THE INSURANCE INVESTIGATION 469 



charged to the dividend and passed to the dividend account. 



Q. It was not dividend as such, was it? 



A. Well, it was part of the dividends earned by the com- 

 pany. 



Q. But not what the officers were entitled to as policy 



holders? 



A. I am not defending it and it stopped right there; it was 

 a theory that prevailed then, but we have learned better since. 



Think of not only taking the policy holders' money in this 

 way, but actually crediting it as having been paid to the policy 

 holders ! 



The time referred to by this witness is shown, on [the 

 same page of the testimony, to be the year 1870. The time 

 that the witness was testifying was March 28, 1877. This 

 crude method of looting the treasury was, as this witness says, 

 abandoned in the early seventies because they had learned 

 better. It was never very clever, but it was this idea of voting 

 themselves bonuses upon the surplus that no doubt suggested 

 the desirability of making the surplus as large as possible so as 

 to increase the amount of the bonus. The ease with which 

 these bonuses could be voted to the officers and then covered 

 up by charging them to the dividends paid to policy holders, 

 suggested also the great possibility of concealment contained 

 in a large surplus. Since a large surplus was not contemplated 

 by the law, it was required to earn nothing, and it was easy to 

 account for any money which might disappear from a company 

 by calling it surplus and charging it as paid out in dividends. 

 m Of course, this was all very petty and crude, as compared with 

 5 what the officers of the insurance companies are doing at the 

 present time. As Mr. McCurdy says, they have learned better 

 now. They have improved upon these early, primitive 

 methods; but the idea that found lodgment in the brains of the 

 insurance officers at this time was the desirability of increasing 

 the surplus. 



Straight across the pathway of each company, forbidding 

 large surplus accumulation, was the provision in its charter 

 requiring distribution of the surplus to be made at short peri- 

 ods. The first thing to do, therefore, was to get rid of those 



