The Prudential Life Insurance Company has $2,000,000 capital stock. The stock is owned and the company absolutely controlled by a few men. This capital of $2,000,000 represents only $91,000 paid in in cash; the balance has been derived from stock dividends; that is, profits that have been made out of policy-holders. In addition to this enormous amount, there has been paid ten per cent. in cash dividends annually, so that for every thousand dollars paid in the stockholders hold $22,000 of stock, upon which they receive annually $2,200, or, as Commissioner Cutting puts it, "each year for ten years the stockholders have received in cash dividends more than twice the original investment." I commend to the policy-holders of the Prudential and other insurance corporations, and to other honest men, these tremendous figures: every $1,000 invested turned into $22,000, not in a gold or diamond mine, but in a life-insurance company where every dollar comes from the policy-holder who is supposed to pay in only enough to insure a promised payment plus provision for honest expense.

The Prudential Company owned the stock of the Fidelity Trust Company, the capital of which was $1,500,000, and the directors came before Commissioner Cutting and informed him that they proposed to double up the stock of the Fidelity Trust Company to $3,000,000; that the new $1,500,000 at a par value of $100 was to be sold for $750 per share; that the new stock was to be bought by the Prudential Company and the Equitable Company; and that with the proceeds of the sale, the Trust Company was to buy a control of the Prudential Company from its directors. The motive of this transaction was as follows: The set of men who absolutely controlled the Prudential, with its sixty millions of assets belonging to its policy-holders, proposed to control it for all time, but without tying up $7,000,000 of their own money in the business. In other words, they desired to eat their pudding and yet have it for continuous re-eating, and had found a way to accomplish this heretofore impossible feat.

By this plan the men who controlled the Prudential Company, and thereby the Trust Company, at the time the plan went into force, would forever continue to manage and control both institutions, although not one of them held a policy or any investment in the insurance company beyond the one share of stock required by law to qualify as director.

If this scheme had been consummated it would have borne to "frenzied finance" the same relationship that perpetual motion does to mechanics. By it a few men could gamble forever with the entire assets of the policy-holders of this corporation for their own personal benefit. If my readers will imagine the same scheme applied to several other great insurance companies and the men controlling them, the "System's" votaries, they will recognize the "System's" ideal world, with all the people in a condition of ideal servitude. However, this ingenious plan was forestalled because there happened to be in control of the life-insurance affairs of Massachusetts one of those old-fashioned relics of American honesty—a man who thought more of the interests of the people intrusted to his care than of the prospect of innumerable "made dollars" which might have been his had he proved more amenable. It is regrettable that he was not able to deprive the conspirators of their power to juggle with the property of the corporation, for only two weeks later they developed and executed an alternative device which practically accomplished the result which the Massachusetts authorities had declared illegal and the courts of New Jersey had enjoined.

There is food for thought here for the policy-holders of American insurance corporations who have intrusted to the "System" and its upholders the billions of their savings, to which they are adding every year hundreds of millions. To them I recommend a reading of the Forty-eighth Annual Report of the Massachusetts Insurance Commissioner, dated January 1, 1903, and the decision of the New Jersey judge who passed on the case. These men are surely not to be accused of exploiting my story. Under the head of "Control of Life Insurance Companies" in the Massachusetts Report will be found the following:

The Insurance Commissioner had the honor of addressing the insurance committee of the General Court relative to the control of life-insurance companies by other corporations or by syndicates. For some years it has seemed to impartial observers who are conversant with life-insurance matters, and have also seen the eager quest by promoters for funds to finance all kinds of enterprises, and the determined struggle to grasp every opportunity for speculation, that there would be no cause for wonder if covetous glances should be turned toward the massive accumulations of life-insurance companies. It is well, therefore, to pause and ask what would be the chances for obtaining control of them, and what might be the result of such control, and in general whether the funds of such companies are imperilled by modern methods.

Insurance corporations on a capital stock basis, on the other hand, give their policy-holders no voice in their management. To obtain control of such a company it is necessary only to control by purchase or otherwise a majority of its capital stock. If a "king of finance" should start out with the determination to secure a majority of the stock of such corporations, the chances are that in some cases at least he would be successful. He might, it is true, be obliged to pay more than the "book value" of the shares; but perhaps control of a company's assets would well be worth twice or thrice or even more than what could be figured out as the value of the stock on the books of the company. On no other theory can the figure offered for life-insurance company stock in some cases be accounted for, since these offers are not warranted by the surplus nor by the dividends paid, nor by both combined.

