panies of the latter kind might, if controlled by unscrupulous men who were disposed to do so, be disposed to perpetrate fraud upon the people of the country through the use of the mails, but I do not believe that there is any likelihood that fraud would be perpetrated upon members of their own professional groups by organizations constituted of those groups.

Framing amendments to this bill that would distinguish between these two classes of companies may involve some difficulties; but certainly it should not be necessary to write a "gun-shot " prescription in order to get a few people who are presumably mulcting the public.

I would also raise the question whether proceeding against crooked corporations under the general fraud laws would not in most instances reach them. The Government is quite relentless in pursuing those who use the mails to defraud, and juries are not at all hesitant in returning verdicts of guilty when there is a reasonable amount of evidence to sustain charges. I doubt whether it is either a necessary or a proper procedure for the Government to reach out and say, "We shall deny the use of the mails to all of you because a few of you might be guilty occasionally of perpetrating a fraud upon the public." That is a lazy man's approach to the problem. We should rely upon the law-enforcement officials of the Department of Justice and the Post Office Department to bring to book those who are perpetrating frauds upon the public, instead of placing unreasonable restrictions and unnecessary hardship upon organizations that have for many years been doing a legitimate business, selling insurance at a low cost to people, many of whom otherwise could not afford adequate protection.

I thank you, gentlemen.

Mr. ASHBROOK. Thank you very much.

I wish, at the request of Congressman Haines, of Pennsylvania, to insert this telegram in the record.

(The telegram referred to is as follows:)

Congressman H. L. HAINES:

HARRISBURG, PA., March 16, 1935.

I understand that the Post Office Committee, of which you are a member, will hold a hearing Monday morning on the Hobbs bill, H. R. 6452. This bill will greatly injure the Minister's & Casualty Union, in which I hold membership. I wish to protest against this bill and ask your help in defeating it, or so modify the bill that it will not cripple such legitimate and helpful associations, which are established for mutual protection of clergymen and similar groups.

Rev. G. HALE BUCHER.

Mr. ASHBROOK. Now, if there are no other Members of Congress present, I will permit Mr. Brashears to speak.

STATEMENT OF EDWARD S. BRASHEARS, REPRESENTING
SCARBOROUGH & CO., CHICAGO

Mr. BRASHEARS. Mr. Chairman and gentlemen of the committee, my name is Edward S. Brashears. I appear on behalf of Scarborough & Co., nationally known brokers, of Chicago, Ill.

Mr. Chairman, this seems to us to be an attempt to burn down the forest in order to get a defective tree. I am told that the purpose of this bill is to prevent frauds upon the public, and yet in the inter

est of that very worthy motive, if that is the motive of the bill, which I doubt, it seems impractical to hamstring all of the legitimatestandard insurance businesses of this country.

In this act there is but one type of insurance transaction that can be carried on without first going into the question whether or not the agent doing the business has complied with the laws of the State to which the letter is addressed, or in which the risk is located, and that type of business is the renewal of life insurance policies and the renewal of accident and health insurance policies.

It is easily conceivable that a man, having an automobile insured in the city of Chicago, on a trip through some of the adjoining States,. might find his insurance expiring, and might address a letter to his agent, telling him to continue the insurance in force, and mail him a check to accomplish that purpose, and find that the agent to whom he wrote could not use the mails to even mail back to him the insurance premium receipt.

It seems to me that that is going rather far afield in an attempt to catch the alleged fraudulent operator of an insurance organization. If it is desired to reach the fraudulent operation of insurance companies, then all that is necessary would be to require the company to do business in the State in which it was organized, or in which it was domiciled. In either one of those States, it ought to be subject to control, examinations, and the testing of its security.

But that is not the method here attempted. Here we attempt to visit upon the Post Office Department the obligation of denying the use of the mails to any company doing business with any policyholder in any State where it has not complied with the laws of that State.

The laws of the different States vary. That simply means that the agent who has a communication from a policyholder in Pennsylvania finds himself handicapped in such fashion that he cannot handle the demand of his policyholder, because he would have to go. to Pennsylvania and take a mental examination and secure a license in the State before he could send that man back a policy premium receipt.

