KKCKIYKU. 



677 



R 



RECEIVER, an officer appointed by a court 

 to take charge of the property of an insolvent 

 rorpnratimi, and to pay the stockholders or poli- 

 cy-holder^, if an insurance company, whatever is 

 due tin-in. The loose laws of the several States 

 relating to bankruptcy brought on a condition 

 of things lietween 1875 and 1882 that favored 

 i In- alui.-i- of ollice by those who held receiver- 

 ships. So many flagrant instances of abuse 

 w. -iv known thai tin- Legislature of New York, in 

 1882 and 1883, made a thorough investigation of 

 about twenty insolvent insurance companies that 

 had suffered at the hands of receivers. It was 

 found that in a list of eighteen life insurance 

 companies there had passed through the hands 

 of the receivers the sum of $11,551,957.17; that 

 they paid for legal expenses, including their own 

 fees, $737,101.86 ; that they paid for other ex- 

 penses, including salaries, clerk-hire, stationery, 

 olliee-rent, taxes, and repairs of real estate, trav- 

 eling expenses, auctioneers' fees, appraisers' fees, 

 and miscellaneous expenses not otherwise classi- 

 fied, $598,404.54 ; that they distributed among 

 the creditors of the corporations, and in accord- 

 ance with court orders based upon findings of 

 s, $2,426,692.55 ; that at the date of their 

 last annual reports (Dec. 31, 1881) there re- 

 mained undistributed, and presumably to the 

 credit of the funds, $3,565,041.37; that there 

 was lost to the creditors from depreciation of 

 the securities, bad debts, and worthless assets, 

 $4,089,800.07 ; and that there appeared to be un- 

 accounted for, $134,856.78. The average per- 

 centage of expenses to amount distributed was 

 235} per cent. The statements of the receivers 

 showed marked differences in the methods of ad- 

 ministering the various tnists, and wide di- 

 vergence in the amount of expenses incurred 

 and compensation received. The investigation 

 showed that a certain person (called for con- 

 venience Mr. A) kept two accounts with Messrs. 

 B and C, afterward kept two accounts with D 

 and E, stock brokers doing business in Wall 

 Street, and subsequently transferred the accounts 

 to their successors, Messrs. P, G & Co., on 

 the dissolution of the original firm. One of 

 these accounts was for Mr. A individually, the 

 other was in his name as receiver. As receiver 

 he loaned to the firm of D & E large sums of 

 money, ranging from $100,000 to $400.000, upon 

 which D & E deposited securities as collaterals 

 for the loans. These securities never left the 

 possession of Messrs. D & E, but were merely 

 nominally transferred to Mr. A, and held by the 

 firm to his credit as a private customer of the 

 concern. The same course was adopted by the 

 other firms. In his private account he bought 

 and sold stocks for speculation, depositing col- 

 laterals with his brokers as margin. But the 

 brokers' books failed to disclose what stocks were 

 thus deposited as collateral security, and the 

 testimony of witnesM-s under examination was 

 to the effect that if the collaterals which they 

 put up for the loans were used by Mr. A as 

 margin in his stock speculations, precisely the 

 same character of entries would be made in 

 their books that were found in them when ex- 



amined by the committees. In other words, it 

 was possible for Mr. A to use the trust funds 

 that he held as receiver for speculative margins 

 as a stock gambler in Wall Street ; and the man- 

 ner in which the books of his brokers were kept 

 would be explainable equally on the theory that 

 this was a legitimate investment or a dishonest 

 use of trust funds. It was significant in this 

 connection to observe that Mr. B of the firm of 

 D& E was a special partner of Mr. A in his 

 business as a banker and broker. It further ap- 

 peared that the drafts drawn against the fund 

 by Mr. A failed to disclose from which fund 

 they were drawn, the brokers honoring his drafts 

 either from the loan account as receiver or from 

 balances to his credit from stock transactions 

 indifferently ; that is to say, they were prepared 

 to honor whatever drafts he drew against them 

 up to the amount to his credit, either as loans 

 made by him as receiver or as profit passed to 

 his account from his stock speculations. More- 

 over, interest was allowed by the brokers to Mr. 

 A on his loan account as receiver at the rate of 

 4 per cent., and interest was charged against 

 Mr. A on his individual account as stock specu- 

 lator at the rate of 7 per cent,, and yet but 

 one interest account was kept with Mr. A. It 

 was also shown that Mr. A's administration of 

 the insurance company was characterized by all 

 the objectionable features incident to the exist- 

 ing system of receiverships, with this additional 

 objection in his case, that the -order appointing 

 him receiver did not contain a direction as to 

 the investment of the funds or designate the 

 trust company in which they should be deposit- 

 ed or the class of securities that should be pur- 

 chased for investment, as was usual in other 

 orders appointing other receivers. This omis- 

 sion from the order permitted Mr. A to open 

 the call-loan accounts with the several firms of 

 brokers heretofore mentioned. It was further 

 shown that the most prominent evils of the sys- 

 tem of receiverships arose from the difference in 

 the personnel of the receivers, some being com- 

 petent, diligent, and honest, others incompetent, 

 slothful, and careless; from the difference in 

 their compensation, some being grossly excessive, 

 others reasonably fair, and others not sufficiently 

 remunerative ; from the enormous expenses in- 

 curred in the administration of the fund, these 

 expenses being of two kinds legal expenses, so 

 called, which included fees to counsel, referees', 

 receiver's, and court fees : and expenses consist- 

 ing of office rent, clerk hire, traveling expenses, 

 payments to experts, book-keepers, and account- 

 nuts, maintenance and repairs of real property, 

 and payment of taxes. Another evil was the 

 lack of uniformity in the proportion that the ex- 

 penses bore to the amount realized and distrib- 

 uted ; in some cases the percentages being high- 

 er than 200 per cent., and in other cases as low 

 as 18 per cent. Another evil of the system 

 was the lack of uniformity in the methods 

 of keeping accounts. In some instances clear 

 and accurate statements were made, showing in 

 items the various amounts received and dis- 

 bursed. In other instances, the receipts and dis- 