Is there aught to prevent a bold manipulator from entering this inviting field and purchasing a controlling interest in the stock of enough such life-insurance companies to make their combined assets aggregate one hundred million dollars of the more than six hundred millions of assets of stock life-insurance companies doing business in Massachusetts? This accomplished, he transfers his rights to a "trust," or an association, or trust company, which is not only a bank of deposit, but is also engaged in brokerage schemes, in financing large enterprises and promoting all kinds of corporate consolidations, and underwriting their stock for a consideration. The central controlling trust company, or whatever it may be, becomes a medium through which the investments of the controlled insurance companies are made; all sales of their securities pay tribute to its treasury; all funds awaiting investment are deposited in its keeping; the most valuable of their securities are turned into cash, and then used by the controlling power for such purpose as it sees fit. All these things are conceivable, and their accomplishment would be a no greater task, seemingly, than some of the gigantic "operations in finance" of the last few years.

Judged by what has happened in other fields, this trust would not only control these vast assets, if the plan should be executed, but would control them without individual liability on the part of its managers.

THE PRUDENTIAL MERGER CASE

Is there really any danger, it may be asked, that any trust or syndicate will attempt to control the stock and assets of life insurance in this way, or is this simply the presentation of possibilities? As an answer to that question here follows a plain, unvarnished story of what has been attempted and what has taken place within the past year between one of the life-insurance companies doing business in Massachusetts and a trust company with which it has close relations.

In October, 1902, the Insurance Commissioner received from the president of the Prudential Insurance Company of America a letter, transmitting a copy of a circular letter addressed "To the field and home office staff" of the company. That circular letter disclosed a plan of mutual control between the insurance company and the Fidelity Trust Company, a corporation organized under the laws of New Jersey. It stated that:

"The capital of the Fidelity Trust Company is about to be increased from $1,500,000 to $3,000,000, the new stock being sold at $750 per share. This will result in giving the Fidelity Trust Company a capital of $3,000,000, a surplus of $13,000,000, and a considerable amount of undivided profits, making this company, from the standpoint of capital and surplus, as large if not larger than any similar institution in the country. Sufficient of this stock will be taken by the Prudential Insurance Company to give it, together with its present very large holdings of Fidelity stock, absolute control of that company. A very large portion of the balance of said stock is to be taken by the Equitable Life Assurance Society of New York, which will give to that company a very substantial interest in the Fidelity Company, and therefore justify it in materially increasing its business with the Fidelity. The bulk of the new money thus to be received by the Fidelity Trust Company is to be used by it in the acquisition of a controlling interest in the entire capital stock of the Prudential Insurance Company.... A contract has been entered into between the Fidelity Trust Company and a large majority of stockholders in interest of the Prudential, in which the latter have contracted to sell their holdings of Prudential stock, or as much as may be necessary, to the Fidelity Trust Company on or before May 1st next, at $600 for every $100 of par value.... While by this arrangement the Prudential Company will control the Fidelity, and, on the other hand, the Fidelity will own a majority of the capital stock of the Prudential, the annual meetings of the two companies will be so arranged and other arrangements be so made that the Prudential will forever be the dominant factor, as of course it should be. The officers of the Prudential are united in their belief that this move is of the greatest possible interest to its stockholders, as well as to all of its policy-holders and its great army of employees. The consummation of this arrangement insures the continuance of the present management of the Prudential, both in its home office and in the field. The advantages of the plans of the trust company are too obvious to need comment. It is expected to consummate this entire transaction between the two companies on or about February 1, 1903."