I think, as a matter of fact, that this marks rather a departure in the upholding of State laws. If the Federal Government is going to assist the States in the enforcement of their laws, by bringing down on anyone who happens to violate the State law, ignorantly or otherwise, or anyone who fails to comply with the State law, then we have the Federal Government stepping in and assuming, by the use of the Federal mails, and by the Department of Justice the enforcement of the requirements of State laws.

If our National Government embarks on any such undertaking, it has doubled its functions, and I should think that the States generally would be opposed to any such proposition.

Now, let us see what you would do with the man who happens to use the mails to mail out a premium receipt to a policyholder who writes in and who is traveling over in an adjoining State and sends in his check for the renewal of a liability policy on an automobile, and you gentlemen ought to know just what that means. What are you going to do to that fellow? You are going to fine him $5,000 for mailing the receipt out, or send him to the penitentiary for 2 years.

Now, I do not know whose task we are trying to accomplish here by this law. I do not know who it is that is trying to put something over, but, gentlemen, it has all of the earmarks of somebody trying to use a Federal law under the guise of preventing fraud to accomplish some purpose of eliminating competition. I believe that such action would be unconstitutional, but I am not going into that. Other speakers, I believe, will discuss that more fully than I am prepared to do, but, as a practical insurance matter, it prevents an insurance agent from carrying on a perfectly legitimate business for which he is licensed in his original State. It prevents his using the mail, if he happens to inadvertently send out a premium receipt to a State where he is not licensed to do business.

Such a drastic law is, as I said to begin with, an attempt to burn down a forest in order to get one defective tree.

One of the Congressmen who has already spoken to you made a point which I intended to make, and I shall not spend any time on that, except to say to you that the present laws of this Nation against fraud ought to be sufficient to control any fraudulent operation.

But, gentlemen, this bill is not aimed at fraud. It is aimed, under the guise of fraud, to attempt to pull somebody's chestnuts out of the fire.

Thank you.

Mr. DOBBINS. Let me understand whom you represent. You say that you appear for Scarborough & Co., brokers?

Mr. BRASHEARS. Yes, sir.

Mr. DOBBINS. Do they act as brokers for any particular line of insurance?

Mr. BRASHEARS. They act as broker for all types of insurance, with standard companies.

Mr. DOBBINS. The same companies that have agents scattered out over the States?

Mr. BRASHEARS. That is right.

Mr. DOBBINS. And those agents seem to be very much in favor of this bill?

Mr. BRASHEARS. Yes, sir.

Mr. DOBBINS. What is the attitude of the principals upon that question?

Mr. BRASHEARS. I would not attempt to speak for the principals. Let me picture the type of an operation where a brokerage firm such as my clients would operate and ought to be allowed legitimately to operate. Let us take the Atlantic & Pacific Tea Co., for instance, that has stores in a dozen States, with trucks operating through a dozen States, with business enterprises scattered here, there, and yonder.

Now, what they do is to come into a brokerage house and say, "I want blanket coverage on all of our operations, wherever situated." This bill is designed to stop such blanket coverage. This bill is designed to force that insured to go and deal with 12, 14, 16, or 20 different agents in 12, 14, 16, or 20 different States. That is what the bill is for; and, under the guise of fraud, to catch fly-by-nights, it is covered up and presented to you to accomplish quite a different purpose.

Are there any other questions? If not, thank you.

Mr. HARTLEY. I would like to say, with reference to Mr. Dobbins' question, that I have consulted with the heads of one of the largest insurance companies in the United States, that happens to be located in my State, and while I am not permitted to mention their name, and while they are licensed in every State of the Union and would not be affected at all by this bill, they told me that they were opposed to the legislation, and that they thought it would do more harm than good.

Mr. DOBBINS. Is that a life-insurance company?

Mr. HARTLEY. It is a life-insurance company; yes.

Mr. ASHBROOK. I would like, if I may, to make good any promises that I may have made. I have had a great many telephone calls, and if there is anyone present that I promised a hearing this morning, I would, of course, like to fulfill that promise.

STATEMENT OF A. L. REED, ATTORNEY AT LAW, DALLAS, TEX.

