Case Histories

Even before Insurance Promoter Albert Shoemake shot himself last week (see above), Texas was shaken by a new series of scandals in its insurance business, the state's second biggest (after oil). Items:

P: Dallas' All-American Home Lloyds, in the red by some $235,000, was thrown into receivership by the Texas Attorney General. Three other companies--American Atlas Life Insurance Co., Dallas Fire & Casualty Co. and U.S. Life Insurance Co.--had their licenses suspended because their officers were "unworthy." One of the three, U.S. Life Insurance, was controlled by Shoemake.

P: Before a state senate investigating committee, an ex-attorney for the Texas Insurance Commission testified that his superiors knew U.S. Trust & Guaranty was insolvent 18 months before they shut it down. While the commission debated what to do, more than $5,000,000 of its assets disappeared.

P: State auditors working over U.S. Trust & Guaranty's books discovered that the company had paid out as legal fees $4,800 to the law firm of State Senator Rogers Kelley, $500 to Senator Kilmer Corbin, other sums to Senator Carlos Ashley and to Senator Jep Fuller, and had retained State Representative Bert McDaniel as counsel. (Kelley and Corbin both said they did not know that their firms were being paid by U.S. Trust & Guaranty.)

P: Texas Insurance Commission Chief Examiner Larry W. Blanchard, his deputy Robert Butler and two other examiners were suspended on charges that they falsified an official report of the financial status of General American Casualty Co., which went broke last year. Blanchard and Butler were accused of having permitted General American to entertain them at deer hunts, Examiner William J. Noad of having accepted $135 from General American to pay his rent.

Judging an Agent. There was plenty more to the General American case. In a suit to recover $6,640,000 for 57,000 creditors, policyholders and stockholders, the state accused the company of buying political influence in Kentucky. When Kentucky Insurance Commissioner S. H. Goebel indicated two years ago that he would investigate General American's operations in his state, General American Director Connie C. Schuchard went to Kentucky and, charged the suit, "hired John A. Keck, a district judge of the state . . . and Wade Hall, an insurance man, to exert their political influence in order to prevent Commissioner Goebel from making said examination . . . For their fraudulent acts . . . Keck was to be paid $100 per month by General American and Keck and Hall were both given a ... territory in Kentucky . . . from which they were to obtain . . . a percentage of all the business written by General American."

The Kentucky investigation never came off. Keck, Hall and Goebel all denied that political pressure was used to block any investigation, but Keck admitted that he and a General American officer had gone to see Goebel "about some difficulties the company was having."

Easy Credit Plan. General American President C. B. Erwin and his officers, the state charged in its suit, also engaged in "year-end window dressing" to make their annual reports look better. One device was to go to the company's bank and get a big loan for one week, show it as an asset on deposit; another was to postdate a check to another company in exchange for a check that could be immediately deposited as a cash asset.

At week's end Garland Smith, who headed the insurance commission while the failures multiplied, stepped aside and turned the chair over to Lawyer J. Byron Saunders. The commission decided to recruit some 2,000 certified public accountants to check the books of every one of the 1,400 insurance companies with home offices in Texas.

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