The Insurance Commissioner of Massachusetts, on receipt of this circular, wrote United States Senator John H. Dryden, president of the Prudential Insurance Company of America, declining to approve of the proposed exchange of stock on the ground that the merger was antagonistic to the interests of policy-holders, inasmuch as it forever deprived them of the power to dislodge the management from the control of the institution. The minority stockholders petitioned the New Jersey courts for an injunction to restrain the Prudential and the Trust Company's directors from carrying out the proceeding for mutual control, and Vice-Chancellor Stevenson enjoined the corporation from executing its project. However, the reciprocal control was effected by the sale of enough Prudential stock to the Fidelity, whose capital was increased for the purpose of purchasing it, so that the Fidelity lacks but eight shares to control absolutely the Prudential. As the situation stands now, the Prudential directors control the Fidelity, and the Fidelity holdings, with eight shares more, control the Prudential. Practically the ring is about as hard to break into as the plan enjoined. Those who control the Fidelity can always "dominate" the insurance company. Minority stockholders and policy-holders alike are practically in the hands of the trust company for all time, and the insurance company's assets can be managed as the majority of the trust company's directors dictate.

The director goes on to explain the relations between a life-insurance company and a trust company, which, in the light of recent exposures, seems prophetic.

"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: "Why have 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 of Everybody's Magazine was 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 for its 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 them beware 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 the regime under 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 the close of the year:

Equitable $25,617,668 Mutual 22,439,396 New York 17,731,710 —————- $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 per cent. 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 and figures 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's sworn report 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 the preceding 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

Dividend Laid by for future earnings. Dividends. dividends.

New York Life $16,826,289 $13,189,278 $3,636,091 Western Company 17,788,820 12,284,255 5,504,565 —————- —————- ————— -$962,531 +$905,023 -$1,867,574

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 $162,326,114 Less those inevitable terminations by death or maturity of endowments 26,767,873 —————— Waste by lapse, surrender, etc. $135,558,241 And when we add the lapsed policies which continued in force, under the "extended-insurance" provision 89,938,500 —————— We 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. was actual waste and 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 in Everybody'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," in Everybody's for 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 a sample copy of 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 in Everybody's Magazine for 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 go in 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 President McCall, of the New York Life, to my office and to my house, reenforced by his special agent's letter, and these reenforced 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 to the 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 of Everybody'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 the New 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 his Maker. 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 in Everybody's Magazine the 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 mind that 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.



In response to this appeal I received over sixteen thousand proxies, representing over fifty-four millions of insurance. The investigations made by the legislative committee of the State of New York are unearthing in a most thorough manner the iniquities of the directors and managers of the Big Three, and before proceeding further I shall await the results of its work. If there is any way short of criminal proceedings to compel the restitution of the millions diverted or stolen from policy-holders, I shall begin suits which I am satisfied can be fought to a successful conclusion.

THE CALL TO ARMS

The extraordinary disclosures made before the investigating committee of the New York Legislature, which is now conducting inquiries into the methods of the great insurance companies, led me finally to issue the following open letter to John A. McCall, in which I review the controversy between us and contrast his disclosures of corruption and mismanagement with his brazen professions of virtue and probity made last year. In order to wrest the two great mutual companies from the control of men who are obviously unworthy to direct them and with whom the policy-holders' funds are plainly unsafe, I asked for proxies which would make it possible for me to bring about a change in the control of these two great corporations.

This letter and call appeared in the November, 1905, issue of Everybody's Magazine.

AN OPEN LETTER TO JOHN A. McCALL, PRESIDENT NEW YORK LIFE INSURANCE COMPANY

Sir: It is time your attention was called to the moral sense of the American people. It is time some one dragged you out of the Wall Street conservatory and set you in the plain white light of daily life. It is time you were shown yourself as you are to-day seen by the millions of your countrymen who, a month ago, believed you to be a great and honorable man.

In spite of the terrible exposures of the past few weeks, in spite of the pitiless revealment of yourself and your directors as tricksters, in spite of the unveiling of the jugglery, grafting, and corruption of your administration of the most sacred trust that can be confided to man, you remain unconvinced of your fall and unpenetrated by your shame. Fortified by the sympathy of your fellow-sinners, you imagine your audacious bluster and your sly evasions before the Investigating Committee of the State of New York represented shrewd generalship and able strategy, forgetting that the enemy against whom your manoeuvres were directed was the American people and that, in this inquisition, your character and reputation were as absolutely before the bar as though you had been indicted for sequestration of the funds of some dead friend's wife.

