June 4, 1905, The [Portland] Sunday Oregonian, Unite Against Common Enemy,
Hyde and Alexander Form Alliance to Keep Wall Street Out of Equitable.
LINCOLN MAY BE CHAIRMAN
Frick Committee's Report Causes Storm or Controversy and It Reveals Contest Between Gould and Harriman.
NEW YORK. June 3. Overshadowing in interest all the other sensational developments in the affairs of the Equitable Life Assurance Society attendant on the rejection by the directors yesterday and the publication today of the report of the Frick committee, comes the announcement that the controversy between President James W. Alexander and Vice-President James Hazen Hyde is at an end, and that these two gentlemen have concluded a defensive and offensive alliance. The basis of this agreement is reported to be that they should in the future devote themselves to the interests of life insurance and keep all Wall-street entanglements out of the affairs of the Equitable.
Mr. Alexander and Mr. Hyde were in conference today with certain of their friends and advisers for more than two hours. Deep interest attaches to the results of the unexpected turn of affairs, the general inference being that it predicts a very determined effort to reconcile the interests of the warring-factions and re-establish the direction of the society on a basis acceptable to all.
It was also made evident today that there is scant probability that the resolution of the directors to create the office of chairman of the board, with plenary power over all departments and affairs of the society, will ever be put into effect.
Robert T. Lincoln for Chairman.
After the conference between Mr. Alexander and Mr. Hyde. It was reported that Robert T. Lincoln had been agreed on by them as the man best qualified to assume the chairmanship of the board of directors.
The prominent features of the Frick report, about which there was boundless speculation when it was practically rejected and suppressed at the meeting yesterday, proved, when it was published in full today, to follow closely the outlines forecasted several days ago. Both Mr. Alexander and Mr. Hyde are severely criticised, and the report declares that, assuming Mr. Hyde to be guilty of the things charged by Mr. Alexander, the latter is "culpably negligent in acquiescing in them for so long a period. and in not bringing them to the attention of the board of directors."
Hyde's Defense of Himself.
Counsel for Mr. Hyde issued late today a long statement defending Mr. Hyde's position in reference to the attacks on that. la hl. attention "i c<ai to the fact that Mr. Ryan had repeatedly offered to trustee his stock; and had for many weeks urged that a man "of dominating National "reputation" be placed at the head of, the society. The statement covers the details of numerous stock purchases alleged by Mr. Alexander to have been made, at the instance of Mr. Hyde without consultation with any members of the society, and declares them to have been approved at meetings of the finance committee at which Mr. Alexander was present. Mr. Hyde reiterates his charges that Mr. Alexander conspired against him with the design of ousting, him from his position and obtaining control of the society himself. Mr. Hyde referred to the so-called subsidiary companies of the Equitable, and said "the Equitable had profited through these corporations. Other transactions were gone into at length."
Alexander's Answer to Frick.
Interest in the proceedings of the board of directors when the Frick report was made was renewed tonight when the text of President James W. Alexander's reply was made public. Mr. Alexander's statement was long and went into the Frick correspondence in detail. He called the Frick report "In many respects unjust" and said it was based on "incomplete data." at the same time promising that there would be "submitted to the board statements from an actuary of the society and from the secretaries of some of the other officers who from their intimate relation to the various phases of the business are well qualified to discuss the report in such aspects." He defended the society's business methods elaborately.
Lost Business In May.
It became known late tonight that Second Vice-President Tarbell in the course of his address before the board of directors yesterday said:
Our business in the month of May will be about $5,000.000 less than in May last year and I am of the opinion that our terminations for the month will be greater than our entire losses, so that we will have less outstanding insurance at the end of May than we had at the beginning. Our representatives by their herculean efforts were able to keep our business fairly well until there was talk of receiverships and actions for receiverships.
Railroads Fight For Control.
According to the Herald, Mr. Frick, in handing in his resignation, said be never again would sit as director in any corporation of which Mr. Hyde is also a director. The charge made by Mr. Hyde that an effort had been made by Mr. Harriman to take control of the society away from him was pointed to in connection with reports circulated last night that one reason for attacking Mr. Hyde was that he was friendly with George J. Gould, and that other interests desired to prevent Mr. Gould from obtaining any assistance from Equitable funds in extending his railroad lines westward to the Pacific Coast and eastward to the Atlantic. According to these reports, the Union Pacific and Pennsylvania Railroad interests and Mr. Frick joined together to oppose Mr. Gould. Mr. Gould was one who attended the conference in Mr. Hyde's office yesterday, and considerable surprise was expressed when it was found that Mr. Harriman who, up to that time, had been counted upon as a Hyde supporter, was not present at the conference.
