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It’s All the Rage in Washington These Days, Too! 4 I Bartlett Appears Exclusively ix The Texas Observer SMITH’S PHONE BESIEGED grxas Mbstruer JANUARY 11, 1956 Ineorporating The State Observer, combined with The East Texas Democrat Ronnie Dugger, Editor and General Manager Sarah Payne, Office Manager Published once a week from Austin, Texas. Delivered postage prepaid $4 per annum. Advertising rates available on request. Extra copies 10c each. Quantity orders available. Entered as second-class matter April 26, 1937, at the Post Office at Austin, Texas, under the act of March 3. 1879. We will serve no group or party but will hew hard to the truth as we find it and the right as we see it:’ We are dedicated to the whole truth, to human values above all interests, to the rights of man as the foundation of democracy; we will take orders from none but our own conscience, and never will we overlook or misrepresent the truth to serve the interests of the powerful or eater to the ignoble in the human Staff Correspondents : Bob Bray, Galveston; Anne Chambers, Corpus Christi ; Ramon Garces, Laredo ; Clyde Johnson, Corsicana ; Mike Mistovich, Bryan Jack Morgan, Port Arthur ; and reporters in Dallas, Houston, Beaumont, El Paso, Crystal City, and Big Spring. Staff Contributors: Leonard Burress, Deep East Texas ; Minnie Fisher Cunningham, New Waverley, Bruce Cutler, Austin ; Edwin Sue Goree, Burnet; John Igo, San Antonio; Franklin Jones, Marshall ; George Jones, Washington, D.C.: J. Henry Martindale, Lockhart ; Dan Strawn, Kenedy ; Jack Summerfield, Austin ; and others. Staff cartoonist: Don Bartlett, Austin. Cartoonists : Neil Caldwell, Austin ; Bob Eckhardt. Houston : Etta Hulme, Austin. MAILING ADDRESS: Drawer F, Capitol Station. Austin, Texas. EDITORIAL AND BUSINESS OFFICE: H4 West 24th St.. Austin, Texas. Phone 7-0746. HOUSTON OFFICE: 2501 Crawford St., Houston, Texas \(Mrs. R. D. Randolph, director, subTRIPS REVEALED courts last week on a finding by the insurance commissioners that its man b ao -ement is not worth of .public confidence. Rep. Doug Bergman of Dal las, who also represented Irwin and is a law firm partner of Cain, denied portions of an Observer story of Dec. 28 that Irwin said he paid their firm about $30,000 in fees the past year, less than $14,000 of this to get three minor Irwin companies ‘quietly buried by the insurance Commission.” It is also reported that Cage flew Saunders and Smith to Miami from Texas and that other flights were made to New York, but as the two officials said they would not answer any more questions about what they regard as their private lives, these is sues were not pressed and are still in doubt. Smith, then chairman of the Insurance Commission, and Mrs. Smith were taken on an expenses-paid trip to Hawaii last April by Charles McCormick, president of International Life. The Insurance Commission occupies eight of the nine floors of International Life’s Austin building. Smith said Mrs. Smith was ill last April and they decided to take a trip; that they mentioned it to their friends, the licCormicks; that the McCor’nicks suggested they go to Hawaii at the Mceormicks’ expense, and they consented. Smith said he saw nothing wrong with . the trip, that McCormick had never aSked him a favor, and that he treated International life \(a Texas pany. dcCormick to the Observer he paid for his trip out of personal funds. “I’m damn tired of being bothered about it,” he said. The Senate Investigating Commit. tee this week may feel a certain em . harassment if these trips come to its attention in open hearing,,since three of its five membersSenator Searcy Bracewell, the chairman, of Houston; Senator Otis Lock of Lufkin, and Senator Johnnie B. Rogers of Austinwere guests of Sabine area oil companies, other, industries, and businessmen at the annual duck hunt at Port Arthur in December. The Texas Conipany’s boat boat, “Ava,” is used by the senators on this junket. Senators vote on such matters as oil and industrial taxes every legislative session. The two commissioners were balky and exasperated under this line of questioning. “Hell, we’ve been an lots of trips,” Smith said. “We mix with the fraternaty ; it’s our business to !” “NIy own life is open : to the public, my personal life is not,” Saunders said. “It was no secret I was in Hawaii,” said Smith. “I sent 150 postcards back to friends. It was purely social.” Both commissioners denied that any public issue is involved in their acceptance mit trips from insurance company executives. However, Mark -Wentz, the third commissioner,’ told the Observer early this week : “I just know that I have never accepted any trip from any insurance executive or at the expense of any company.” He would not comment further. N A SIN-MILLION dollar damage suit .filed by creditors against the receiver for General American Casualty last week four insurance examinersincluding the chief examiner and the supervising examiner-were accused of aiding a conspiracy to defraud creditors. They were variously charged with going on hunts with executives of General American, with accepting $135 from the company for apartment rent while examining it, and with accepting meals and entertainment. The petition also says V.F. Blanchard and George Butler, the one-twomen on the commission’s examining staff, accepted. “other gifts” from the companybut they are not specified in the petition. The attorneys for the states’ liquidator charge these examiners with willfully painting a false financial picture of General American, which went broke in 1954. The Observer has learned that Hubert Green, Sr., father of Governor Allan Shivers’s campaign manager in Bexar County, apparently received’ $15,000 from General American between April 15 . and June 3, 1954, for legal services rendered the company. Checking a creditors’ suit against General American filed by attorney Garland Smith of Weslaco \(not recourt in Brownsville, the Observer found testimony bearing on this matter by Renne Allred, Jr., former attorney for the Insurance Commission liquidator of bankrupt companies. In