Throughout this broad country of ours are good Americans who have slaved and toiled to gather up the hundreds of dollars which you have exacted from them yearly as the price of the future livelihood of their wives and children, or as the provision for their own old age. You have made yourself the custodian of these funds under sacred pledge of square dealing and safe and honest administration. You have made yourself the national executor, the great depositary of the moneys of the widow and the orphan. You have cried your virtue and honorableness from the housetops, and, under the stress of your pleadings, hundreds of millions of dollars have been confided to you annually—half the savings of the nation have been turned into your coffers, all because you insisted that you were honest beyond all other men, and that the dear ones left behind might rely on your generosity and integrity for their support.

And it is with the moneys that might at any time have been claimed by these widows and orphans that you have been rigging syndicates, debauching legislatures, juggling judges, manipulating stock-markets, and doing other things which will be proven later. Instead of employing the vast power and the immense wealth intrusted to you to conserve the interests of your policy-holders, you have made yourself a part of the cruel robbing machine which the "System" has created to deprive the American people of their savings. Under the pretence of seeking profitable investment, your corporation has been perverted into a vast stock-gambling agency. You have filled the high places in your corporation with your own children and relatives and their relatives, and conferred on them great salaries out of which they have grown rich. You have paid out to friends and associates, on various pleas, millions that rightly belonged to your policy-holders. You have done all these things habitually, yet to-day you describe the investigation being conducted into your operations as an impertinence, and secretly you regard this inquisition and all that pertains to it as a waste of time and energy. You are unrepentant, unashamed, and defiant.

I shall take this opportunity, sir, of reviewing our own relations during the past year and contrasting your position to-day with that you boasted twelve months ago.

One year ago, in Everybody's Magazine, I said:

"The officers, trustees, and officials of the 'Big Three' life-insurance companies have been and are systematically robbing their policy-holders. They are grafters—mean, contemptible grafters."

I gave specific instances of their thieveries.

You replied, not by haling me to court, but by:

Circulating throughout the world documents by the millions, disparaging my reputation by advertisements and "news" and "editorial" statements from your subsidized insurance press, denying my charges and attacking my character, all at the expense of your policy-holders.

You libelled me in thousands of private letters to policy-holders, many of which came back to me.

You employed James M. Beck, ex-Assistant Attorney-General of the United States, then and now chief attorney for Henry H. Rogers, the Standard Oil Company, the "System," and the Mutual Life Insurance Company, to ridicule my utterances and asperse my honor in addresses in the cities of Philadelphia and Boston.

You employed James H. Eckels, ex-Comptroller of the Currency of the United States, now president of the Commercial Bank and representative of the "System" in the West, to attack my arguments and distort my motives in Chicago.

You ordered Vice-President Perkins, of the New York Life Insurance Company, to perform similar service in Philadelphia; and

The burden of all these documents, advertisements, and disguised advertisements and addresses was: "Lawson is an unmitigated liar and scoundrel, whose sole reason for attacking the insurance companies is that we refused him insurance."

I replied by printing your personal letter to me, wherein you importuned me to accept insurance in your company.

Again you gave me the lie, and pronounced your letter spurious.

I replied to you and your followers by instancing cases of perjury, bribery, and false statements.

I stated that your claim that your company did not own, nor loan upon, stocks was false, and that it was made for the purpose of misleading and imposing upon your policy-holders, banks, trust companies, Government officials, and investors.

You answered this by writing a letter to one of the great churchmen of America, and in it you said: "I pledge you my word of honor this company has never, since 1899, had a dollar's interest, directly or indirectly, in any stock. Lawson knows this, and deliberately, for his own base purposes, makes charges to the contrary which he knows to be false."

To-day you and your fellow-plunderers stand convicted in the eyes of the whole world not only of juggling the moneys of the widow and the orphan in the stock-market, but of manipulating these trust funds for the benefit of your own pockets. To-day the world is aghast at your perfidy and amazed at your temerity.

Notwithstanding the turpitude already exposed to the people, you still imagine you can so conduct yourself as to prevent the investigators from fastening on you and your associates the more desperate crimes that have been committed in the past—the 150 to 200 millions stolen and diverted or used in corruption. You know as I do that only the very edges of this national cesspool have yet been uncovered. You know that not only have the ballot-box and the Legislature at Albany been tampered with, but the law-making and administering machinery of other States corrupted, the Federal Government surrounded, and certain of the judiciary of America "educated."

