is handling it in accordance with the instructions which have been given to him.

The CHAIRMAN. Would I be correct in assuming, then, there was laxness somewhere along the line?

Mr. DANDY. Laxness might be a strong word. Whether the administrator misunderstood, I wouldn't know. I don't believe there was laxness on the part of Occidental.

The CHAIRMAN. But you would not deny that there was laxness somewhere along the line in the following out of a contract?

Mr. DANDY. There was certainly an error in following it out; yes, sir. They did not follow the policy terms in bringing these people in. The CHAIRMAN. I would think that a person responsible for the handling of such things would know a good deal about the policy and how it was being carried. That is why I used the word "laxness." I think we would call it that in our business.

Mr. WELTMER. Mr. Dandy, I would like to read an excerpt from another letter. Incidentally, I will read the entire letter into the record. It is dated June 10, 1954, to Mr. A. B. Halverson, assistant vice president, group underwriting and operations division, from Mr. Thomas R. Martin, regional group manager, Occidental Life Insurance Co. I read the last paragraph:

It might be of interest to you and to our sales division to know that directly as a result of the company's inept and disappointing treatment lately of this broker with respect to this case, the Occidental has been placed in the unique and miserable position of not being "on the inside looking out" when we quote on the Sacramento painters case next week, involving $100,000 annual premium. Jones tells me that on this case we will not get a second chance, and our quotation will be treated exactly like the other six companies. This will very likely result in the other six companies beating our brains out as they always do, because, as you know, the only―

and it is underlined

reason we write any of this negotiated business is that we are fortunate enough to have broker control.

Mr. Dandy, would you explain to me what is the extent and nature of the broker control?

Mr. DANDY. I would like to say, first, that is the opinion of a salesman, a group fieldman, selling group insurance for Occidental. It does not represent, necessarily at all, the opinion of the Occidental officer. What he has in mind I could only surmise. I think I know what he has in mind. I believe the first group case Mr. Jones placed with Occidental was the northern California sheet metal case, and at that time there were a number of agents, brokers, who wanted to be named broker on the case. Our Sacramento group salaried fieldman, an employee of Occidental, selling group insurance, worked with Mr. Jones. It was an Oakland case.

He went over with Mr. Jones many, many, many times and worked with him. In other words, we gave Mr. Jones very fine service, and it ended up that Mr. Jones was named broker on the northern California case and that Occidental got it.

Then on the southern California sheet metal case, we put in bids along with some other companies, and we were awarded that one. We had always apparently Mr. Martin thinks we have been slipping in the last few months-we had always given Mr. Jones very good service, and I would gather that Mr. Martin felt that as a result of

that, Mr. Jones, all other things being reasonably equal, would like to have Occidental get the case.

Mr. WELTMER. Do you say that that does not necessarily reflect Occidental's opinion? Does it?

Mr. DANDY. It certainly does not reflect mine. I don't know of any broker control. We don't own Mr. Jones. We don't control him in any way. He is a completely independent broker. The only possible reason that he would have for placing the insurance with us is that our rate is O. K.; it is in line with the others, and that we give him good

service.

Mr. MCCABE. May I go back a moment, Mr. Dandy, to your discussion of the Nevada case in which Mr. Royer's name came up? Can you tell us who was the broker on the final placement of that insurance policy in Nevada?

Mr. DANDY. Mr. Jones.

Mr. MCCABE. Mr. Jones of Sacramento?

Mr. DANDY. Of Sacramento. That is the way Mr. Barr came in. Mr. MCCABE. Did Mr. Royer share in the commission and that sale? Mr. DANDY. On that sale? I will have to explain that commission. We are an agency company. We appoint general agents covering a certain territory. It is their job to hire agents, train agents, house agents, to contact brokers and get them licensed with Occidental so they will place business with Occidental. They normally write very little insurance themselves. They are not salaried, they are independent contractors. But they get paid by what we call an overwriting commission on all the business placed by the brokers or the agents that they have signed up in their territory. That is what is referred to as a commission.

Neither Mr. Barr nor Mr. Royer were named agent on the case. They got an overwrite which we pay in lieu of a salary that we would pay if he were a salaried branch manager of Occidental. We pay them salaries. We have both salaried branch managers who do the same work and we have general agents who are working on an overwrite commission basis.

The reason there was a dispute about this was that the broker was in Sacramento, Mr. Barr had signed him up, but the case he sold was. down in Mr. Royer's territory. We have instructed-we have had instructions out for a long time to the general agents-that when the broker or agent of one general agent goes to another general agent's territory, that it is entirely up to the home office to decide how the overwrite will be split between the two of them.

