any profit on it other than to just get me out whole on it. Of
course, we had not paid any dividends on the stock there, and
during the Townsley litigation I had to go in debt.
Q. What was the Townsley litigation? A. We dismissed
him, as I told you, for that proxy business, and then he sued
us for $365,000.
Q. What became of that suit? A. He got a verdict for $50,-
000; judgment was arrested, tried before the Appellate Divi-
sion, and it was unanimously turned down — reversed.
Q. What happened then? A. Well, he sued over again for
$500,000, but after his testimony was all in he had forgotten to
amend his complaint, and I think it was Judge BischoflF there
«aid he could only sue for the $365,000, inasmuch as he had not
amended, so the jury gave him a verdict for $10,000, which the
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Testimony of Richard Morgan
company paid promptly, because the Appellate Division there
cost us more than that in the first case.
Q. When did you retire as president? A. September the ist,
I think it was, 1902.
Q. And who succeeded you? A. Mr. Charles H. Fancher.
Q. That was after the purchase of the stock? A. Yes, sir.
Q. How long did he remain president ? A. Why, I think until
the 1st of January that next year.
Q. Who succeeded him? A. Mr. Foster M. Voorhes, ex-
Governor of New Jersey.
Q. That was after the sale to the Knickerbocker Investment
Company and after the stock had been put in a voting trust ? A.
Yes, sir.
Q. The stock that you sold with other shares were put into
a voting trust, under which they still remain ? A. Yes.
Q. That voting trust was a compromise after the transfer of
the shares of stock to the Knickerbocker Investment Company,
occasioned by the fact that the purchasers had not taken the
precaution to procure a resignation from the Board of Direc-
tors? A. Well, that I don't know; I was not in the board at
that time.
Q. Wasn't it a result of the objection of the minority interest
represented in the board to the transfer? A. Yes.
Q. And they did not resign, but continued in office? A. They
did.
Q. And the result was a voting trust? A. Was formed?
Q. Was formed, and Mr. Voorhes represented the purchasers
of the stock and Mr. Sberer represented the minority represented
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Testimony of Howard K. Stokes
in the board, and they nominated Governor Stokes? A. No, I
think it is just the other way. I think that Governor Stokes rep-
resented the Knickerbocker people
Q. We have the papers, I think, which show that? A. And
then between the two of them, Mr. Voorhes — I don't know.
Q. You are not sure of that? I think that is fully covered by
the report of the Referee already in evidence? A. Mr. Odell's
report, yes.
Q. Now since that time what has been your connection with
the company — have you had active charge of any part of this busi-
ness? A. I have — that is, the adjustment of its ten-year term
policies — those omes I told you about with the inadequate rates.
Q. Have you had anything to do with the general management
of the company ? A. Only as a Director.
MR. HUGHES: Will you withdraw? Mr. Stokes, will you
take the stand ?
HOWARD K. STOKES, called as a witness, being duly sworn,
testified as follows :
BY -MR. HUGHES:
Q. Mr. Stokes, what is your connection with the Bankers* Life
Insurance Company ? A. Third Vice-President and Treasurer.
Q. How long have you held those offices ? A. Since some time
in June, 1903.
Q. Have you the management of the company? A. No, sir.
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Testimony of Howard K, Stokes
Q. Who does take charge of the general affairs of the company?
A. The Executive Committee, Board of Directors and Executive
Committee.
Q. And who is the active man in the direction of affairs? A.
At the present time?
Q. Yes. A. I presume I am at the present time, yes, -sir.
Q. Is this a list of the securities now owned by your company, a
complete list? A. I assume that it is, Mr. Hughes. It was made
up by our Secretary who has those matters in charge.
MR. HUGHES : I will have that marked for identification.
(Paper marked Exhibit 821 for identification.;
Q. Is this a complete list of the purchases and sales of securi-
ties during the last ten years (showing witness paper) ? A. Yes,
sir.
(Paper marked Exhibit 822 for identification.)
Q. Is this a complete list of your collateral loans for ten years
last past (showing witness paper) ? A. Yes, sir.
MR. HUGHES : Mark that for identification.
(Paper marked Exhibit 823 for identification.)
Q. Does your company invest in stocks? A. It has a few.
stocks, stocks in the Consolidated Gas Company, in the Chicago,.
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Testimony of Hozvard K. Stokes
Milwaukee & St. Paul Railroad and the American Tel^japh &
Telephone. That is the only three stocks we hold according to my
recollection.