You believe you can keep the evidence of these crimes from the American people by the same kind of bluff and effrontery with which you met my first charges. But you have mistaken the tempers of your countrymen.

I have been authorized in writing by over 16,000 policy-holders, carrying over fifty-four millions of insurance, to act for them.

I had intended to await the finish of the New York investigation before proceeding, but as I have had placed in my hands during the past few days evidences of the determination of yourself and your accomplices and fellow-conspirators to face it out regardless of consequences, and as I believe men capable of committing the acts that have been proved during the past few days are fully capable of taking the transportable part of the billion and a quarter funds to foreign countries, and of using them to keep themselves from their justly deserved punishments, I have decided to act now.

In sending you this open letter, I am actuated only by a desire to bring you and your associates to such a sense of the seriousness of your position that you will see it is useless longer to attempt to defy the American people.

Yours, for the Exposure of Corporation Sneak Thieves, THOMAS W. LAWSON.

TO LIFE-INSURANCE POLICY-HOLDERS

At the beginning of my story, in 1904, I made certain accusations against the management of the three big life-insurance companies.

I knew, when I began my story, that the big life-insurance companies were in the hands of grafters and thieves, just as are the great banks, trust companies, railroad companies, and big corporations and trusts.

This I knew and, in plain language, said it.

The big insurance companies, through their officers and trustees, replied by declaring: "He's an unmitigated liar."

I kept at my knitting, for I knew the crimes of these insurance grafters were such that, sooner or later, the world would have an opportunity to judge fairly who were the unmitigated liars and thieves.

The opportunity is at hand.

To-day the press of the world is devoting its space, news and editorial, to a recital of the contemptible and heinous crimes of the New York Life and the Mutual Life Insurance companies—not as I relate them, but as their own officers and trustees publicly confess them.

In the July instalment of my story I called upon policy-holders to sign a coupon blank inserted in Everybody's Magazine, and send same to me that I might speak for them in a plan to further their interests.

In response to my call I have received up to October 4, 1905, 16,307 answers, representing $55,165,916.

I think my readers, when they analyze the following list and take into consideration the character of the senders, many of whom are men of the highest standing—bishops, ministers, governors, mayors, judges, senators, members of Congress, railroad, bank, and trust company presidents—will agree with me that it is the most remarkable collection ever made by one interest since life insurance began.

INSURANCE COUPONS

Received from June 20th to October 4, 1905

New York Life $18,845,410 Equitable 17,317,956 Mutual 14,550,240 Miscellaneous 4,452,310 —————- $55,165,916

Alabama 22 Montana 130 Arizona 127 Nebraska 236 Arkansas 124 Nevada 28 California 842 New Hampshire 73 Colorado 211 New Jersey 282 Connecticut 177 New Mexico 40 Delaware 43 New York 1,780 District of Columbia 152 North Carolina 466 Florida 230 North Dakota 143 Georgia 169 Ohio 985 Idaho 150 Oklahoma 154 Illinois 1,012 Oregon 93 Indiana 415 Pennsylvania 1,133 Indian Territory 130 Rhode Island 67 Iowa 560 South Carolina 81 Kansas 316 South Dakota 104 Kentucky 153 Tennessee 157 Louisiana 197 Texas 580 Maine 144 Utah 68 Maryland 126 Vermont 57 Massachusetts 843 Virginia 242 Michigan 406 Washington 417 Minnesota 574 West Virginia 205 Mississippi 173 Wisconsin 318 Missouri 499 Wyoming 36

Alaska 27 Corea 1 Argentina 1 Mexico 71 Bermuda 1 Newfoundland 4 Canada 344 New Zealand 1 Chili 1 Panama 2 China 1 Philippines 16 Colombia 1 Porto Rico 5 Costa Rica 1 Santo Domingo 7 Cuba 4 Straits Settlements 1 England 9 Sweden 1 France 4 Trinidad 2 Hawaii 35 Uruguay 2 Honduras 2 Yukon Territory 4 Japan 4 ——— Grand total 16,307

As soon as I received a number of signatures sufficiently large to warrant it, I quietly began operations.