Did Platt Start the Fight.
Intimations were forthcoming from an official of the Equitable that Thomas C. Platt first instilled trouble in the Equitable. It was said that he started to get even with ex-Governor Odell and the hitter's friend. E. H. Harriman. He realised then that Mr. Hyde was being paid by Harriman and started the fight through Alexander.
FRICK SCORES MANAGEMENT.
Condemns Extravagance and Sharing in Profits of Stock Purchases.
NEW YORK, June 3. Liberal extracts are published today of the report made to the Equitable Life Assurance Society directors by the Frick Investigating committee, which the directors rejected. The report consists of 38 printed pages. Its principal points follow closely the outline forecasted several days ago, and in closing the committee declared:
Concluded on page 9
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UNITE AGAINST COMMON ENEMY(Continued from First Page.)
sions, excessive expenses and superfluous offices should not be tolerated.
Investments should be carefully made and all the useful formal precautions employed to insure the location of the moral responsibilities of the officers who are charged with the duty of making them.
The committee having pursued its investigation of the present management of the society sufficiently far to convince it that the personnel of the management should be radically changed, and the methods of conducting the business of the society brought back to sound legal and ethical lines, begs to be relieved from further duty.
Hyde Director of Many Companies.
In mentioning the particular executives who, the committeemen believe, should be retired, the report said:
The shortcomings in interior executive officers are largely due to the methods which the principal officers have encouraged or permitted, and, so far as correction of these irregularities calls for further removals of officials, that matter should be dealt with and largely controlled by the judgment of the reorganized management.
Among other features is a letter from President James W. Alexander sent to the committee in response to a request for specific data under 11 heads. The letter is largely devoted, however, to a reiteration of the charges against Mr. Hyde, among them being one to the effect that large quantities of stock belonging to the society stand in his name, enabling the vice-president to become a director in many corporations.
"If there is any need," the president wrote, "for the society to be represented upon the boards of the companies whose securities the society holds, that representation should not be centered in one person, who cannot, by any possibility, give proper attention to the duties of so many positions."
The report also contains a long letter from Mr. Hyde concerning syndicate transactions, heretofore made public. Commenting on these deals, the report says:
"In one case in which, the syndicate profit was $30,213, the society now holds the securities purchased, which at present quotations show a loss of about $60,000. In all other cases the society has either made a profit or could make a profit by selling the securities at the present market. The net result to the society of the purchase of these syndicate securities has been a very considerable profit. If the society had acquired the securities by taking allotments in the original underwriting, the profits would have been greater by $196,107.
"While the society was gained by the transactions, the report declares that the officials in the syndicate were guilty of a breach of propriety and a breach of trust in this course of dealing with a corporation they were serving.
Alexander Is to Blame.
The report declares that, if Mr. Hyde were guilty of the things charged by President Alexander, the latter was "culpably negligent in acquiescing in them for so long a period, and in not bringing them to the attention of the board of directors at such time and in such way as to enable the directors to consider them in connection with the exercise of their responsible duty of electing the officers of the society."
After quoting a letter alleged to have been addressed to Mr. Hyde by Mr. Alexander last November regarding the duties of the fiscal committee, and detailing the manner in which two new members were to be handled, the report continues:
"The committee finds that, so far as Mr. Alexander's charge against Mr. Hyde is true, namely: "That he has displayed a strong personal ambition, and an inordinate and unsafe love of prominence, a great responsiveness to flattery, pliancy in the hands of persons whose interests are not necessarly parallel to those of the policy-holders of the society," Mr. Alexander is largely responsible.
Details of the society's operative machinery, financial methods, salaries, etc., are gone over in great detail, with reasons for changes wherever the investigators saw ground for criticism, and the report concludes with a plea for recognition of the great responsibility toward policyholders in the society and in all similar organizations.
HYDE AGREES TO NEW SCHEME
At Same Time Produces Evidence Alexander Slanders Him.