Q. Out of the total of securities of $1,035,668.74 in bopk value,
what is the amount of stocks which you hold? A. About $38,-
000 — they are not separated here.
Q. Has your company participated in any syndicates ? A. Not
that I know of, sir.
Q. Has any officer of your company entered into any syndicate
or participation in any underwriting where the company has pur-
chased any of the securities floated by it ? A. No, sir, not to my
Icnowledge.
Q. Has your company made any contributions for political pur-
poses ? A. No, sir.
Q. To any party ? A. No, sir.
Q. Or in any campaign, State, national or local? A. No, sir.
Q. Has your company made any payments in connection with
matters of legislation ? A. No, sir.
Q. Have you ever paid any money to Andrew Hamilton? A.
No, sir.
Q. Or William H. Buckley? A. No, sir.
Q. Or A. C. Fields? A. No, sir.
Q. Have you made any payments whatever as contributions to
any organization or association for the purpose of facilitating leg-
islation or opposing it ? A. No, sir.
Q. What proportion of your business is written on the deferred
•dividend plan? A. I cannot answer that question.
Q. Who would be able to answer that — ^your Actuary? A.
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Testimony of Edmund L. Baylies
The Secretary and Actuary, he is prepared to answer on matters
of that kind.
Q. Is he here? A. Yes, sir.
MR. HUGHES : Will you withdraw a minute, please?
EDMUND L. BAYLIES, resumed.
BY MR. HUGHES:
Q. Have you produced the books showing the receipts and dis-
bursements in connection with the mortgage tax matter last
spring ? A. I have the book here before the Committee. It covers
the entire period, both while I was Treasurer and while Mr. Mar-
ling was Treasurer when I went away in May, as I have already
testified.
Q. How much of the money contributed was contributed by in-
surance companies? A. $i,ooo.
Q. Which were the companies that made those contributions?
A. It was contributed $500 by the Germania and $500 by the
Comptroller of the Metropolitan Life.
Q. What institutions, not giving the names, but what classes of
persons or institutions contributed the residue? A. They were
trust companies who were interested in that clause of the bill re-
lating to trust mortgages, and builders who were interested in
building operations and who thought that their rates would be put
up by the tax bill if passed, real estate brokers who feared that the
bill would injure their business and then also the classes of whonj
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Testimony of Edmund Baylies
I have already spoken; that is, the individuals who were lenders
of money and individuals "who were borrowing money.
Q. What was the total amount?
THE CHAIRMAN: You forgot the one important class of
banks and bankers who, I notice, were largely interested.
A. I should have stated that and the reason why that class con-
tributed was that the committee, as a substitute for the Mortgage
Tax Bill, proposed a bill in which the bankers of this city were
very vitally interested, which was a bill to tax all securities,
whether issued in this State or elsewhere, and secured by mort-
gage or not — ^that is the class of railroad bonds that are generally
dealt in in the New York Stock Exchange, it was proposed in a
bill that was presented to the Governor, the passage of which was
urged, that a tax should be imposed on those securities, the amount
of which was very large, going into the hundreds of millions, and
it was thought that securities issued by companies in other States
should pay a tax of one-half of one per cent, so that the securities
would not be declared taxable ; for that reason we appealed to the
bankers.
BY MR. HUGHES:
Q. What was the total then? A. $22,580.
Q. How much of that was disbursed for advertising? A. I
make up the advertising, postage and postal cards together $9,-
369.09.
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Testimony of Edmund Baylies
Q. How much was paid for leg^l expenses? A. Some ten dif-
ferent attorneys in New York City and in the western part of this
State and some in Albany — only two a few hundred dollars in
Albany — received $5,065.17. I would say that the members of
the Committee who had charge of this matter made no charge for
their services except in the case of Mr. Van Ingen, who practically
spent some four months of his time to the exclusion of all other
business traveling over the State and b€ing in Albany.
Q. How much was he paid? A. There passed through Mr.
Van Ingen's hand $7,818.37. I think that his personal participa-
tion in that amount would be between four and five thousand dol-
lars that he received for his personal services.
THE CHAIRMAN: The witnesses who have been requested
to be here and have not been called will kindly be here sharply at
half past ten in the morning, to which time the Committee will now
adjourn.
Adjourned to 10.30 A. M., December 21st, 1905.
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ALDERMANIC CHAMBER,
City Hall, New York City.