The first direct result is the investigation now being held. This investigation has proceeded far enough to put before the public absolute proof of all the crimes I have charged, and three to thirty times as many more.

It is now evident to all that:

1st. The policy-holders in the great companies have yearly paid into their company scores of millions more than necessary.

2d. The policy-holders have been robbed of scores of millions.

3d. The vast funds now on hand have been habitually used by the grafters now in control of them in the rankest kind of stock-gambling.

4th. These funds have been used to corrupt the ballot-box and the law-makers of the country.

I repeat, absolute proof of all this has been made public.

It should now be evident to all that:

1st. The funds now on hand are in actual jeopardy, because they are in the absolute control of unprincipled scoundrels.

2d. Unless something is done, and done at once, by the policy-holders, each and every one of the largest companies may become insolvent; that is, they may not be able to meet the engagements of their policies, because of waste of funds, tremendous falling off of new business, tremendous cost of new business, and the nature of the new business—so-called "graveyard business"; for I am credibly informed that they are now seeking to insure those who formerly have been refused insurance because of physical infirmities.

It should also be plainly evident that, if the policy-holders move, and move quickly, they can be absolutely assured that:

1st. The funds as they are to-day will remain intact.

2d. They will be added to by the restitution of from $75,000,000 to $150,000,000.

3d. A score of the thieves who have plundered policy-holders in the past will be sent to prison.

4th. The future payments of policy-holders will be largely cut down.

5th. The present swollen surpluses will be returned in large part to policy-holders.

6th. In the future policy-holders will actually run the company.

7th. All policy-holders can be assured that in the future they will receive the actual worth of their policy at surrender.

All this being so, it is most eminently desirable for policy-holders to act, and at once.

The time will never again be so opportune, for if nothing definite is done now, policy-holders will be discouraged for all time.

I have given the subject the closest and most earnest study, assisted by the best insurance experts and lawyers procurable, and guided by the suggestions of over 100,000 policy-holders, for in addition to the 16,000 mentioned, I have received over 90,000 letters. I have come to the conclusion that the one thing for policy-holders to do now is:

To authorize some one in whom they have confidence to select a committee to take their proxies and at once seize possession of the two great mutual companies, the New York Life and the Mutual.

I omit the Equitable at this stage, because litigation may be necessary before the Equitable, being a stock company, can come into the policy-holders' hands. But in the other two, no obstacles can be placed in the way of the policy-holders' taking control.

To empower this committee to bring action at once to compel full restitution and enforce full punishment, and then to change the present method of conducting the insurance business.

The vital question is: Whom can the policy-holders trust to do this?

The "Big Three" are at present spending vast sums of the policy-holders' money to prevent some such action as this, in the following ways:

First, by moulding public opinion through paid news and editorial items; next, by the collection of proxies; and third, by the inauguration of different moves and dummy suits and investigations.

There are already three of these affairs under way. Almost any way the policy-holders turn for relief they are confronted with traps which, if they fall into them, will make relief and rescue impossible.

Any man or body of men who go to the great expense necessary to collect proxies must have some hidden scheme for reimbursing themselves, or they must be working in the interests of the thieves now in control.

I therefore make bold to say: I am the natural one to make this move.

Just a minute before you pass judgment. Let us see if I am:

1st. I have already spent in my work over a million dollars of my own money.

2d. I am willing to spend, if necessary, two millions more.

3d. I will absolutely prove I want nothing in return.

4th. I will absolutely prove on the face of my plans that I cannot in any way benefit beyond the satisfaction I shall derive from putting another spike in the "System's" coffin.

I ask of the policy-holders simply this:

Fill out the following form of proxy; sign and seal it, and send it to me. Quick action is most desirable in view of contingencies.



FOOTNOTES:

[20] In the course of the legislative investigation of the great insurance companies in New York, it developed that the Mutual Life Insurance Company conducts a publicity bureau, organized to discredit any one who dares criticise its methods. This bureau is conducted by one Charles J. Smith, on a salary of $8,000 per annum, and he works through Allan Forman, editor of the Journalist. Forman maintains a "telegraphic news bureau" and secures publication in various newspapers or periodicals of matter sent him for dissemination by the Mutual Life, and he is paid $1.00 per line of the policy-holders' money on all matter for which he obtains publicity. The whitewash paragraphs recently published throughout the country in regard to President McCurdy and the Mutual Life were all paid for on this basis.



