786 will be found in the book of exhibits.)
Q. From whom did you receive the subscription? A. From
Kuhn, Loeb & Company.
Q. And what was the amount of the subscription? A
$50,000. I forget what the allotment was. We subscribed for
as much as the participation
Q. You subscribed for ten thousand pounds? A. Yes.
Q. And you received an allotment? A. It would show there
we received an allotment of ten thousand.
Q. How many of the bonds did you take? A. The same
amount.
Q. And did you sell them ? A. Yes, sir.
Q. And after crediting the profit on the syndicate of $1,170.80
against the price of the bonds you realized on the re-sale a net
profit of $3,326.79? A. Yes.
Q. The sale being made on November 27, 1905, through A. A.
Ryan & Brother? A. Yes, sir.
Q. The taking of the bonds having been on August 3, 1905?
A. Yes, sir.
Q. And the letters exchanged in regard to the matter are
these (handing papers) ? A. Yes, sir, are these.
MR. HUGHES: I offer them in evidence.
(Papers marked Exhibit 787 and 788.)
Q. The next subscription is the Republic Iron & Steel Com-
pany first mortgage. Is this a statement of that transaction
(handing paper.) ? A. Yes, sir.
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MR. HUGHES : I offer it in evidence.
(Paper marked Exhibit 789.)
(Exhibit 789 will be found in the Book of Exhibits.)
Q. That participation was through an allotment from the
Morton Trust Company? A. Yes, sir.
Q. As shown by the following letter? A. Yes, sir, it was a
share of their participation.
MR. HUGHES: I oifer that letter in evidence.
(Paper marked Exhibit 790.)
THE WITNESS : We had nothing to do with the syndicate
managers in that case.
Q. Who was the syndicate managers? A. Blair & Com-
pany.
Q. You accepted that? A. Yes, sir.
Q. Did you have to put up any money ? A. No.
Q. Did the Morton Trust Company put up any money for
you ? A. No, sir, I think not ; in fact, I know they did not.
Q. Nobody had to put up any money? A. Yes, sir.
Q. What did you get as a profit? A. One thousand eight
hundred and forty-seven dollars and four cents.
Q. So that your entire interest in the transaction was
through the receipt of the letter notifying you of the allotment
and the subsequent receipt of a check for the profit? A. Yes.
Q. And the letter accompanying the check is the letter of
November 20, 1905 (handing paper) ? A. Yes, sir.
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MR. HUGHES: I oifer that in evidence.
(Paper marked Exhibit 791.)
Q. You did not enter into that syndicate with the idea of tak-
ing any of the bonds, did you — you did not take the allotment
with the idea of investing in any of the securities? A. No,
because it was not expected that we would have to.
Q. It was an industrial, was it not? A. It was an indus-
trial.
Q. It was a matter as to which you would not contemplate
a permanent investment? A. Yes, sir, that is right.
Q. The next syndicate is Imperial Japanese Government 4s,
maturing in 1931 ? A. Yes, sir. That is still open.
Q. This is the statement of the participation? A. Yes.
MR. HUGHES: I offer this in evidence.
(Paper marked Exhibit 792.)
(Exhibit 792 will be found in the Book of Exhibits.)
Q. Imperial Japanese Government Sterling Loan, 1905, No-
Tember 28th, first subscription, $1,250. From whom did you
receive your allotment? A. Kuhn, Loeb & Company.
Q. What was the amount of your allotment? A. I have for-
gotten. Mr. Metcalf, how much was it?
MR. METCALF: Our allotment was £2,000.
THE WITNESS : It was very small. I think it was i2/xo.
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Q. And did you put up any money? A. We put up the first
call called for the subscription.
Q. One thousand two hundred and fifty dollars. A. Yes,
sir.
Q. November 28th? A. Yes, a few weeks ago, I believe.
Q. What is the item in red ink of $250? A. The first check
was drawn for the full amount of the subscription, and this
was a refund of the balance over the first amount.
Q. Have you taken any of the bonds? A. We have sub-
scribed for the same amount.
Q. You have not taken them? A. We have not got
them Oh, yes, in fact we just got them yesterday.
Q. But you have not paid for them? A. Yes, we paid for
them yesterday.
Q. How many of the bonds have you taken? A. Two
thousand pounds.
Q. The entire amount allotted to you? A. The entire
amount allotted to me.
