ustxtxb_obs_1957_02_26_50_00005-00000_000.pdf

ti STATE EYED ICT, OK’D IT IN 1956 $750,000 in 3 Years AUSTIN Here, in brief, is the chronology of the Insurance Cornmission’s regulation of ICT Insurance Co. September, 1955. Examiners E. B. Kelley, W. J. Noad \(since released from employment by the Jr.” Marvin James Poole, Sam E. Stock, and Joe Curtis of the Texas commission, R. L. Ferguson of Mississippi, and Harry J. Aden, Oregon, began a threezone examination of ICT Insurance Co. April 2, 1956. All three insurance commissioners approved a reinsurance agreement between ICT Insurance Co. and with Missouri Union Insurance Co. April 6, 1956. The examiners’ report declared the company solvent, with “a combined surplus protection to the policyholders of $1,883,584.443.” The report did not take account of the firm’s continued losses. Annual reports on file with the commission show small operating profits in 1950, 1951, and 1952; a net loss of $412,000 in 1953; a net loss of of $256,000 in 1954; and a net loss of $1,627,439.59 in 1955. The unassigned surplus claimed in the company’s 1955 report was $1.9 million. The April examination report noted the “unique” situation whereby the company’s stock accounts were kept under a management contract with Jack Cage & Co. The contract was reproduced in its entirety, and it was noted it was terminated in January, 1956. The audit apparently does not see through the July 15, 1955, agreement whereby Jack Cage & Co. wrote off an apparent debt to ICT Insurance Co. of almost $1 million as income for Jack Cage & Co. Noting the losses, the commissioners asked for a new statement of condition in a few months. July 1956. James Cage, president of the firm, noted a “hidden surety” which increased the firm’s liabilities substantially \(Observ”called the chairman of the board” AUSTIN The case of Renne Allred, Jr., has now come full cycle. He was fired Sept. 15, 1954, as attorney for the insurance liquidator by the three insurance commissioners, Byron Saunders, Garland Smith, and Mark Wentz. The three gave no public reason \(Smith menand Allred charged it was because he intended to sue their chief examiner, L. W. Blanchard, in a receiver’s action. Blanchard was subsequently released from employment and is nowa defendant in a receiver’s action. Blanchard was subsequently released from employment and is now a defendant in receiver’s acaction in the General American Casualty Co. bankruptcy. The three Austin district judges who had appointed Allred signed an order cancelling their action, so he went back to his law practice in Bowie. Once since then he spoke up againto the Senate investigating committee, which he informed that he had transmitted to the insurance commissioners a memo warning of U.S. Trust & Guaranty’s shaky condition long in advance of the commissioners’ trip to Austin to see him and Atty. Gen. John Ben Shepperd. Shepperd, said Cage, said “he didn’t know what he would do” if he held bonds involved in the surety obligation. Saunders, said Cage, said the situation seems impossible… I don’t know how you will work it out.” “By September we had worked out an answer,” Cage says. “I called the chairman and told him ‘This does improve your position?’ I replied it did. ‘Well, then, I feel you must go through with it. I have no objection,’ he said,” Cage asserts. Sept. 4, 1956. Commission received a balance sheet from ICT Insurance Co. Sept. 5, 1956. Saunders and Chief Examnier Tom Robinson wrote Cage asking for more details on the firm’s bond and stock schedules. Betwen Sept. 5 and Sept 20, ’56. Cage called Saunders by telephone and, says Cage, “asked him what specific information did he want … I asked what his desire was on valuation of the ICT Life stock…. We wanted to cornply with the board’s wishes on the valuation.” Cage says Saunders said he would talk to Robinson and call back but that he diid not call back. Sept. 20, 1956. Not having received a written answer from Cage, the commission instituted a new examination over the period Oct. 1, 1955, to Sept. 30, ’56 with Chas. T. Ramsey in charge. E. E. Fuller of Georgia and Tom Tutty of Montana represented national insurance zones three and six, respectively. Late January, 1957. Cage was advised informally the report would show insolvency. Feb. 11, 1957. Ramsey’s report showed surplus deficit as regards policyholders of $2,960,243. 