II

THE ENEMIES I HAVE MADE

When a man discovers that a public building full of men, women, and children is infested with rats and that these vicious rodents have undermined its foundations and honeycombed its structure, it becomes his duty, first, to warn the occupants of the presence of the rats, next, to show them the damage that has been wrought and how the rats can be trapped and killed—and then he may take a hand in the rat-hunt himself.

That is about what I have been doing, and if proof were needed that the "System" suffered under my exposure of its villainies, I should have it in plenty in the showers of mud bullets it has fired at me. From scores of quarters these volleys came. A regular army of the "System's" votaries must have been out working like Trojans to stop my work, to discredit me, to bespatter me with its dirt.

The manner in which the "System" writhed under my attacks showed how seriously it was hurt. What surprises me was that so little intelligence was exhibited in defaming me. Such wanton, foolish attacks those that were made on me personally! As though it mattered who or what I am in comparison with the accusations I have made. Americans are not fools. To say that Lawson is this or that does not minimize or detract from his charge of robbery and conspiracy.

Every morning after I began to write "Frenzied Finance" I found a new budget of personalities in my mail, in the newspapers, in pamphlets. Learned lawyers traveled about the country slinging mud at me at banquets and society gatherings; scores of hireling weekly and monthly papers devoted pages to vilifying me; the insurance press was laden with assaults, and for fear the public should miss the brickbats, the insurance companies carefully mailed them to their policy-holders. All these tirades were in one key—that of crude abuse. The statements about myself and my career were nothing but lies. They were not even cleverly imagined.

Upon entering on this crusade against "Frenzied Finance" I expected attack. Reforms are not matured to accompaniments of incense and rose-water, and I had made up my mind to disregard the mud and its slingers. Afterward, if there were any "System" left, I rather looked forward to smothering it beneath the foulness of its own generating. There came a time during the year, however, when I deemed it proper to depart from this resolution and nail some of the lies my enemies were circulating about me. I debated the subject thoroughly, for the rancor of these assaults was evident and I could not help feeling that the general run of my readers would be impatient of the space given these gutter rakers. The determination to go at them was clinched by a letter which came to me, with a number of others from clergymen of various denominations, from a learned Catholic priest, who put the case for a reply most earnestly. He said:

You owe it, my son, to yourself to clear away, for once and all, the charges your enemies have made against you. I have faith you mean all that you say, but there are many, many sons and daughters who are troubled in heart and harassed in mind with doubt whether your motives be pure, and if your deeds in the past have been along the ways of the good. It is my advice, if you will accept it, that you put aside your pride and your dignity and frankly and openly tell us whether these charges that we read are true or false.

BECK VS. LAWSON

I shall deal with the subject as fairly as possible, reminding my readers, however, that I am at a disadvantage in having to use pen and ink instead of the implement appropriate for the purpose, a hose connected with a disinfectant barrel. To begin with, I reproduce the following from the Toledo Blade, December 26, 1904. (I have similar paragraphs clipped from one hundred other papers.)

JAMES M. BECK FLAYS LAWSON

Calls Boston Author-Broker a Frenzied Fakir.

DEFINES MONEYPHOBIA

Declares He is Victim of New Disease—Compares His Actions to "Crazed Malay Running Amuck."

PHILADELPHIA, December 26th.—Ex-Assistant Attorney-General James M. Beck talked on "Moneyphobia" at the thirty-ninth annual commencement exercises of the Peirce Business College. He paid his respects to Thomas W. Lawson in such terms as "frenzied fakir" and "crazed Malay running amuck." ... "There are abundant indications that this epidemic is now rife in the community. The extraordinary vote polled by a Socialistic candidate for President, in a time of general prosperity, seems to evidence this, as does the avidity with which many intelligent people read in a cheap 'penny dreadful' magazine the incoherent, self-contradictory, and self-incriminating articles of a notorious frenzied fakir, who, like a crazed Malay, is wildly running amuck, and, without rhyme or reason, slashing at the reputations of judges, senators, and financiers."