Q. In any of these cases that have been mentioned did you
buy any bonds in excess of your allotment? A. Not from
Kuhn, Loeb & Company.
Q. Have you from any one else? A. We did, $5,000 of the
Japanese ists, from the Morton Trust Company.
Q. In any other case have you bought any? A. No, sir.
Q. So what you have stated covers your entire transactions
in connection with the securities as to which you participated
in the syndicate? A. Yes, sir.
Q. Now, the last syndicate is the Bethlehem Steel Company
syndicate. When did you obtain a participation in that? A.
November 29th.
Q. Nineteen hundred and five? A. Nineteen hundred and
five.
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Q. From whom did you receive the participation ? A. Har-
vey Fisk & Sons.
Q. What is the amount of your participation? A. One hun-
dred thousand dollars, with a further contingent participation
of $50,000.
Q. As shown by this letter of November 22d, 1905? A. Yes,
sir.
MR. HUGHES: I offer that in evidence.
(Paper marked Exhibit 793.)
Q. Did you sign the syndicate agreement? A. I did, on the
instruction of the Finance Committee.
Q. Is this the resolution of the Finance Committee giving
you those instructions ? A. Yes, sir.
MR HUGHES: I will read in evidence.
A meeting of the Finance Committee of the Washington
Life Insurance Company was held at the office of the Morton
Trust Company, November 29, 1905, at 1.30 p. m.
Present: Messrs. Allen, Morton, Ryan, Whitney and Tat-
lock.
The minutes of the meeting of November 22, 1905, were read
and approved.
The president reported the sale of $50,000 Imperial Japanese
loan, 4i% second series at 93; and the purchase of $50,000.
Lehigh & Wilkesbarre Coal Company, 4^% bonds for 1910, at
101% and interest.
Also that after consultation with officers of the Finance Com-
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mittee, the company had subscribed to the new Imperial Ja-
panese 4% loan to the amount of its participation in the syn-
dicate formed for the placing thereof.
On motion, the above mentioned transactions were approved.
On motion, it was ordered to accept participation of $100,000
in the syndicate being formed by Harvey Fisk & Son for the
purchase of the Bethlehem Steel Company first, extended, guar-
anteed 5% bonds.
On motion, adjourned.
JOHN TATLOCK,
President.
Q. That is the last meeting of the Finance Committee? A.
That is the last entered in the book.
Q. How do you reconcile the joining in the syndicate with
the opinion expressed at the meeting of the Board of Directors
in July, as to the attitude of the company toward industrial
securities? A. Well, I do not take the personal responsibilities
for investments.
Q. You acted under instructions in the matter? A. I acted
under instructions, and in these syndicates^ it is understood you
do not have to take the bonds unless you want them.
Q. But you do have to take them if you do not want them,
if you are required to? A. If you are required to, yes, sir.
Q. Well, my point was this. There appears to have been a
definition of policy at the meeting of the Board in July, 1905,
as to the propriety of investing in industrial securities. Has there
been a change in that policy? A. No, sir, I do not think there
has, but the line — ^but the definition of what is industrial is so
broad and without such definite limits, that I think there would
be a difference of opinion in any Board. For instance, we hold
$50,000 of the Lackawanna Steel Company bonds and notes, 5
years, 5% notes, and while, of course, that is an industrial se-
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Testimony of John Tatlock
curity, yet no man who has any opinion on securities would
consider that anything but first class.
Q. Well, is the point then that you will invest in first-class
industrial securities or that you will not invest in industrial se-
curities at all ? A. Well, I think it is rather the first because
Q. That is, you will not invest in poor industrial securities?
A. I know that that very point came up when Mr. Snyder
drafted that report, that paragraph concerning industrial se-
curities in the report of the Auditing Committee, that very point
about the Lackawanna Steel Fives that I mentioned to you just
now.
Q. Well, then, your company has no settled policy with refer-
ence to industrial securities as a class, but only scans them a
little more carefully before making an investment ? A. I think
that is a fair statement, although
Q. Now, have you had any other participations in a syndicate
of any sort through the Morton Trust Company or through any
one of your officers which does not appear iit the sheets which
have been mentioned? A. No, sir.
Q. Are you entitled directly or indirectly to any benefits on
any syndicate participation which does not appear in these sheets
which have been put in evidence ? A. No.
Q. These comprise all your transactions of that sort ? A. Yes,
sir.
