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PAPERS LASH Insurance Commission, Drew Pearson Are Blamed U.S. Trust Failure Called ‘Black Eye’ for’ Texas WILCO’S Sick Leave Plan Protects You on AND off the Job! available to small groups of employees from 5 to 50 to large groups, up to thousands …. and to individuals! Western Indemnity Life Insurance Company affiliated with Home Office : 5011 Fannin, Houston, Texas AGENCIES THROUGHOUT TEXAS -.,11111,9,4*!^e’ AUSTIN Some of the state’s major newspapers have roared angrily at the failure of U.S. Trust and Guaranty of Waco. The Fort Worth Star-Telegram asked : “Who ‘goofed’ ?” Why, it asked, did the state fail to tell the public last June that it had found the company insolvent? The Dallas. News called for -full inyestigation. The Beaumont Enterprise asked why the Senate failed to pass I-I.B. 240, whiCh would have put U.S. Trust under the Banking Code. Calling the failure “another shocking insurance scandal,” the Enterprise asked About 240 : “Did the sort of lobbying all too familiar in state capitals prevent the bill from being passed ?” The Houston Chronicle said “the insurance mess” is, giving Texas “a \(Continued from Page the session that the Legislature would be derelict if it allowed U.S. Trust to continue in operation without regtilation: Yarborough stated : “It is apparent that the present state administration and particularly the Insurance Commission is not going to clean up anything.” He hit “the gross breaches p f public trust” and said he had pleaded for a “clean-up of the insurance ‘mess for three years.” “The Insurance Commission and the state administration protect their cronies and hold the people while pickpockets fleece them,” Yarborough said. He called on district attorneys and grand juries to investigate. “They are the traditional bodies with the will to protect the public from bribery and graft,” he said. This is no time to let the whitewash brigade march , again.” Ramsey , said that the public may lose $100 million from stock-selling insurance Company operations in Texas. He said the state could not have opened up the U.S. Trust situation without the state reform laws passed in 1955. Rep. J. 0. Gillham of Brownfield said the Senate should find out THE TEXAS OBSERVER Page 4 Jan. 4, 1956 scandalous reputati6n” thronghotit the nation. Why, asked the Chronicle, did the Insurance Commission let Texans continue -to invest in U.S. Trust after it had been found insolvent ? “It is simply incomprehensible that it \(the continue to advertiSe heavily ‘for new investors,” said the Chrcinicle. The stiffest editOrial, perhaps, was carried in the Temple Telegram. The failure Of the company; it, was said, is the people’S penalty “for Miserably ,Poor state government.” “Despite all the whining alibis of governors, cornMissioners, and politicians, that is what it boils down to,” the Telegram said. A share of the blame is on the Texas press, radio, and television for not discovering the ‘facts before the insolvency \( said the editorial ; but the people depended on -the state govern whether legislators or state officials “have ever accepted any fees; retainers, or emoluments’ from U.S. Trust and Guaranty. The Senate committee has instructed the state auditor to produce any records bearing on this. AUSTIN It is now formally settled that Congressman John J. Bell will not be prosecuted under an original Guadalupe County grand jury charge of conspiracy to take more than $150,000 from the state. in a 24-veteran Guadalupe County veterans’ land deal. The latest grand jury heard only* .two witnessesthey did not call Bell, and no state officials were on handand then “no billed” Bell, even though they re,-indicted McLarty on nine veterans’ land counts. Indictments by an earlier grand juryin,cluding the charge against Bellwere thrown out on a technicality. As originally revealed in The Texas Observer, Bell took large sums of money from promoters of group land deals involved in the massive veterans’ land scandal. In February he denied he had represented group promoters in a wire to the Observer; in March, he testified in Austin he had accepted merit; and the government failed ht this case. -Thus, said the , editorial,. Texas is “shamed before the nation.” . The Houston Post said the ease gives Texas another “black eye,” observed that Pearson has not offered, to return “the considerable money he received for his personal assurances of the company’s integrity.'” In an.editorial, Charles Green of the Austin American attacked Drew Pearson for endorsing U.S. Trust `.`for hire … but … over his byline.!