17 as of Sept. 30. The board ordered the firm to show cause why it shouldn’t be put out of business. Feb. 13, 1957. Cage states the commissioners advised him $1.5 million would bring the company back on its feet because of a conceded increase in the valuation of ICT Life stock. Feb. 21, 1957. The board found the company insolvent. action against that firm. Now one of the district judges, Charles 0. Betts of the 98th district court, has named Allred attorney for the receiver in both the ICT and U.S. Trust & Guaranty cases. His orders say , he has “full confidence in the integrity and ability” of Allred; gives him “full, complete, and free access” to any and all of the files of the companies; and instructs that he “shall be subject only to the orders of this court.” Allred is in Austin working on the U.S. Trust and ICT cases. Emmett Shelton recently resigned as attorney f or t he liquidator, complaining of insurance commissioners’ hostility to him. He recommended the liquidation division be put entirely under the district judges. Sen. Herring, Austin, has introduced a bill to do this. Atty. Gen. Will Wilson and the three judges are in favor of this step. John Osorio, chairman of the Insurance Commission, has no objection and says the division should be under either the courts or the board. Allred does not replace Shelton; he is the court’s attorney only for the ICT and U.S. Trust cases. Judge Betts has been holding co operation. They, and the work papers behind them, now provide the first real insight into Cage’s operation. Skiles last week in Dallas gave the Observer complete access to his files. BenJack’s expense accounts for the year ended May 31, 1955, include claims he spent $850 on a movie star. What, was asked John McCully, public relations man for Texas State Federation of Labor, was that for? “Beats hell outa us,” he replied. “Doesn’t anybody have any theories? “I suppose everybody has theirown theory,” responded Jerry Holleman, executive secretary of the state federation. Cage claimed he spent more on the starlet than he spent on a number of other girls. For example, in. the same voucher, he lists other feminine names by the sums $32, $700, $500, $475, $200. To John Robert Powers for “hostesses for party.” went three hundred twelve dollars. But Mary Alice, another feminine name, is identified with a twelve hundred dollar item. Other vouchers Cage turned in include $1200 to a woman for “public relations,” and additional sums for the girls of $253.74, $950, $275, $475, $300, $100, $225, $275, $70, $100, and others. Payments to individuals, out of the Highland fund specifically include $200 to Mannix Carr in San Francisco and another $300 wired to Sally Robinson in Santa Barbara. Otto Mullinax of Mullinax and Wells, Dallas, said Carr and Robinson are names of one personthe same person who was involved in the paternity suit. Cage’s wife is now suing him for divorce. One open-sky account was maintained at Highland Park State Bank, Dallas. In a year and a halffrom May 1953 to November 1954more than $127,000 was disbursed from this special account on signatures of Cage and four others, though Skiles could not find corporate minutes authorizing the account. No detailed statements were found on some $30,000 of cash withdrawals. \(“We cannot be satisfied that they were made altogether for the benefit of the company….” said the Group totals in this account 000 cash withdrawn by check, largely by BenJack Cage, which includes $2,500 withdrawal to reimburse for “personal check for trip to Europe” in 1954; paid to others, $55,000 to various individuals, including $16,000 to some department and jewelry stores, $2,000 to clubs and country clubs, and $3,000 to Twenty-One Club \(a promotion of Cage’s Lazy-C pay for BenJack’s personal items $3,000 \(a conservative estimate taxes of Mr. and Mrs. B. J. Cage, $1,000; doctor bills for BenJack’s Father, $1,000; and Mrs. Cage’s bills at the Shamrock Hotel \(pre1954, $554. Reference to the work papers turns up the following worksheet notations from the Highland Park account alone: In 1953, four tickets to “Kiss Me Kate,” $12; jewerly, $46; Dr. R. E. Fisher, $500, “father’s dr. bill”; $3.50 to B. C. Forbes &, Sons Publishing Co., Inc., apparently for a book \(“101” U.S. Trust pre-trial conferences in hopes of settling depositors’ claims to priority creditors’ rights in trial by March 25. Last week he consolidated creditors’ suits to