Q. And all the securities which you have purchased either
directly or indirectly or have acquired that have been floated by
syndicate managers are comprised in the list of securities pro-
duced which has been furnished the committee ? A. Yes, sir.
Q. Have you participated yourself in any of the syndicates?
A. No, sir.
Q. Have any of the executive officers participated in any of
these syndicates? A. No, sir, nobody connected with the com-
pany in any capacity.
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Q. Well, the members of the Finance Committee have, have
they not ? A. Not personally, no. •
Q. Not in any of them ? A. Not in any of them.
Q. You are prepared to testify to that positively? A. Yes.
Q. So that Mr. Ryan was not in any of these S)mdicates? A.
Not personally.
Q. You mean by that if he had any interest it would be
through the Morton Trust Company? A. It would be through
the Morton Trust Company's interest.
Q. And similarly with Governor Morton? A. Yes, sir.
Q. Are these brokers related to Mr. Ryan that have been
mentioned? Ryan & Kelly? A. Yes, sir. The Ryans are his
sons.
THE CHAIRMAN : The committee to-morrow will meet in
the Aldermanic Chamber at the other end of the building at
10.30 o'clock sharp.
Adjourned to December 20, at 10.30 A. M.
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ALDERMANIC CHAMBER.
City Hall, New York Ch'y.
December 20, i</)5.
The committee met pursuant to adjournment, Senator Arm
strong in the chair.
JOHN TATLOCK, resumed.
BY MR. HUGHES:
Q. Mr. Tatlock, are these all the collateral loans made by the
Washington Life Insurance Company since January i, shown
by the papers received by the committee ? A. Yes, sir.
MR. HUGHES : I will have them marked for identification.
(The papers were marked Exhibits 794, 795, 796, 797 and 798
for identification.)
Q. These appear to be business loans on collateral ? A. Yes,
sir.
Q. Has there been any loan since January i, 1905, to or for
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Testimony of John Tatlock
the benefit of any officer or director of the company, directly or
indirectly? A. No, sir, absolutely none.
Q. Is this a complete list of legal fees paid by the Washington
Life for the ten years last past ? A. Yes, sir ; up to the end of
1904.
MR. HUGHES: I will have it marked for identification.
(Paper marked Exhibit 799 for identification.)
Q. You found no records of any payments to Andrew Hamil-
ton? A. No.
Q. Or to A. C. Fields? A. No, sir.
Q. Or to William H. Buckley? A. No.
Q. Or of any payments in connection with matters of legisla-
tion? A. No, sir.
Q. (Handing paper.) Is this a complete statement from the
books of the Washington Life of the loans made prior to De-
cember 31, 1904, for the preceding ten years ? A. Yes, sir.
MR. HUGHES: I will have it marked for identification.
(Paper marked Exhibit 800 for identification.)
Q. Is this a correct statement of the amount of your out-
standing insurance on the annual and deferred dividend plans
respectively? A. Yes, sir, to November i.
Q. November i, 1905? A. Yes, sir.
MR. HUGHES: I will read it in evidence: "The present
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amount of outstanding insurance on the annual dividend plan is
$12,339,000.
"The present amount of outstanding insurance on the deferred
dividend plan is $45440,000."
Q. What is the method by which annual dividends have been
calculated? A. For a number of years it has been the custom
to allow one and one-half per cent, interest on the initial re-
serve for the policy year and five and one-half per cent on the
loading on the premiums. These contributions so-called for
each age were modified according to a scale of percentages, the
scale varying according to the duration of the policy, the poli-
cies issued in the earlier years getting 100 per cent, of the con-
tributions and for the later years being scaled down according to
the table which has been submitted.
Q. Is the method correctly stated in this memorandum that
has been produced ? A. Yes, sir.
MR. HUGHES : I offer it in evidence.
(Paper marked Exhibit 801.)'
(Exhibit 801 will be found in the Book of Exhibits.)
Q. Is that the same method that was adopted by the Mutual
Life? A. It was very similar.
Q. Similar, but different? A. No, only in detail.
Q. In other words, you took one and one half per cent, in-
terest on the initial reserve and 5^ per cent, on the loading on the
annual premium? A. Yes, sir.
Q. That was the manner in which the dividends were calcu-
lated, whatever the income may have been? A. Of course, you
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will understand this is the method adopted by the prior actu-
ary of the company.
