schedule of benefits and everything lined up so we could go ahead with a welfare plan.

The CHAIRMAN. Are you through on that?

Mr. JONES. Yes. I just wanted to let you know that nobody asked me to come into the case. I think that has been inferred here a couple of times. I instigated the going into the thing myself.

Mr. LUCAS. I think it may be well for you to add that you and the Occidental Co. have grown up in this business together.

Mr. JONES. That is more or less right, and I will go along with that. Mr. LUCAS. You have enjoyed very close cooperation with each other, have you not?

Mr. JONES. Yes. They cooperate with me very well.

Mr. LUCAS. Wouldn't you go further and say that you cooperate with them, too?

Mr. JONES. Yes; I would.

Mr. LUCAS. That is all.

Mr. MCCABE. Mr. Jones, in connection with this bank loan, can you tell us whether any of that money was spent in soliciting union welfare fund business?

Mr. JONES. In soliciting it?

Mr. MCCABE. Or in trying to procure it, furthering your own business interests in that regard.

Mr. JONES. Yes. I would say it went to pay my expenses.

Mr. MCCABE. In such payments did you at any time pay any money to any union representative?

Mr. JONES. Certainly not.
Mr. MCCABE. You did not?

Mr. JONES. Never at any time.

Mr. MCCABE. It has been testified to here that your records indicate certain gifts and cash payments to Tom Hanley and other union representatives. Would you care to tell the committee what you think on that subject?

Mr. JONES. I think I explained that to you in my office. I volunteered the information of the $100 to Mr. Hanley

Mr. HOLT. Would you please address your answers to the committee?

The CHAIRMAN. We do not know all of this. You may have had a dozen conversations, but we do not know it.

Mr. JONES. On the first Christmas after I had closed the case of the Sheet Metal Workers in southern California, I bought a piece of furniture, a piece of maple furniture, for Mr. Charles Artman, and I had intended on buying a two-suiter suitcase, for Mr. Hanley. That would be the only two persons that I would think about for Christmas at this time, the first year.

I did not know whether Mr. Hanley had a two-suiter or not, or whether he needed a suitcase, so I thought well, I will give him a hundred dollars and let him buy what he wants. I started to do that, and Mr. Hanley said, "Look, don't you ever give me money. If you want to buy me a little present, that is one thing; but don't give me money." And I never did again. But that was a Christmas present which I considered was very well earned by a man who had done a whale of a job in getting this case and getting it rolling.

The CHAIRMAN. Mr. Jones, I would just like to make this comment: I am in the selling business and have been most of my life.

I understand where we have various favorites and various friends. I do not get too upset about that or the giving of reasonable Christmas presents.

The thing we are trying to find out here is whether the fundwhich belongs to the workers, and which I emphasize-pays out too much money for this coverage that they get. That is all I am interested in finding out. I don't mind little gifts as long as they are not too heavy on the fund. I understand a salesman who gets business is going to try to keep a customer. I understand that. That is done all the time in business.

What we are trying to find out is: Is this charge excessive, or whether too large amount of commissions have been paid to brokers, or is the retention rate too high in insurance companies, and things like that. Those are the things that are important. They cut down the amount of benefits or coverage that workers can get. Mr. JONES. I agree with you, Mr. McConnell.

Mr. MCCABE. Mr. Jones, do you feel you have adequately explained to the committee your position with respect to these payments and gifts which were testified to?

Mr. JONES. I would like to go just a little bit further with it.

So far it appears that I have only given gifts to Mr. Artman and Mr. Hanley. That is not true. The next year I gave Mr. Artman, I think, another piece of maple furniture, and I gave Tom Hanley a briefcase. And I believe I gave Fred McCormick at that time a briefcase. That is as I recall it. I can't remember it.

I gave a whole lot of presents at Christmastime. I just ordered them again this year, and I am surprised at the number. And I believe her name came into the thing-I believe I gave her a present, and I believe I gave the secretary of the trust fund one, to my best recollection.

Can you hear me?

The CHAIRMAN. Yes.

They were all reasonable amounts for presents?

Mr. JONES. Yes. I gave a lot of them this last Christmas. I gave a clock, another briefcase, a fountain-pen set. I gave the girls trinkets for their ears. They cost $5 or $6 or $7, and they do a lot of good.