speed up the process. purchases; $200 dollars for “inspection services and medicine”; various expenditures for flowers; $28.20 for “New Year’s game tickets” and $19.20 for “4 Cotton Bowl tickets”; to B a r clay Luggage Shop, New York, $138.37; $100 to director of internal revenue for “1/2 payment due Mrs. Jack V. Cage” and $1,000 to director of internal revenue for “BenJack and Dorcas Cage” both dated September 14. In 1954: $5 to “renew passport”; $595, “air conditioner in, 1954 Cadillac”; $3, “Jimmy’s Shoe Repair”; $275, “14K watch attachment”; $750 \(check signed by Francis J. “cocktail Lazy C Ranch”; $50, “2nd quarter pledge BJC” to St. Paul’s Methodist Churdh; $7.50 to Neiman-Marcus, “hat renovated”; $52, “wire to Jerry Sands Las Vegas”; $4, two watch straps; $6 to each of three men, “waiter penthouse”; $260, to “SMU box office”; and various expenditures for drugs, optical, car repair, and flowers. In 1955: To R. E. Fisher, M.D., $500, “father’s account”; $12 ‘chiropractic”; $2 5 0 dollars “for Christmas party”; $4, “medicine for BJC”; $7, “Christmas gift to maid”; $3.50 to Ben Gentle \(who is the tax assessor-collector in check for almost $500 divided between “directors meet at ranch” and the c r y p t i c explanation, “Thanksgiving.” Funds from this account were used to pay four traffic tickets. Mrs. Ben Jack Cage also figures in the account. On June 6, 1953, a $200 each check is noted in the workpapers, “for deposit only to thereafter a check a month. “O.K. BJC” is written at the bottom of this letter, and a legal and auditing note dated 8/5/53 bears the sum, $600. Sept. 16, 1953, Jacco’s secretarytreasurer sent Moore another hundred dollars and thanked him “for the services which you have rendered …” The worksheets \(which were discontinued in this area of ment, five $100 payments, and one $50 payment, in that order. Sparks said in Houston he was acting as a “lobbyist for , labor” when he engaged Moore. “There was nothing unusual about the transaction,” he said. It’s “cornmon practice …. But they keep it pretty quiet. You never know who’s working for who in Austin.” Sparks said he is now a real estate dealer and a majority stockholder in the Southern Memorial Gardens, a cemetery. LATER Sen. Moore said he had never appeared before the insurance commission for ICT and “I never did anything in the legislature for them. I don’t even know what they were interested in in the legislature, if anything.” Moore was chairman of the insurance committee in the 1953 session. As reported here earlier, Moore received $13,600 in attorney’s fees from Texas Mutual for 40 months ending in February, 1953, a week before that firm went into receivership. He was on a $200-amonth retainer from General American Casualty Co., which went bankrupt in June, 1954. He received a $500 check for services from a U.S. Trust & Guaranty subsidiary in 1953. Senators were cautious in comment on Moore’s ICT fees but Sen. Henry Gonzalez, San An a/c Mrs. B. J. Cage.” Six of the hotel bills are noted to include “Mrs. Cage.” A check to Foley’s department store in Houston for $56.52 is noted in workpapers, “Mrs. Jack Cage pers.” In 1954 $3.50 of a larger check to the Lakewood Country Club is identified as paying for “golf lesson Mrs. Cage.” The same year a check on this account paid the Dallas Athletic Club about $20 for “Mrs. BJC and BJC bath and mass” \(presumably me a n i n g Other. miscellany. charged to Jacco’s accounts: Premiums on a policy on BenJack Cage’s life, with the beneficiary his mother, not the cornand furnishings \($17,000 worth of furniture out of the Highland Cage’s penthouse two bedrooms, two and a half baths, kitchen and bardining room atop the ICT Building in Dallas; $749.57 for J. G. Vaughan’s income tax; $250 to “Stevenson and Sparkman” out of the 1954-55 Cage account; In Cage’s 1954-55 expense accounts, “miscellaneous and unidentifiable items,” $22,000; “public relationsrecipient unidentified,” $3,250; ThirtyLone airline credit cards, including one for Mrs. Jack Cage; gifts for “managing editors, Business Week, New York Times, Saturday Evening Post, Lloyds,” $543.73; and almost $350 to an unidentified “Amani Mgeni Uwanda.” Auditors work papers are all informal documents and may contain errors. tonio liberal, said it “looks at first blush like a compromising situation.” Meanwhile, Rep. Ben Atwell of Dallas and two former representatives, Horace B.