Mr. REED. You promised Mr. Hatton W. Sumners that you would hear me this morning.

Mr. ASHBROOK. I would not deny anything to Hatton W. Sumners, I am sure.

Mr. REED. I practice law at Dallas, and my family practices economy. [Laughter.]

I am representing a cotton warehouse and cotton people that are interested in this bill, and are opposed to it, but before I take up the terms of the bill, and I am not going to take up a lot of your time, I want to tell you that my firm in Dallas handles some of the cases, I think, that this bill was designed to cover, but, in my judgment, it goes far beyond the necessities of those cases.

I have one of those cases here, a good example, of an insurance company that mailed accident and health policies out to people throughout the country and said, "If you send us in so much, the policy immediately becomes effective", but when the time comes for those policyholders to collect, we find that we have no way of reaching those companies in the State where the policyholder resides.

In this case, despite the fact that one of the best doctors in the State of Texas signed this woman's certificate, this company at Kansas City, Mo., paid no attention to the efforts to collect the claim. I am in sympathy with the correcting of that.

Mr. ASHBROOK. Have you insurance companies of that kind in your own State?

Mr. REED. Yes, sir.

I am in sympathy with the effort to correct that, but I want to tell you that this bill is not designed for that purpose, and it is not necessary for that purpose. All we need, and all that I would have needed, to collect this woman's claim, would have been a provision that this company could be served by serving a citation on the Secretary of State of Texas; and such a bill has been introduced, I think, as H. R. 1431. I do not know whether it is still on the calendar or not.

Mr. ASHBROOK. Who is the author of the bill?

Mr. REED. Mr. Cartwright, of Oklahoma. That bill needs some improvements, but the idea is there.

Now I want to give you some examples of what this bill would do, that you have before you.

Mr. HARTLEY. Would you mind telling me to what committee that bill has been referred?

Mr. REED. It was referred to the Committee on the Post Office and Post Roads-this committee-but I do not know whether this bill has ever been brought up or not.

Mr. ASHBROOK. It has not been referred to this subcommittee, and it should properly come to this subcommittee. I have a suspicion that I heard that the bill had been withdrawn.

Mr. REED. It may have been, Mr. Chairman; I do not know. But I came to Washington not so long ago and went around to see Mr. Cartwright about the bill and suggested to him that it needed a little dressing up to catch the situation that I described to you, and he told me at the time that he had introduced it by request and was not primarily interested in it; and I want to make some corrections in it and leave it with the committee.

These people are not always defrauded by fraudulent companies, for this particular company that I refer to, and the Department of Justice gave me a record on it, could stand up and say that they had the money to pay it, but what they do is to hide behind some technicality in their policy, and all that we would have needed to catch them, to protect this woman, would have been the right to serve them in the State of Texas, instead of going to Kansas City to have a costly lawsuit.

I want to tell you what your proposed bill does. In most of the States, the Cotton States, with which I am familiar, there is not any regulation that fixes insurance rates. In the State of Texas we happen to have a commission that fixes the specific rate for insurance, but in the State of Oklahoma, right across the line, there is an insurance commissioner, and the insurance laws that this act would require interstate insurance companies to comply with, would materially increase our cost of doing business, and yet there is no protection to the insured in that State in the form of fixing rates, and I want to give you an example of the difference. I am speaking now of the same character of cotton warehouse plants, one with the same marine classification, of B, one situated in the State of Oklahoma and one in the State of Texas. In the State of Texas, the insurance rate is 64 cents, and if you pass this law, requiring the insurance people doing business in Oklahoma to comply with the local conditions in the State of Oklahoma, it will cost them $1.99 with the same class of facilities.

The insurance companies that generally write our business are legitimate, and they are willing for you to require the insurance companies to accept service on the Secretary of State for their account. The only people that are not willing to do that are the people that are trying to get by without paying legitimate claims, and who are just outside, just over the line of the fraudulent statutes of Congress. You can catch most of these, and in the investigations that the Department of Justice has already made they have caught a lot of them.

With the permission of the committee, I would like to make some corrections in this H. R. 1431, and file it with you. I think that it