NEW YORK. June 2.-Counsel for James Hyde issued a statement this afternoon outlining the position of Mr. Hyde with reference to the attacks made on him. The statement follows:
The resolutions passed at yesterday's meeting for a selection of the chairman of the board, and requesting Mr. Hyde to trustee his stock, contained nothing that is new, and it will be remembered that, from the outset of this unfortunate and unnecessary controversy, Mr. Hyde had offered again and again to trustee his stock for a limited term under proper restrictions, so as to secure a board of directors which the policyholders and the public would accept as fearless and independent, although it would be difficult to find a more representative body of men than those constituting the present board.
Mr. Hyde may well complain that his disinterested efforts to save the society from the calamity have not been appreciated and in the multitude of plots and counter-plots to capture control of the society, the effort has been under cover of abuse to wrest his property from him. The suggestion that a man of dominating national reputation, fearless and independent, be put at the head of the society, with the office of chairman of the board, and with unlimited power, is one that Mr. Hyde has been constantly urging for six weeks past as a solution of the trouble. All he asks is the selection of some person whose name will be a guarantee of honest, fearless investigation and management. He is willing to take his chance with such a man.
Will Defend His Reputation.
Mr. Hyde has said from the outset that there is one subject, and only one, in which he will never budge. That relates to the so-called "charges, etc." He will fight to the end in defense of his reputation. Anything short of that demanded by the welfare of the society he is, has been, and always will be willing to sacrifice.
The publication of parts of the Frick report has given a most misleading impression. One of the complaints Mr. Hyde makes of that report is that, although it sets forth in full Mr. Alexander's letter containing his complaints against Mr. Hyde. It significantly omits Mr. Hyde's personal reply and defense. Parts of a short preliminary letter are given, but the main reply is entirely omitted and most sparingly referred to in the report. This necessitates, unfortunately, the publication by Mr. Hyde of his defense, and that will have to be done.
Hard Nut For Alexander to Crack.
A copy of a letter from Mr. Hyde to Mr. Frick, dated May 18, was here given out, in answer to the charges that purchases had been made at Mr. Hyde's instance without consultation with Mr. Alexander or other officers of the society. The letter enumerates numerous stocks purchased for the Equitable, and Mr. Hyde quotes from the secretary's records in regard to these transactions to show that the purchases were approved by the finance committee, and that the records of the secretary show that Mr. Alexander was present at most of the meetings and voted to approve the purchases. In relation to the purchase of $1,780,000 preferred stock of the Union Pacific, the letter said:
The purchases of Union Pacific preferred stock were three in number. Mr. Alexander, in his letter to you of May 2, makes the following extraordinary statement with respect to these transactions:
"These purchases were made without prior consideration by the executive committee, and without my knowledge. I am informed that Mr. Hyde personally was a member of the syndicate. Upon inquiry, since made, I am satisfied that this stock, held by th Equitable, is the proportionate amount of stock subscribed for under the syndicate agreement of Mr. Hyde individually; that one of the conditions of the agreement was that the stock should not be sold by the individual subscribers for a period of six years, or some provision to that effect.
"This particular transaction evidences two things: the improper assumption of authority to commit the Equitable to large transactions without proper supervision and consultation, and the making of the Equitable, for all practicable purposes, a party to an agreement such as, in my opinion, it is not justified in becoming a party to...and which lies entirely outside the pale of permissible transactions for an insurance company."
Quotes Alexander Against Himself.
In reply to this charge, I beg to say,
First---That, before the purchases were made or agreed to be made the subject was fully discussed with Mr. Alexander and his assent secured.
Second---That the syndicate agreement was signed by me in my individual name, with the knowledge and consent of Mr. Alexander, for business purposes and convenience, but not for the purpose of gaining any profit or advantage to myself, nor have I ever derived any personal profit or advantage therefrom.
Third---That so far from the transactions having been consummated without the knowledge of Mr. Alexander, he dictated to me the following letter with respect thereto, which confirmed his previous oral assent:
"James H. Hyde. Esq.---Dear Sir: In view of the fact that you have entered into a contract dated November 11, 1903, between yourself, Messrs. E. H. Harriman, James Stillman, Kuhn, Loeb & Co., and others: for the benefit of the Equitable Life Assurance Society, and that the society is to receive the profits resulting therefrom, it is understood that the society from time to time will supply such funds as may be necessary in the transactions therein contemplated, and that you personally will be fully indemnified and protected against any personal liability or loss which you may incur or in any way become liable for in the course of the carrying out of said agreement.