Mr. MCCABE. I appreciate that explanation, Mr. Dandy, but I would like, if we could, to establish specifically whether Mr. Royer received any sales commission on this transaction.

Mr. DANDY. Mr. Royer received one-half of the overwrite commission. He received no direct commission as agent on the case.

Mr. MCCABE. Would he have received any direct commission as agent had he been successful in placing the business were it not, we assume, for the objection which some union official lodged against him personally?

Mr. DANDY. If the trustees to whom the policy is issued had named Mr. Royer as the broker on the case, Mr. Royer would have received writing agent's commission as well as overwriting commission.

Mr. MCCABE. And that writing agent commission in this case was paid to Mr. Jones at Sacramento because he was the broker named? Mr. DANDY. Yes.

Mr. NEARY. Can we read this entire letter into the record?

Mr. MCCABE. I believe that is in the record.

Mr. NEARY. The entire letter is not in the record.

Mr. WELTMER. The entire letter is going to be admitted.

Mr. NEARY. I just think that the entire

Mr. MCCABE. May we suspend for just a moment on that, and let me ask this further question of Mr. Dandy?

Do you know, Mr. Dandy, do your company records indicate, that the trustees in this case actually decided that Mr. Jones, of Sacramento, would be the agent?

Mr. DANDY. The way that the agent is named is on the application for the insurance. I do not have the application with me. I believe you have it. I think you will find that the application is signed by two of the trustees. Probably if I could see the application, I could tell you for certain.

Mr. MCCABE. The reason I asked that

Mr. DANDY. And Mr. Jones' name appears as soliciting agent on the bottom lefthand corner.

Mr. MCCABE. I asked that question specifically because of your response to an earlier question wherein you said that Mr. Royer would have received the writing commission had he been named as the broker by the trustees. I wonder if you can tell us definitely whether Mr. Jones was named as a result of some formal action by the trustees?

Mr. DANDY. I am sorry, I can't tell you that. We take our records from the application.

The CHAIRMAN. Mr. Counsel, is there any reason why all these letters should not be read in their entirety at all times?

Mr. MCCABE. None whatever. We are trying to expedite.

The CHAIRMAN. I think it would be wiser to read all letters.

Mr. MCCABE. I believe Mr. Weltmer's request was that it be included in the record in its entirety.

The CHAIRMAN. If it is included in the record in its entirety, that is all right.

Mr. NEARY. Shall we read the first page of the letter?

Mr. WELTMER. It has been included. Shall we read it into the record?

The CHAIRMAN. Not if it is included. If we have the letter here, we are not going to listen to it again. You did not request that it be put into the record.

Mr. WELTMER. I request that the letter be put into the record in its entirety, Mr. Chairman; all of the letters.

Mr. NEARY. May we read it?

The CHAIRMAN. It is in the record now.

Mr. NEARY. I talked to Mr. Weltmer this morning, and he explained to me that he had certain pinpointed questions of Mr. Dandy which he wanted to ask this morning to connect up with other testimony. I said I was perfectly willing to expedite the matter. But I think that there are certain inferences that are possible to be drawn. I don't want to interupt the hearing at this point, but I do think at some point in the hearing when it is convenient we ought to be able to make full explanation to clear up any possible

The CHAIRMAN. Is there anything that has to be cleared up? Let us take it now and get it finished. Is there anything that has to be cleared there that is not clear from your letter? If so, read it. It is whatever you think. We want the facts, that is all we want. We do not want anybody smeared unnecessarily.

Mr. NEARY. Mr. Dandy wanted to explain about this broker and agency business.

The CHAIRMAN. All right. Read it and explain it, then.

Mr. DANDY. This is an interoffice memo dated June 10, 1954, to Mr. A. B. Halverson, assistant vice president, group underwriting operations division, regarding policy 2355-LH, Southern California Sheet Metal.

As you know, Jordan L. Jones has always been desirous of having all routine matters handled with this policyholder through him and has always had the understanding with home office that correspondence, etc., would be directed to and routed through him instead of directly to the administrator and/or trustees. While Ron Martin was with us, this request of Jones was complied with, and everyone was relatively happy about everything.

Lately, we seem to be going out of our way to irritate, infuriate, and alienate this fine source of business, as far as the handling of this particular case is concerned. Jones showed me three letters yesterday addressed directly to the policyholder, the administrator, and the trust's auditing firm, and mailed directly to them from our representatives:

1. April 29, letter to the trustees, subject retired members, signed by A. B. Halverson.

2. May 3, letter to John Fuller, administrator, subject subgroup reporting forms, signed by N. R. Wagner.

3. May 21, letter to M. A. Samuelson & Co., auditors, subject reserves for incurred but unreported claims and maternity, signed by J. D. Anderson.

