Illinois & Stevens

Chicago's Stevens family hates publicity. And until last November when Stevens-controlled Illinois Life Insurance Co. tumbled into receivership with $150,000,000 in policies and $13,000,000 in Stevens-owned hotel mortgages frozen tight in its portfolio, the Press let the Stevenses pretty much alone. Since then their financial doings have blossomed into a major Chicago scandal. Last week auditors told the receiver just how much these doings had cost Illinois Life--$12,456,409, about one-third its assets.

For several months both State and Federal authorities have been digging into the long chain of manipulation which led to the insurance company's fall. Loans of $3,446,000 to the Stevens family & friends, use of dummies, frenzied finance were rooted out of the books. Neatest Stevens trick:

In December 1931 the $33,000,000 Stevens Hotel ("World's Greatest") faced the year end with $16,000 in cash--not enough to pay food bills for a month. To window-dress the balance sheet Hotel-&-Insurance-Man James W. Stevens had the hotel company swap a $600,000 unsecured note for $600,000 of Illinois Life's Liberty bonds. Thus the Hotel Stevens was able to report the balance sheet item: "Cash including Liberty bonds--$616,000.''

Not content with this the Stevens Hotel on the last day of the year traded a third mortgage for its note held by Illinois Life, thereby slashing its current liabilities by $600,000. Illinois Life allowed the hotel 78-c- on the dollar for its third mortgage but on the same day put the mortgage on its books at par. Although Stevens Hotel first mortgage bonds were then selling at 25-c- on the dollar, Illinois Life credited itself with a $200,000 profit. That did not end the amazing jugglery, for a few days later the Stevens Hotel gave notes to Illinois Life not in exchange for the third mortgage but for $700,000 cash. Illinois Life shortly declared dividends amounting to $1,000,000.

James William Stevens, a shrewd, smallish old man who used to prowl around the Loop on Sundays spotting likely real estate propositions, is head of the family and was chairman of both the insurance company and the Stevens and La Salle Hotels. Son Raymond William was president of Illinois Life. Genial, square-faced Son Ernest James is the active hotel man who now often says: "I feel as if I were a hundred."

Illinois Life was the biggest life insurance failure last year. Eight of the nine others were either Illinois companies or their subsidiaries. Tenth was a small Negro company in Washington. Intensely jealous of their good name, insurance men throughout the land have roundly flayed Illinois' insurance laws in general, their lax enforcement in particular.*

*TIME erred last week in stating that the Aetna Life group of Hartford had taken over most of the insurance and bonds (including $50,000 bonds of Col. Luke Lea & Son) of receivershipped Union Indemnity Group of New Orleans. Aetna Life appointed as representatives several agencies that formerly handled Union Indemnity underwriting, executed a binder pending Aetna's investigation of the agencies' business.

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