EQUITABLE TO PAY $4,000,000 ON SUITS;
Settlement of Long-Standing Litigation Approved by Hotchkiss and Attorney General.
PROFITS AT ONCE $5,000,000
Hyde's Cheap Leases Which Have Prevented New Buildings Here and In Boston to be Canceled.
ALBANY, May 2. -- Through a settlement which to-day received the approval of State Superintendent of Insurance Hotchkiss and Attorney General O'Malley, litigation of many years' standing involving millions of dollars, by which the Equitable Life Assurance Society and some of its Directors from the Hyde regime have been harassed, has been wiped off the calendar. According to a statement made to-day by Supt. Hotchkiss, the settlement involves the payment of $4,025,000 by the Equitable Life to the Mercantile Trust Company, the Mercantile Safe Deposit Company, and the Security Safe Deposit Company. In return, according to the statement, the Equitable will receive immediate benefits valued at $5,048,000, or a net gain to the policy holders of $1,018,000.
The action brought against certain Directors of the society by the State for waste of the resources of the Equitable has been dropped. The Equitable will pay to the Mercantile Trust Company $2,750,000 in settlement of the so-called "Turner" loans, which is $650,000 less than was at first claimed. In return it will receive bonds and certificates representing lands in Colorado and Kentucky said to be worth at least as much as the sum it pays out.
By the payment of $1,050,000 to the Mercantile Safe Deposit Company it obtains a release from the lease it had granted for a portion of its building on Broadway, and by a payment of $225,000 to the Securities Safe Deposit Company of Boston a similar release from a lease to part of its building in that city. It is estimated that these releases will enhance the value of the real estate of the Equitable by $2,000,000 and $430,000, respectively.
The so-called "Turner" loans, which had proved fruitful causes of litigation, took their rise in the days of Henry B. Hyde, founder of the Equitable. In 1894 he was interested in the Western National Bank with Marcellus Hartley, Gen. Louis Fitzgerald, William N. Coler, Jr., and John C. Searles. This bank at that time made certain loans to the value of $621,291 which were of doubtful character. The State Bank Examiner objected to them, and they were transferred to the Mercantile Trust Company by means of dummy loans to a clerk named Turner. The Equitable at this time owned 12,000, or a majority, of the shares of the Western National Bank, and was also closely allied with the Mercantile Trust Company.
After a time the Bank Examiner's suspicions were drawn to the Turner loans, and he requested that they also be withdrawn from the trust company. Then Mr. Hyde went to Messrs. Hartley, Fitzgerald, Coler, and Searles and requested their personal guarantee in order to satisfy the State Banking Department. They gave it on the distinct pledge, it is alleged, of Mr. Hyde that neither the Equitable nor the Mercantile would ever try to enforce it.
When President Paul Morton took office he instituted litigation in relation to this loan, and the Mercantile made claim on the Equitable. Its guarantors urged the promise of immunity they had received from Mr. Hyde, and as the outcome of the case was exceedingly doubtful it has now been recommended by the committee representing the policyholders and Directors of the Equitable that it be compromised on the terms set forth above.
The question of the long leases by the Equitable to the Mercantile Safe Deposit Company in New York and the Securities Safe Deposit Company in Boston attracted a great deal of attention at the time of the insurance investigation. It was stated then that the Mercantile Safe Deposit Company had among its stockholders these men, who were also Directors of the Equitable: James H. Hyde, James W. Alexander, Gage E. Tarbell, Valentine P. Snyder, Thomas D. Jordan, Charles B. Alexander, Henry R. Winthrop, Alvin R. Krech, and William R. McIntyre.
The rent which was paid to the Equitable by the Mercantile Safe Deposit Company was so small that in fifteen years all the insurance company had received in excess of what it had been forced to expend in the way of repairs was $3,463. In addition the lease was extended in the last few years of the Hyde regime so as to run for 100 years.
The Equitable has had for some time under consideration the pulling down of its present old-fashioned quarters on lower Broadway and the erection of a modern skyscraper. Two years ago it filed with the Building Department plans for a building loftier even than the Metropolitan Life Insurance Company's tower. It proposed to build on the block it now occupies a building 62 stories high and measuring 909 feet from the street level to the base of the flag staff.
The Equitable will now be at liberty to carry out this design as it sees fit. In the same way, it will be able to improve the real estate in Boston, having bought up the lease of the Securities Safe Deposit Company, which also had nearly 100 years to run.
The settlement also provides for turning over to the society the pension claimed by Mrs. Henry B. Hyde, widow of the founder of the society.
The settlement was reached after many conferences between a committee of policy holders and Directors of the Equitable, extending over two years. The committee was composed of J. Edward Swanstrom of New York, Charles H. Zehnder, formerly of Philadelphia and now of New York; Thomas Spratt of Ogdensburg, and W. A. Day of counsel for the Equitable. Deputy Attorney General Edward H. Letchworth represented the Attorney-General, and Alfred Hurell, counsel to the Insurance Department, and Nelson B. Hadley, Chief Examiner of life companies, represented the Insurance Department. After participating in the consultation they urged the Attorney General and the Superintendent of Insurance to approve the settlement. In a memorandum submitted they say:
When one considers that this settlement will end costly and troublesome litigation, much of which would result unfavorably to the society; allows the society to improve its buildings in New York and Boston, and thus take advantage of the steadily increasing values of this real estate, all without cost to the society, and at the same time puts it in position probably to gain millions by reason of readjustment---there can be but one conclusion, and that is that official approval should be given to the settlement and the same consummated at once.
When the question of injunction in the case of Hyde vs. The Equitable was decided by Judge Bischoff, the law governing the case was set forth which practically charged the defendant with the Turner loan liability of over $3,000,000. The statute of limitations had already run against the Directors, who had collusively fastened on the society the burdensome leases, when the action was commenced by the State.
There is no escape from them, and at the same time no affirmative relief against those who caused them can now be obtained. This being so, the same course to pursue is to permit the society to effect this settlement, whereby those liabilities can be avoided and practically accomplish all that could be gained in the suit by the State, if it were maintainable.
Under all of the facts and the circumstances, we therefore recommend to the Attorney General the discontinuance of the suit of the People of the State of New York against the Equitable et al., and to the Superintendent of Insurance that his approval be given to the proposed settlement as outlined.