December 21st, 1905.
The Committee met pursuant to adjournment, Senator Arm-
strong in the chair.
HOWARD K. STOKES, resumed.
BY MR. HUGHES:
Q. Your company was recently examined by the Insurance
Department? A. Yes, sir; examined the latter part of last
year.
MR. HUGHES: I will offer in evidence the report of the
Insurance Department or rather the chief examiner under it
of March 13, 1905.
Report marked Exhibit 824 and read in evidence by Mr.
Hughes.
Q. What is the amount of the salary paid your President?
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Testimony of Howard K, Stokes
A. We have no President just now. The President of the com-
pany resigned the ist of November. We have no President.
Q. Who is the acting President? A. I am.
Q. What was the salary of the President prior to his resig-
nation ? A. $8,000 a year.
Q. How long had that been the case ? A. Since he came with
the company in January, 1903.
Q. What was his interest in the company personally — ^was he
a stockholder? A. Yes, sir.
Q. Holding how many shares of stock? A. I think he holds
ten — I am not positive, but I think it is ten.
Q. Was he a policyholder in the company ? A. Yes, sir.
Q. To what amount? A. $5,000, I think.
Q. What are the otTier salaries paid by the company? A. We
pay the medical director $4,500. I may say, Mr. Hughes, that
the salaries have recently been slightly changed.
Q. Well, if you can give me a statement of what they were
and what they now are ? A. The salary of the medical director
was $5,500, and changed to $4,500 from the ist of November.
The general counsel, salary $3,500 ; the secretary of the company,
salary $2,700. Those are all of what we call the official force.
Q. Those are all the executive officers' salaries? What is
your salary? A. I don't have any salary.
Q. You have none at all? A. No.
Q. You never have had a salary? A. I had a salary until
November ist.
Q. What was your salary? A. $4,000.
Q. That was relinquished entirely ? A. Yes.
Q. What was the reason of the reduction in the salary list
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Testimony of Howard K. Stokes
November ist? A. The President resigned and it was thought
advisable to make some other changes in the way of economies.
Q. To what extent did you introduce economies at that time ?
A. Discharged some of the employees in the office and have
reduced the amounts of money usually advanced to agents and
various other economies, amounting I should think, maybe five
to eight hundred dollars a week altogether.
Q. Your expenses apparently in 1904 were $283,586. What
do you estimate that amount to be in the year 1905 ? A. I have
not estimated that, Mr. Hughes.
Q. You estimate that it will be considerably less ? A. Yes, sir,
it will be less — ^I cannot say.
Q. What rate of commissions do you pay to agents? A. We
pay 65 per cent, of the first year's commissions, 15 per cent,
second year and 7\ for the life of the policy on three chief forms
of policies, that is the ordinary life, twenty year life and twenty
year endowment, and other commissions are graded and are less
than that.
Q. Can you tell me if those are the correct amounts of the
new business written by your company since 1898 (showing wit-
ness Blue Book) ? A. No, sir, I cannot tell you that they are.
I have no way of verifying them except by the books of the com-
pany.
Q. You have not a statement here ? A. I think probably the
secretary has in those technical matters.
Q. How did you or how do you estimate the amount which
can be profitably expended in the obtaining of new business ? A.
] can estimate it by taking the amount on the average which
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Testimony of Howard K, Stokes
it will be probably necessary to set aside as reserve, and take the
remaining sum.
Q. Be necessary to set aside as reserve out of what? A. Out
of the first year's premiums.
Q. Do you do that, as a matter of fact — is that your general
method? A. Yes, sir.
Q. And you take into consideration the probable gain in mor-
tality on the first year's business ? A. Yes, sir.
Q. Have you practically proceeded in accordance with what
is known as the selected and ultimate method ? A. I don't know
what you mean by that.
Q. Have you estimated that you could profitably expend for
getting new business the amount of the first year's premiums
after deducting what could be set aside for reserve upon the val-
uation of the business for the first year as term business ? A.
Yes, sir.
MR. HUGHES : I read from the Blue Book the amounts ex-
pended from 1899 in all to 1904 inclusive :
1899 $223,743
1900 231,009
1901 '•• 256498
1902 300,933
1903 283,879
1904 283,586
That is the expenses, as distinguished from the amounts paid
5606
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Testimony of Miles M. Dawson
to policyholders. I will read the amount of new business writ-
ten during the same period :
1899 $6,859*000
1900 5*366,326
1901 8,229,167
1902 5>427,338
1903 3752,054
1904 4,582,272
MILES M. DAWSON, resumed.