It seems a small enough thing for an insurance company to comply with the highly unusual request of a broker that he be permitted to work on a case. As you must know, all too often we are faced with the opposite situation where securing the cooperation and assistance of the broker is like pulling teeth.

I would appreciate your checking where we got off the track, as far as the longstanding policy of dealing with this policyholder through the broker is concerned, and putting us back on it.

Then comes the paragraph which Mr. Weltmer read. That letter indicates, of course, that Mr. Jones, who was the broker on the case, was desirous of having everything through him, and felt quite concerned because we were not working with him.

The CHAIRMAN. Proceed, Mr. Counsel.

Mr. DANDY. As the broker, he wanted to work with the case. I think that is obvious from the letter.

Mr. LUCAS. I think it appropriate to ask at this point: Was the suggestion of the author of that letter complied with or did the company change its policy?

Mr. DANDY. It is our normal practice, sir, to deal through the broker. Apparently, on 1 or 2 things here we had failed to do it. Normally, we do deal through the broker.

Mr. LUCAS. You did not answer my question. Did you change your policy?

Mr. DANDY. I can't answer of my own knowledge, but I feel sure we would have changed; yes.

Mr. Lucas. Then, in all correspondence and in dealings with the policyholder, your company was represented by Mr. Jones?

Mr. DANDY. Mr. Jones was the broker. Not all dealings, sir, not on the claims, Mr. Jones wasn't. We would deal directly with the administrator on any claim problems. Normal correspondence with the

trustees or the administrator, if there has been any following this letter, would have gone through Mr. Jones, I feel quite sure. Mr. LUCAS. Parden me, Counsel.

Mr. WELTMER. Mr. Dandy, I would like to read an office memorandum, dated November 15, 1951, to Mr. Gordon V. Jenkins, assistant division manager, from K. S. Jensen, group superintendent:

Jordan Jones, an agent of Irv Barr, is now working in southern California on the sheet-metal workers case. Our group representative, Mr. Herb Eagle, is working with him.

Mr. Jones tells me that very shortly he will be negotiating a sheet-metal workers case in Nevada on two locals covering about 200 employees. I understand one of the locals is located in Las Vegas and the other in Reno. I am not certain where the headquarters are or where the application will be signed. Mr. Jones has already applied for a Nevada license.

Jordan Jones is also planning to negotiate a sheetmetal workers case in Arizona. We are now getting the information for him relative to securing an agent's license there.

I am passing this information on to you so that you can determine what agency problem is involved and whether all or any part of the overwriting should go to our general agents in Nevada and to Mr. Tinnin by virtue of business being written in Arizona.

K. S. JENSEN.

Mr. DANDY. That is Mr. E. S. Jenson, instead of K. S. Jensen. Mr. WELTMER. Do you care to comment on that letter? Mr. DANDY. This is along the same lines that I mentioned before. We have a Sacramento broker thinking about a case which we hoped we might get in southern Nevada and one in northern Nevada where each place at that time we had a general agent, and in Arizona where we also had a general agent. It is the thing of a broker from one general agent moving over to another general agent's territory. We must make the decision as to how we split our overwrite commission between our general agents.

Mr. WELTMER. Mr. Jones is an agent of Mr. Barr, is that correct? Mr. DANDY. He is either an agent or broker. At the moment, I wouldn't know.

Mr. MCCABE. Mr. Dandy, I believe that letter refers to him as an agent of Mr. Barr; is that correct? Correct me if I am wrong. Mr. DANDY. He says an agent. While there is a definite distinction between them, sometimes people say agent where they mean broker. So I would not swear which he is.

Mr. MCCABE. In that connection, Mr. Dandy, whether he is an agent or a broker, as you suggest, would he in either capacity have been paid any commission or any expenses, rather, by Mr. Barr? Mr. DANDY. I have no knowledge of that.

Mr. MCCABE. As a matter of practice, should Mr. Barr in a situation of that type share in the expenses incurred by Mr. Jones in acquiring and placing the business?

Mr. DANDY. Normally not. Normally, a general agent does not pay traveling expenses if an agent goes out to sell business someplace. If he is an agent, usually often, very often, supplies him with office space and typist help and stationery and all of that sort of thing, but it is not normal for a general agent to pay traveling expenses. If he wanted to, he could. It is not normally done.

Mr. MCCABE. It is not normally done?

Mr. DANDY. It is not normally done to my knowledge.