JAMES W. ALEXANDER
New York, January 21, 1903. "
This is a facsimile of the accuracy of Mr. Alexander's statement, and of the straits he finds himself for causes of complaint against me. The manifest insincerity of such illustrations of usurpations of authority requires no comment.
But this is not all. The record of the finance committee shows that these purchases were ratified, and that Mr. Alexander was present when the first of them was approved.
As to the charge of personal ambition, love of prominence and responsiveness to flattery, I confess being ambitious to worthily fill the place that was occupied by my father in the community and it may be that I am exceptionally responsive to flattery, although I am not aware of the fact.
Excuses Dinner to Cambon.
As to the charge that I have acquired an unpleasant notoriety by reason of my recreations and enjoyments, I know of no such instance, other than the occasion of a fancy dress ball, in which it was reported that occurrences of a scandalous and indecent nature took place. These reports were, however, inspired from the sources that are now attacking me. They were published when the conspiracy to destroy my reputation and deprive me of my position in the society was well underway. Mr. Alexander was aware before me giving of the "Cambon" dinner that, while given in my name and the name of Senator Depew, it was given for the purposes of assisting the society and I told Mr. Alexander of the amount paid for the dinner, which was paid for by my personal check, and the return of this amount to me by the society, which he approved of as a proper disbursement by the society. While it might have been an injurious method of advertising the society, had its name been connected with it, still many such affairs I had been given at home and abroad for the same purpose without the Equitable's name being mentioned and allowances have been made by the society for the cost of the same.
In connection with the dinner, the statement has been repeatedly made and widely circulated that it was given with a view on my part of being awarded the Order of the Legion of Honor from the French government and not in the interests of the Equitable Society. The fact is that the Legion of Honor degree was conferred upon me two years before the dinner. Then obviously the entertainment could not have been given openly in the name of the Equitable Society. That would have defeated its purposes, which were to honor the retiring Ambassador and to secure the good will of his government with respect to the matters that the society then had and may have had thereafter pending in France. There was ample precedent in the society for this method of furthering its prosperity.
SAYS EQUITABLE MADE MONEY
Depew's Defense of Officers Against Frick's Charges.
NEW YORK. June 3.---Senator Chauncey M. Depew made an extended, statement today regarding yesterday's meeting of the Equitable. He said:
"The adoption of the report of the Frick Investigation committee would have meant that every member who voted for it subscribed to everything that was in it. Its adoption was impossible, in view of its attacking the deferred-dividend system, under which 90 per cent of the society's total policies, aggregating $350,000,000, have been written. After the answers of the officers of the society had been made, I don't think anyone in the meeting agreed to that."
The statement that Mr. Hyde will relinquish his stock, Mr. Depew said, meant either a sale or a trusteeship of the stock:
"It was on the lines of the society passing into the hands of the policy holders," he explained.
"Of course," remarked Mr. Depew, "under the Maddox decision, Mr. Hyde's stock is a very valuable asset."
Mr. Depew went on to tell something about the meeting. He said:
"When the officers made their defense the impression was that, while they might have been guilty of indiscretions, the society had lost no money, but, on the contrary, it had made a great deal of money. In other words, it had gained more in the five years that the report covered than it had made during the previous ten years. It had added in this time $500,000,000 in outstanding insurance, while it had taken 40 years previously to get $1,000,000,000.
"It had increased its assets in these five years about $120,000,000, and had increased its surplus between $16,000,000 and $20,000,000. The directors knew that the results were the result of extraordinary ability on the part of officers who were attacked. To punish men who accomplished such results by dismissing them would be too harsh, and to replace such men by new men would prove disastrous to the company."
Mr. Depew here entered into a lengthy analysis of figures to show that the Equitable's surplus is really more than $50,000,000, instead of about $12,000,000, as figured by the Frick committee. There was nothing in the talk of a Frick-Harriman conspiracy, Mr. Depew said. He concluded with this statement: "I know Mr. Frick acted with the utmost conscientiousness."