The CHAIRMAN. There is no question about that.

Mr. MCCABE. We have had testimony here this afternoon to the effect that you informed Mr. Martin, Mr. Ron Martin, then with the Occidental, that in the Sacramento painters' case the Occidental would not get a second chance and that the quotation from that company would be treated exactly like those of six other companies. Would you care to explain that to the committee, sir? Do you have any comments on that testimony?

Mr. JONES. Sometimes you have to kind of prod the company men along a little bit to get something. This letter that was read here was entirely new to me. I never knew it existed. I never knew that I was supposed to be put out at the company. This is simply a sales representative in northern California making a big pitch to the company to gain some concession for me.

Frankly, when I quote on a case, I have a feeling that Occidental would like to keep me, and when he is quoting on a case, he gives the

company all kinds of pictures as to why my quotation, the one they gave me, should be very, very good. I don't even know what he is talking about in the letter.

Mr. MCCABE. We also had some testimony, Mr. Jones, to the effect that you paid a claim filed by Mr. John Fuller, the administrator of the welfare fund, on an automobile under circumstances which, from that testimony, would indicate that you knew at that time he was not the owner of the automobile.

Would you have any comment to make on that?

Mr. JONES. I don't believe that is right. I don't believe that I knew that. You have 1 automobile there, and I had, I think, 7 automobiles for the entire group of business agents of 371. We were having difficulty, frankly, in collecting the premiums on those seven automobiles. There wasn't enough money in the treasury in 371.

I am telling tales out of school here. This is beside the point, so maybe I better not go into it any further. It is other business and does not pertain to this.

But I did not know that there was anything wrong with the claim. The only thing I knew was that a letter came through from Providence stating that they did find something wrong with it, and would I comment on it. I don't think I commented yet.

Mr. MCCABE. You have since learned that there was something wrong with the claim, as you put it?

Mr. JONES. That is right. I have very little to do, as you probably know, with the general business, I have two offices and mine is over in the group department.

Mr. MCCABE. Mr. Jones, you mentioned your dealings with union representatives and union officials. I wonder if you would car to tell us whether it is your practice to urge upon union officials that they seek a more favorable collective bargaining contract from employers. in order that they may be able to meet the cost of premiums?

Mr. JONES. No. No, I don't do that. I have no part in negotiations at any time. An insurance broker or consultant-that is not part of it. Mr. MCCABE. I would like to ask you, sir, if, on the 30th of November 1953, you wrote a letter to Tom Hanley, in which you discussed the claims expense for the sheet-metal policy for the prior 10 months, and found that it was running at a deficit, and in that letter you commented that the increase negotiated by the union would not be enough to cover the cost of the premium and that they should look forward to an additional increase of 50 cents a month in the collective bargaining, this to be in addition to a specific dread disease situation that you had discussed with them?

Mr. JONES. I recall such a letter; yes.

Mr. MCCABE. Would you explain to the committee the circumstances under which you wrote it, and why you wrote that letter?

Mr. JONES. We had written this case back in January 1951, is it?
Mr. MCCABE. 1953.

Mr. JONES. No, I am talking about the inception of the sheet-metal case, January 1951. It was at a rate of $10. At that time it was supposedly very competitive bidding, so everybody had their pencils sharp. We had continued on with this case for 1, 2, 3, and this was now the 4th year, was it not?.

Mr. MCCABE. This letter was written on November 30, 1953.

Mr. JONES. That is pertaining to the fourth policy year, and we had not asked for a rate increase all during those 3 years, although I don't need to tell you that hospital and medical costs had practically-well, I was going to say doubled. They are up more than 50 percent. So any policy in at a rate will not stand forever at increased medical costs, will it? However, this one has stood up well, and we were watching.

I think you might have found some other letters in my file where I had called attention to the fact that we were watching the claims situation. There is one in there that states about a $3,000 refund that could have been paid at the end of the second year, but it was felt that it was better to leave it on deposit with the company, because the claims were on the rise all the time.

So this letter was to inform the trustees that it may be necessary to bolster that rate by the payment of an additional 50 cents. I don't think that entailed asking the employer for another 50 cents.