BY MR. HUGHES:
Q. Have you computed the net earnings of the Bankers' Life
Insurance Company from the reports for the years 1899 ^o 1904
inclusive? A. Yes, sir, I have.
Q, Is this a correct statement (handing paper)? A. I think
it is. .
MR. HUGHES: I will read it.
1900 $95>50i
1901 33*290
1902 a loss of 25,528
1903 a loss of 49*715
1904 58,655
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Testimony of Miles M, Dawson
Q. Have you made a comparison of the valuation of the pol-
icies of the Bankers' Life Insurance Company by the Insurance
Department of Massachusetts under its method of dealing with
preliminary term policies as compared with the valuation of the
same policies in New York. A. I can give an explanation of
that, too. I have.
Q. Is that a correct statement of it (handing paper)? A. Yes,
.•sir, it is.
Q. Please state it upon the record. A. New York, the pol-
icies valued as written, being on the modified or non-discriminat-
ing preliminary term plan, as to certain of the policies, $1,182,-
^876; Massachusetts, all policies valued as preliminary term for
the whole first premium, all plans under the provisions of
the Dewey Law, $173,842; larger reserves charged by New
York, $109,992.
^. What is the explanation of that? A. The policies issued
by the Bankers' Life Insurance Company from 1899 ^^ ^9^^
were on the modified preliminary term plan, which means that
they had but one preliminary term rate, equivalent to the or-
dinary life rate after the first year; and that all the additional
premiums on limited payment and endowment policies were
guaranteed to be returned as a cash value if called for in ad-
dition to the ordinary life reserves and was put up in the re-
serves. The New York Department valued these policies as
they were written, charging proper reserves. The Massachusetts
Department disregarded the terms of these contracts and valued
them as if the whole first premium had been made term insur-
^ance.
Q. You referred in your statement to the Dewey Law in
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Testimony of Miles M. Dawson
Massachusetts. What was that law? A. The Dewey Law was
passed, I think, in 1897 and provided that certain companies,
some of them domiciled in Massachusetts, and others already
doing business in that State, should be given the privilege of
having their policies valued for five years as preliminary term.
That law was afterward renewed for three years as applying to
those same companies.
Q. Did the Bankers* Life Insurance Company come under
that law? A. It did.
Q. And it secured the advantage of that valuation? A. It
secured the advantage of that valuation.
Q. Are there any other New York companies under that law
that you know of? A. The Mutual Reserve.
Q. How about the Security Mutual? A. The Security Mutual
was entitled to the provisions of the law, but by being qualified
by making out its report under a different form, the ruling of
the Department put it under the regular old line law as to valua-
tion in that State.
Q. Does a company, which is an assessment company and
which was not doing business in Massachusetts at the time of
the Dewey Law come under its provisions? A. No further
companies except those then doing business have ever been ad-
mitted to the advantages of the law.
Q. What is the difference in the valuation in Massachusetts
.under the Dewey Law and outside of it? A. Outside of it they
value policies without regard to how they are written, as if they
are not preliminary terms. Under it they value the policies as
preliminary terms without regard to how they are written.
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Testimony of Howard K. Stokes
HOWARD K. STOKES, resumed:
BY MR. HUGHES :
Q. Since the report to the Department under date of March 13,
1905, have you made any changes in the amounts paid for getting
business? A. Since March 13, 1905?
Q. Since the date of this report of Chief Examiner Vanderpoel
to the Insurance Department. A. No, sir.
Q. Your efforts to come within your loading have been to
the extent mentioned in the cutting down of salaries ? A. Yes.
Q. And office expenses? A. Yes, sir.
Q. I think you did mention the matter of advances to agents.
To what extent have you reduced your advances to agents? A.
They have been reduced from about eight hundred dollars a week
to about two hundred and fifty.
Q. How did that leave the outstanding agents' balances at the
present time as compared with last December? A. I think they
are just about the same as they were last December.
y. 1 notice an investment of May last, Pere Marquette Rail-
road Consolidated Mortgage. Who authorized that investment?
A. The Finance Committee.
Q. Who were on your Finance Committee? A. William
Scheerer, Mr. William B. Reed, John G. Hanrahan, Alva Trow-
bridge ; I think there is one other, whose name I do not just now.
recall.