June 4, 1905, The [Portland] Sunday Oregonian, Page 6, Editorial,
THE NEW FINANCE.
It appears that the Equitable Assurance Society belongs neither to Mr. Hyde nor to Mr. Alexander, but to the astute financiers who have for some years sat on its board of directors and who have permitted the figureheads to believe that they were in actual control. If we have learned anything from the Frick report and subsequent developments. It is that Hyde is a fool, which we already knew, and Alexander a high-salaried nobody---which many suspected---who has been used as a pawn in the great financial game played by able and seasoned gamesters like Schiff, Harriman and Gould. Mr. Alexander and Mr. Hyde have organized their little petty larceny schemes by which they acquired a fat rake-off for throwing open the doors of the over-flowing Equitable treasury to the Wall street wizards who were buying stocks, floating bonds, organizing trust companies, consolidating banks and building railroads and other things all over the United States. Whenever the real players wanted to further some gigantic scheme that required use of millions of somebody else's money, they allowed their puppets to create a syndicate, known by the pompous title of "James H. Hyde and Associates." They threw a few thousand in the way of the Frenchified dandy, whose chief notions of insurance were obtained by a spectacular drive through Wall street behind a tandem team festooned with hothouse Violets: and the young Jehu of Insurance considerately "whacked up" with his friend and preceptor, the $100,000 Alexander, who mourned as he tearfully cast up the figures of his swelling bank account that there were no more worlds for him to conquer. If Mr. Gould wanted $50,000,000 to build an extension to the Western Pacific, he mentioned the matter to a few of his associates in the Equitable, or some other company, and the key to the vaults was promptly turned over to him. If Mr. Harriman longed to oust Mr. Hill from control of the Northern Securities Company, he casually remarked to Mr. Schiff that a few millions would do the trick, and Mr. Schiff, who is a director in the Equitable, and a few other concerns that handle money that is yours and mine and the other fellow's, did the rest; Mr. Hill, in self defense, was obliged to hurry around to the private entrance to Mr. Morgan's bank and see about it. This is what we have long admiringly termed high finance---the ability and opportunity to conduct immense operations in the speculative and investment world and to make the rank outsider put up the money.
The Equitable row has taken a new and startling turn. It is, in its present phase, the most portentous happening in our recent fiscal history. It throws a clear light on many things that a frenzied litterateur had heretofore dragged into the general view, but which the public was skeptical about. This is not to say that what Lawson said was true in detail; but it was in essence. Gigantic sums of money are piled up in New York by appeals to the thrift and prudence of the moderately well-to-do who desire to lay by a store for a rainy day. This great treasure is doing nobody any good in the cobwebbed vaults of the insurance companies; so related trust companies are organized and are given in some part the direction of the insurance company's investments. In the case of the Equitable, we are told that the side schemes of "James H. Hyde and Associates" were on the whole profitable to the insurance company; but we know, too, that they were profitable to Hyde et al., or would have been if they had not been compelled to disgorge. What service has President Alexander rendered to the Equitable Assurance Society that he should be paid $100,000 a year and vastly larger "perquisites"? What has young Mr. Hyde done but incalculable mischief? What has Tarbell done to earn his immense salary but quarrel with Hyde? Are the abilities of these men so superior to the merits of men struggling along on a moderate income, doing their duty as they see it, paying their debts, abusing no man's trust, and devoting to their private gain no funds placed in their hands for safekeeping and legitimate accretion, that 600,000 policy-holders should allow them such enormous regular and irregular remuneration? Can any man earn $100,000 per year salary? And, if he can, is he entitled to put all his available relatives on his clients' payroll at proportionate wage? And if some men can honestly earn $100,000 and aid their family and dependents to get a great deal more, does it follow that men like Alexander and Hyde are in that class?
We are told that the Equitable and all the great insurance companies are entirely solvent, and we believe it indeed, there is no doubt about it. It is the business of the management to keep them solvent, for neither Mr. Gould nor Mr. Harriman. nor Mr. Schiff, nor Mr. Frick, nor any of the great operators can have any possible interest in contributing to its insolvency. But it is not consoling to think that the chief problem to be solved in the Equitable is not whether the policy-holders shall direct the investment and conserve the interest of $400,000,000 assets, but whether it shall be done by Mr. Gould or Mr. Schiff.