* He argued that this justified the American .fgi o , “deleting a portion of Drew Pearson’s column,” as it has done on occasion when it contained unfavorable references to Senator Lyndon Johnson and a few others. But, said the . editorial, . “we were caught napping along with every other newspaper in the state … We are sick at heart …-We are all giiilty in some degree of carelessness or ineptness.” This editorial did not refer to the role of the state ., U. S. Trust was advertised in. the newspapers and on Pearson’s weekly TV program. From , Washington, Pearson a:mplified a ,statement he made in a wire -to the He said Rep. Maury Maverick, Jr., had warned him about the company. ‘alit that its president, A. B. Shoemake, had convinced him it w a s sound. \(The Observer also warned him about the company last wrong about it. He apologized to investors. In the case in which Bell was originally indicted in Guadalupe County, the sum of $4,916.16, which he indentified as a “legal fee,” as in the other nine deals, was paid him by McLarty in October, 1952. The state employs lawyers at small fees as “closing attorneys” to handle , routine details in land cases. Bell said that he -received from McLarty one $3,000 check that was repayment of a loan; one $500 check of which $250 was repayment of a loan and the rest a fee; a check for $3,066.66, of which $1400 was for “help-‘ ing secure an oil and gas lease”; and one $3,000 check as a fee. This was -all stated in testimony on the Guadalupe deal. In return for this sum, Bell said there were an abstract and some memos for him to look after and that he made an attempt to get some mineral rights straightened out \(unsucMcLarty. “My services were available at all times,” he said. He did-not pre GUARANTEE A IA BOOTSTRAP AUSTIN A promotional booklet published by U.S. Trust & Guaranty Co., soliciting people to accept “certified drafts” for their money, contains this statement under the heading, “STABILITY”: . “The dependability and stability of the operations of the United Service Group of the U.S. Trust Companies is reflected in the current financial report of the parent company, the U.S. Trust & Guaranty Company, which insures and guarantees all Certified Draft Accounts up to a maximum of $10,000:00.1′ In other words, The company that accepts your money insures it. Among the thousands of disillusioned investors _last week there were some who said they hadn’t exactly understood that sentence. “U.S.,” by’the way; stands for **United ServiCe” in this case not the United States. frageTry Is Reviewed commission should not “perSecute” sound home life company. It is understood that Irwin will also contend that his connections with three other insurance companies with’ unfortunate financial histories have not been such that they should prejudice the interests of the stockholders in his American Atlas Corporation, which owns . American Atlas Life. Irwitr states that he has not attempted to manage any of the insurance compan-* ieS he has been associated with. . The commission has ordered American Atlas Life; Dallas Fire, and two Shoemake-relatetl companies, U. S. Life Insurance CO. and Southern Medical and Hospitalization Service, to show cause Jan. 5 why their licenses to do business should not be revoked. Irwin has informed the Observer that Tom Robinson, insurance . mission examiner, advised his firm to hire V. C. Thompson, former commission examiner charged with accepting money from Texas Mutual during his audit of that company for the state, to help with the firm’s Books. Irwin sail Robinson gave this advice during his audit of an Irwin firm late this year, Thompson was hired. pare any deeds, contracts, or other legal papers, but he did talk to Bascom Giles about the deal. * He was, at’ that time, a state sena tor. Last week Denver Perkins, Bell’s lawyer, specified again the fees he received in the otherdeals: $2,500, $500, $625, $750, $6,258, $3,650, $562, $350, $8,000. In all 223 veterans and transactions for $1,477,000 were involved in the Bell-pushed deals. Perkins argued last week that it was logical for the promoters to hire Bell. “Bell knew more about the veterans’ land law than anyone else. He wrote it,” Perkins said. “When you’ve got $100,000 to half a riding on a transaction, you just can’t afford to make any mistakes. I think there was justification* for hiring him.” Bell had testified’ in Mirch how he took $4,000 in cash as half-payment on one fee with6ut giving a receipt for it and how he had made three loans of $6,900 to McLarty for which he did not take a note or security. Last week he said the grand Jury’s failure, to re-indict him was “a complete vindication.” He prepared for his race for re-election next year with a statement that he would not try to point a finger at the people wilocaused him to be indicted. The Gonzales Daily Inquirernot, far from Bell’s home town of Cueropitched in with an eight-column streamer : “Bell Vindicated in Veteran Land Deal.” Bill For a ‘State F.D.I.C. Failed in the 1955 Legislature AUSTIN A plan which might have ended the heart-break connected with insurance company failures in Texas was proposed at the last session of the Legislatureand was killed. Rep. R. L. Strickland of San Antonio introduced the bill, modeled after the Federal Deposit Insurance, to “insure insurance companies.” The bill would collect a one per cent tax on all insurance premiums \(added to the $25 million fund. This board ‘Would then take over the outstanding ‘policies of all defunct companies. The bill Was considerby the House Insurance Committee and was still being considered there when the session ended. Insurance executives gave it no support in the reform program. POLITICIANS TAKE -NOTE more than $27,000 from such pro’ moters for work “with officials of the Board:” John Bell Prepares for ’56 *Race