an exhibit attached to Smith’s petition, Allred had asked Judge Jack Roberts of 126th district court in Travis County to ignore the Commission’s efforts to fire him. Allred said he planned to take testimony of an attorney to determine what services he had performed for payment by General American to him of $15,043.75 in three roughly equal checks dated April 15, May 25, and June 3, 1954. But, said Allred in the document, he had postponed the testimony \(which was to be taken shortly before the torney was the father of a county campaign manager of one of the can dilates for governor, and your -petitioner did not want. politics to become involved in this lawsuit.” Court records show that Hubert Green, Sr., filed a suit in May, 1954, on behalf of General American’ Casualty against Stewart Hopps, among others: Hopps is a nationally known insurance investor and financier. After General American was . thrown into receivership, Green, Sr:, filed a suit for C. B. Erwin, president Of General . AMerican, and some other present defendants of the creditors’ suit in Austin. This suit sought a declaratory judgment against the receiver for General. American in connection with liens Green’s clients were claiming against General American. Hubert Green, Jr., Shivers’s Bexar County manager in 1954, is now district attorney there. District attorneys or judges in every major city in Texas \( Continued from except San Antonio have stated. that they are developing information on the $7 million collapse of U.S. Trust & Guaranty for presentation to., their grand juries. Green, Sr., contacted in San Antonio, told the Observer he began working for General American the first week of April, 1954, and continued until mid-June, when it went into receivership. He confirmed that thereafter he filed a suit for Erwin and others. who had signed personal notes, proceeds from which had gone to General American. It appeared that the first suit by General American joining Hopps and others was connected with a new management group for Erwins’ company of which Hopps was a part. Certain allegations are also made in the Brownsville suit concerning William T. Moore, state senator from Bryan. In the action \(D.H. Zachman, et al, that Moore “was employed by the controlling defendants \(G e n e r a 1 in their relationship with the Board of Insurance Commissionersof Texas.” Moore refused to tell the Observer On the telephone last week whether A’. B. Shoemake, president of defunct U.S. Trust & Guaranty, had tried to retain him. Moore cast two important committee votes against regulation of U.S.. Trust as a bank last year. Moore was paid $13,600 between 1949 and 1953 by Texas Mutual, another bankrupt insurance company, for what he said was legal work. He was chairman of the Senate Insurance Committee at the time. , \(See. separate It will be recalled that in 1953 and 1954, a former campaign aide to Governor Shivers, John VanCronkhite, was paid more than $11,000 by Ralph Hammonds of then-sinking, now-defunct Lloyds of North America. Hammonds said it was for political influence ; Shivers said VanCronkhite was “sucked in.” THE BROWNSVILLE petition by Garland Smith of Weslaco also alleges that the insurance commissioners “are proper, if not in fact, necessary parties defendant:” This is based on an allegation that the court, “being required to accept and appoint as its officers the parties so named by the executive department, thus has its independence impaired” in a manner prejudicial to creditors of bankrupt companies. The petition makes the point that the liquidator of these companies, J.D. ‘Wheeler, who decides who is and is not sued by,tlie creditors, is appointed by and responsible to the executive the statute “per se places the receiver in a position of serving two; the court and the executive,” says the petition. “The executive has shown an inclination to intervene in the affairs of this receivership,” says the Smith petition, because it .fired Allred as attorney for the receiver because, Allred alleged, he intended to explore “possible collusion” between insurance board officers and General American. Iii the .Allred attachment, Allred states concerning a transaction which transferred assets f r o m General American Lloyds to General American Casualty in May, 1952: “The board was informed of this the Chairman of the Board and its Chief Examiner that no evidence of fraud would be found in General American Casualty Company.” Allred also states therein that “the chairman of the Board of Insurance Canunissioners” admitted in June, 1954, that both General Lloyds and General American were insolvent in June, 19.52. Allred set out the General American-paid. apartment rent for an examiner which is now a part of the massive $6.6 million creditors’ claim \($135 for James Noad, arranged with the company, it is alleged, at BlanchT HE THREE coMmissioners, all appointed by Shivers, have various backgrounds. Saunders was a Smith County lawyer until he was appointed to the Insurance Commission on Oct. 9, 1953. He was a fraternity roommate of Shivers , at the versity of Texas. Smith, a graduate of Arlington State College, directed an orchestra, published the. Caldwell News, managed Jesse James’s campaign for state treasurer, and became James’s chief clerk before entering the Navy in 1944. After the war he managed Shivers’s successful campaign. for lieutenant governor and Sen. G.: C. Morris’s losing campaign for Congress against Speaker Sam Rayburn. With Shivers as Lieutenant Governor, Smith became secretary of the Senate. When Shivers became Governor in 1949, Smith became his administrative assistant. ;Shivers appointed Smith casualty insurance commissioner in 1.952. -Wentz did not know Shivers before his appointment. All the agency associations . in Texas recommended him for the Insurance Commission. He had a large insurance agency in West Texas, but he sold it upon his appointment in 1955. As Smith left a Thursday hearing last week he moaned : “My ulcers are having babies.” Newsmen calling his home were told he was gone for the weekend. He said Monday his home phone is ringing day and; night. R. D.