Mr. MCCABE. Mr. Jones, this letter was not to the trustee. This is a letter to Tom Hanley, marked personal, in which it was suggested that it would be necessary to negotiate an additional 50-cent contribution in order to defray the projected or the expected cost of premium increases. My question is directed, sir, to the propriety, and your opinion as to the propriety, of an insurance broker injecting himself to that extent in the negotiating process.

Mr. JONES. Do I say negotiated in my letter?

Mr. MCCABE. Yes, sir.

Mr. JONES. I am sorry, I am in error there. I don't mean negotiated. My way of thinking, and it was my thinking at that time, was that the fund had plenty of money in it to provide for an additional 50 cents a month if the joint trustees so desired.

If I said negotiated, I am sorry, I didn't mean it. I never have anything to do with negotiations.

Mr. GRAHAM. Mr. Jones, as a professional insurance broker, what do you think is a fair guaranteed retention rate with reference to policies of this nature?

Mr. JONES. What do I think is a fair one?

Mr. GRAHAM. Yes.

Mr. JONES. Policies of the size of this one?
Mr. GRAHAM. Yes, sir; a policy of this nature.
Mr. JONES. Well, nature.
Mr. GRAHAM. All right.

employees.

What do you mean by nature?

A policy covering the same number of

Mr. JONES. The same number of employees and the same benefits? Mr. GRAHAM. Yes, that is right.

Mr. JONES. I think that-well, certainly no lower than-well, I was going to say let us get 8.75 out of the company next year, based on a 70 percent loss ratio, and guarantee it based on the actual premium paid the company, and not on gross premiums.

Mr. GRAHAM. What was the rate?

Mr. JONES. I would say 8.75.

Mr. GRAHAM. 8.75?

Mr. JONES. I am guessing. I stepped clear out of my

Mr. GRAHAM. You think that woud be a fair one?

Mr. JONES. I am stepping clear out of my department when I tell

you what a company should allow.

Mr. GRAHAM. What is the retention rate on the policy for the Northern Sheet Metal Workers?

Mr. JONES. I don't have that case any more.

I couldn't tell you.

Mr. GRAHAM. What was it?

I lost it a year ago.

Mr. JONES. The last I knew of it, I think it was 12 percent, or 12.25, or something.

Mr. GRAHAM. What was the size of that compared to this one?

Mr. JONES. Somewhat smaller. It was, I guess, about two-thirds the size of this one.

Mr. GRAHAM. It cost more to run a bigger one, then?

Mr. JONES. It costs more to run a bigger one?

Mr. GRAHAM. Yes.

Mr. JONES. You mean

Mr. GRAHAM. They charge a higher retention rate if the policy is larger?

Mr. JONES. No. They don't settle their own claims, I don't think, up there. I am not sure.

The CHAIRMAN. Mr. Jones, is there any standard that can be used in determining whether a retention rate is fair or otherwise, reasonable or otherwise? How do you determine that? I don't know.

Mr. JONES. Retentions are always based on the total volume involved in the case, on the total amount of premium dollars, usually, the number of insurance involved and sometimes the number of employers involved has a bearing. But usually it is the total number of dollars involved in the case during the entire year.

The CHAIRMAN. There are quite a few insurance companies handling this type of business, I presume, in America. How would the rates compare with other companies on the same type of business, as a broker would probably have an idea of the other companies. Is there a table that anybody can give us as a standard to go by, or what? Mr. JONES. No. It is very often, I think, as a broker, as a layman, the personal likes of an underwriter. One underwriter may like, let us say, painters, and the other one has gotten his shirt burned with them once and you couldn't give him a painter's case. So you couldn't sell him that case on a bet.

Going back to your question, there isn't any uniform rate of retention for size that I know of.

The CHAIRMAN. Would you say they are all just negotiated rates, then, each one standing on a certain negotiation?"

Mr. JONES. That is more or less true.

The CHAIRMAN. Rather than on any fixed practices or anything of that sort?

Mr. JONES. It is usually used for competitive purposes.

The CHAIRMAN. I always thought rates were more fixed in the insurance business.

Mr. JONES. Each company's own manual of rates are not the same. Mr. HOLT. Does the type of work that the people do influence it to some extent?

Mr. JONES. Not usually in these cases. These cases, at least in California, are only for coverage off the job. Workmen's compensation, which is a State law, covers them on the job. So the type of employment doesn't usually enter into the thing.