Q. Yes, prior to your connection with the company? A. Prior
to my connection with the company, yes.
Q. Did this method result in giving the same dividends right
along? A. From year to year do you mean?
Q. Yes. A. Well, it would give an increasing dividend, in-
creasing in the ratio of the reserve.
Q. But apart from that proportionate increase the dividends
would be the same? A. Yes, sir.
Q. So that whether the company made or lost money the gain
of the policyholder would increase according as the reserve upon
his policy increased? A. Yes.
Q. Do you think that is a proper way of computing an annual
dividend? A. I am inclined to think that there is a good deal
in justification to be said for that method.
Q. What is the justification for giving a man gains in an-
nual dividends which the company may not have earned? A. I
beg pardon, I misunderstood your question. I thought your ques-
tion was as to the method. Of course, you cannot justify distrib-
uting profits that you have not earned.
Q. I mean it would lead to it in the case of a given year when
they did not make money? A. Yes, sir.
Q. And this plan would lead to that, would it not ? A. In the
particular case of the Washington Life in the past years, yes, sir.
Q. And this method would give a definite percentage of the load-
ing which remained constant on the annual premium each year,
and in addition i^ per cent, upon an increasing reserve? A. Yes.
Q. So that a man would continually have a certain amount
or dividend based upon the loadings and an increased amount
based upon the reserve, regardless of the operations of the com-
pany? A. Yes, sir.
Q. Was that method adopted in the Mutual Life? A. No, sir.
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Q. Then was there an attempt to approximate the dividends
to the actual gain? A. Yes, according to the actual facts.
Q. By a modification of the actual factors that were taken with
some reference to the actual experience ? A. Yes, sir.
Q. What is your method now in the Washington Life? A. The
problem has been presented to me only for the dividends for 1906,
for annual dividends for 1906 it has seemed to me wise to use
that same method for the annual dividends. The changes in the
financial history of the company and the process of reorganiza-
tion which it is going through absolutely precluded any actual
determination of the so-called real earnings.
Q. Have you made any estimate of the results of the business
for the year 1905? A. No, sir — well, yes, for nine months.*
Q. What does it show? A. It shows that for nine months
the actual net earnings of the company, based upon the best valu-
ation of the liabilities I could make, at the end of September
amount to $226,000, of which earnings $77,000 is dividends paid
to policyholders in 1905 and $149,000 in increase in surplus, mak-
ing the surplus at the end of September $224,000.
Q. Is that over and above the capital stock? A. Over and
above the capital stock.
Q. At par? A. At par, yes, sir.
Q. How much of that is due to the premiums received on the
increased capital? A. Well, that premium upon the increased
capital went to make — all but $75,000 of it went to make up the
deficiency at the end of 1904.
Q. So there was only $75,000 which could apply on the gains
of this year, or be a part of them ? A. Yes, sir, or be a part of the
surplus dividend at the end of this year.
Q. So that after setting aside dividends to policyholders in
the amount of $77,000 and paying all of your expenses for the
nine months, you figure you will have a surplus in excess of the
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Testimony of John Tatlock
^75,000 realized from the capital stock, of about $75,000? A.
No, of $149,000.
Q. Oh, that was in excess of the $75,000? A. That was iti
excess of the $75,000. The actual free surplus of the company
at the end of September over and above the capital stock was
$229,000.
Q. How were the dividends on deferred dividend policies com-
puted under the former administration? A. Well, the annual
dividends for a similar policy having a five, or ten, or fifteen year
distribution period were taken during that term, and the revel-sion-
ary values, that is, the insurance values of those paid dividends
as computed for each year were summed ; the present cash value of
that sum of reversionary insurance was considered as the cash
dividend on that distribution period, and those results were modi-
fied by percentage in accordance, I regret to say, with what seems
to me no plan.
Q. What do you mean by that, precisely ? A. Well, there does
not seem to have been any regular method in applying those p*?r-
centages.
Q. They were applied arbitrarily? A. Rather, yes.
Q. Well, with what object? A. Well, I should judge, to make
them look about right, to give a reasonable percentage of the
premiums that had been paid by the policyholder.
Q. What method have you adopted, or do you plan to adopt,
under your administration? A. I plan to adopt a method of
taking the annual dividends which were declared on similar policies
to the distribution policy, and accumulate them at interest to the
end of the distribution period, or what comes to the same thing,