The following is from a Chicago insurance paper, and comes to me with the marginal inscription, "Puncture this bladder when convenient." I may say that I receive hundreds of clippings every day from various parts of the country, sent me by correspondents who are determined I shall be apprised of what my antagonists are trying to do against me.

BANKER ECKELS AND BROKER LAWSON

The splendid tribute to our country's greatness, resources, and possibilities given by President James H. Eckels, of the Commercial National Bank, of Chicago, and ex-Comptroller of Currency of the United States, before the Chicago Life Underwriters' Association, was listened to with earnest attention.

The brilliant young financier ... believes in life insurance for the people. It creates the valuable habit of saving. He deprecates the malicious attacks on companies by men of mysterious motives, and feels it will be a sorry day if they ever become objects of prey for political thieves.

The banker paid his respects to Thomas W. Lawson, of Boston, whom he characterized as a notoriety seeker and branded as a "discredited, disreputable, despised stock-jobber who glories in his infamy." Mr. Eckels lashed Lawson with caustic language, and stated the American people of judgment are not misled by his diatribes.

Mr. Eckels believes that life-insurance presidents reach their high stations by their own ability and grasping of opportunities. Because a man is elevated to a position of eminence and responsibility does not mean he is dishonest. He arrives there because he cannot be held down and remains as long as he proves his worth. The banker declared that life companies, with their vast funds, were being safely guided by men of superior mental mould.

Mr. Eckels referred to President McCall, of the New York Life, as being a clerk in a State bureau office when he first made his acquaintance. He said President McCall had advanced, like other company executives, owing to his own ability and genius for management.

In an early article in this series I stated that one of the favorite operations of the "System" is to pick off those officials who have exhibited unusual talent or energy in protecting the interests of the National Government. In this way they secure the services of men who know the secret workings of the people's institutions and how best to guard the corporations against the consequences of their misdeeds. During the Cleveland administration there developed a "financial phenomenon," James H. Eckels, Comptroller of the Currency. It did not take long for the astute Rogers-Morgan-McCall clique to see that this young man's knowledge of finance in connection with his governmental position might prove a dangerous obstacle to their machine if he were not captured. It was not long before he was captured.

I met Mr. Eckels during the Cleveland bond performance. I need not enter into the details of that extraordinary affair here, for it is one of the sore spots in recent American history. Briefly, the Administration at Washington attempted to issue $100,000,000 government bonds and deliver them in a snap sale to the "System." The New York World began a crusade against the transaction, and was so successful that the Administration was compelled to offer the issue to the public through competitive bids. The result—the bonds fetched many more millions for the Government than if the deal had been allowed to slip along the ways the "System" had greased for it. I remember well the scene at the opening of the bids. It was in the United States Treasury at Washington. With many others who desired an allotment of the bonds, I was present. We were crowded into a small room, and following the direction of young Mr. Eckels, who handled the transaction, we gave him our bids, which, according to the advertised programme, were in sealed envelopes. After all the bids were submitted—mine was for a number of millions—the envelopes were taken by Mr. Eckels into a rear room. Then a few of the leading financiers present, among them John A. McCall, of the New York Life, J. Pierpont Morgan, and one or two others of the "System's" foremost representatives, got their heads together and began an earnest conference. Certain of them went out of the room and after awhile returned for a further conference. There were several such confabulations and comings and goings, until finally, after a monotonous delay, the bids were opened and the bonds awarded. Morgan, McCall, et al., had secured the bulk of the issue at a price many points above what any one had been led to believe the bonds would sell for, and many points higher than the "System" and the Government had proclaimed to the people they could possibly sell for, yet at a price which showed millions of profit a few hours after the bids were opened. I do not charge that the public's envelopes were opened and "peeked" into before the "System's" bids were sealed. Such a charge is not necessary. It has been made many times by the press. Mr. Eckels, to the minds of such of us as could see through cracks in a floor wide enough to drive a four-in-hand coach into without unhooking the leaders, had lived up to his role as a financial phenomenon, and when some time afterward it was bruited abroad that this able young man was to have the presidency of the City Bank, or any other large bank belonging to the "System" that he might select, there was no surprise, although much comment, in Wall Street. Mr. Eckels finally accepted the presidency of the Commercial Bank of Chicago, where he now is one of the important cogs in the "System's" machine.