Q. Are you on the Finance Committee? A. No, sir.
Q. Did you have anything to do with the matter of this invest-
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• Testimony of Howard K, Stokes
ment I refer to? A. No, sir, except making the purchase at the
recommendation of the Committee.
Q. Do you know what efforts the Committee made to ascertain
with regard to the propriety of such a purchase? A. There was
one other member of the Committee I would like to suggest,
Andrew T. Sullivan. They consulted, I think, among themselves,
as to the value of it.
Q. That was a security subordinate to many liens was it not?
A. Yes, sir.
Q. And it is not in a very fortunate position at present? A.
The last quotation I knew of, it showed a very slight loss.
Q. Are you prepared to furnish any reasons for justifying
that investment at that time? A. Nothing, except that the Com-
mittee thought it was a good investment.
Q. Did they look up the data upon the subject at all ; did they
make any examinations to ascertain the condition of the property
and prior liens upon it? A. No, sir, I think not.
Q. Has a receiver recently been appointed? A. Not that I
know of. That road is one of the roads connected with the Cin-
cinnati, Hamilton & Dayton. The receivership, as I understand it,
doe? not apply to the Pere Marquette, only to the Cincinnati,
Hamilton & Dayton.
THE WITNESS : I would like to add in regard to the Pere
Marquette, the purchase of those bonds, that immediately upon the
disturbance which arose over the Cincinnati, Hamilton & Dayton,
I secured from the brokers from whom they were bought a guar- '
antee from them that they would pay the interest coupons at par,
5611
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Testimony of John Fuhrer
and that they would pay within three points of the price we pai«l
for them, so the total loss to the company in case we closed them
out would be less than three hundred dollars.
JOHN FUHRER, resumed:
BY MR. HUGHES :
Q. What is this book that I now show you? A. That is an
estimate for dividends made by the agents.
Q. Made by the agents? A. Well, I don't, know, from whom
it came, it has been made by some of the agents.
Q. By the agents of the Germania ? A. Yes, sir.
Q. It has reference to the expected results on Germania policies?
A. Yes, sir.
Q. Have you presented a statement of your dividend distribu-
tion in 1905, showing the actual results on the policies issued?
A. Yes, sir.
Q. That is a correct statement? A. Yes, sir.
xMR. HUGHES : I offer it in evidence.
(Paper marked Exhibit 825.)
Q. Now, according to this book of estimates at age thirty-nine,
the estimate of fifteen payment life on one thousand dollars, that
is the estimate of cash profits and fifteen year accumulations, was
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Testimony of Francis Hendricks
how much per thousand dollars? A. One hundred and forty-five
dollars.
Q. And what was the actual result on such a policy at fifteen
years, maturing in 1905 ? A. One hundred and two dollars and
thirty-three cents.
Q. Now, take the case of an ordinary life policy with a fifteen
year accumulation, the estimate according to this book at age
fifty- four is what? A. Two hundred and twenty-three dollars.
Q. And what was the actual result in 1905 ? A. One hundred
and fifty-four dollars.
Q. Life fifteen year period? A. That is in 1904.
Q. Well, what was the acutal result in 1905, age fifty-four, life
fifteen year period? A. That is in 1904.
Q. Well, the result in 1904? A. $114.72.
MR. HUGHES : I will have this book marked for identification.
(Book marked Exhibit 826 for identification.)
Q. In each case the figures you have given are on one thousand
dollars of insurance? A. Yes, sir.
FRANCIS HENDRICKS, called as a witness, being duly
swoni, testified as follows :
BY MR. HUGHES:
Q. You are the Supermtendent of Insurance ? A. I am.
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Testimony of Francis Hendricks
Q. When were you appointed Superintendent? A. I took
office about the middle of February, 1900.
Q. How many are employed in the office ? A. I cannot tell you
that.
Q. Have you furnished a complete list of your office staff? A.
I have.
Q. Showing their salaries and the time of their appointments?
A. I have.
MR. HUGHES : I offer it in evidence.
(Paper marked Exhibit 827.)
Mr. Hughes then read Exhibit No. 827.
Q. I assume that that last is the compensation for each of the
appraisers named? A. Yes.
Q. What is the total amount, or what was the total amount
expended by your department in 1904? A. Is the report here?
I thinjc about $137,000— I think it is about $137,000.
Q. About $137,000. What amount was received in fees or in
payments upon examinations and turned over to the State? A. In