After thus obtaining control of California Life, Dooley on Augs 14, 1953, formed a holding company known as Founders Syndicated America, Inc., Reno, Nev., which company was authorized to iss 100,000 shares of preferred stock ($10 par value) and 160,000 share of common stock (no par value). All voting rights were vested: the common stock.

Wickes resigned from Security Mutual Life Insurance Co. as d September 1, 1953, and became associated with California Life Insur ance Co. On September 2 California Life directors resolved to s the Founders Syndicate of America 39,213.4 shares of preferred stoc at $10 per share. On September 25 Founders Syndicate had its firs meeting at which Louis Edell, a nominee for Saperstein, was electe president; Wickes, secretary-treasurer; and Orville Faris, vi president.

In the latter part of September Saperstein, allegedly acting on instructions of Byers, president of LWIU, telephonically notified Ser rity Mutual that the LWIU insurance account was being canceled as cf September 30, the end of the premium year.

The minutes of the October 5-6, 1953, meeting of the board of tre tees of the LWIU social security department reflect that Wickes, at Saperstein's suggestion, was appointed consulting actuary for the social security department at a salary of $10,000 a year. These m utes also show that at Wickes' suggestion the LWIU insurance was transferred from the Security Mutual Life Insurance Co. to the Ca fornia Life Insurance Co. effective as of October 1, 1953.

The trustees who attended this meeting of October 5-6 which was held in Chicago were Byers, Dooley, Goldstein, Toomey, Winte Chasmar, an LWIU international president and president of local of Jersey City, N. J., and Chantry Davis, secretary of the Philadelphis Laundry Board of Trade. James, Saperstein, and Wickes were als at this meeting.

It is interesting to note that at this meeting there was considerable discussion of the inequities allegedly occurring under Security Mutual after which the trustees resolved to transfer the insurance to California Life. No mention was made of the fact that the insurance had already been canceled by Saperstein or of Security Mutual's notifying Saper stein that it would be necessary to curtail his commissions and disperse with the special service fees.

The trustees also resolved to invest $450,000 of the social security department trust fund reserves in preferred stock of Founders Syndi cate after Dooley informed them that he "understood" that a large block of California Life preferred stock was "available" through this corporation after discussion to the effect that this would be a good investment. No mention was made of the fact that Saperstein, Dooley, Wickes, and a group of some of these very LWIU officials at this time owned controlling interest in California Life stock.

On October 23, 1953, there was an issue of 32,536 shares of common stock of Founders Syndicate to a nominee of Saperstein, to Jacob Friedlander, Wickes, and three California Life officials in varying amounts. The purpose of this issue at that time, in the opinion of the subcommittee, could only have been an attempt to deceive the California Insurance Department as to the true ownership of Founders Syndicate which was purchasing overwhelming control of California Life Insurance Co.

er 25, 1953, Founders Syndicate sold 45,000 shares of its k to the LWIU social security department for $450,000. date Founders Syndicate, using these proceeds, bought of preferred stock (90 percent) of California Life for $392,134. This is the stock which California Life 2 requested authority of the California Insurance Dell to Founders Syndicate. Also on the same date CaliCommon stock in the amount of 23,813 shares, which 1 percent of the insurance company's voting stock, was Founders Syndicate by the Dooley-Saperstein-Wickesand by Orville Faris, president of California Life, Rusk, vice president of that company, who owned a seven block of shares. In payment of the California Life ember 23, 1953, Founders Syndicate issued 46,536 shares stock to these individuals and at the same time canceled ock issue of October 23, 1953.

1954, subsequent to the time Saperstein was publicly ng involved in irregular insurance practices by a New vestigation, the social security department gave Dooley e in turn paid back the original investors in the Calimmon stock. At the same time Founders Syndicate to the social security department 32,090 shares of dicate common. So as of that date for the first time rity department had control of California Life. Since › Syndicate has been dissolved and the social security w owns the controlling California Life stock outright. planation offered for this series of transactions by any at the subcommittee hearings was that it was done for concealing the fact that a labor union was purchasing

1954, Saperstein's contracts as agent providing a total 812 percent on this case were terminated by the Calisurance Co. According to the testimony of the presimpany, this action was taken as a result of unfavorable ving Saperstein's insurance activities in the New York is is known, Wickes still retains his position with the with the social security department.

le doubt in the minds of the subcommittee that the insurance would have remained with the Security Insurance Co. if that company had not indicated it sary to curtail Saperstein's high commissions and the $2,500 monthly special service fee.

contentions of the individuals involved that the purol in California Life and the transfer of the LWIU ess to that company was in the best interests of the the LWIU welfare fund, in the light of all the evicommittee is of the opinion that the purchase of Calitheir own names by the very group controlling the LWIU insurance is one of the worst phases in a case ocking abuses and complete disregard for the interests -beneficiaries of the fund.

th of each of the individuals involved in the purchase ife and the Founders Syndicate manipulation is open tion. Each one of them at some point in these trans

actions engaged in activities which were in serious conflict with the other responsibilities. When this group, which acting in concert o trolled the destinies of the LWIU welfare fund, bought control their own names of the company to which they were transferring t fund insurance they placed themselves in a position to profit perso ally at the expense of the welfare fund.

Matthew Dooley represented the San Francisco employers groc was a trustee of the LWIU welfare fund; was also attorney for fund trustees at $10,000 a year; acted as attorney and trustee for th group of individuals in the purchase of California Life common sto and the establishment of Founders Syndicate. He was also a prin in the purchase of the controlling interest of California Life and came a substantial stockholder in Founders Syndicate. As a LWI fund trustee he suggested the purchase of Founders Syndicate pr ferred stock by the LWIU social security department. This permite Founders Syndicate to buy an overwhelming interest in Califor Life preferred stock and gave California Life, of which he was part owner, funds to expand.

The subcommittee feels that it was utterly impossible for him to d all these things in good faith and without serious conflict of interes

The same is equally true of the other trustees of the fund and of the officials or representatives of the laundry workers' union who were involved in the purchase of California Life common stock and the manipulation with Founders Syndicate, namely: Byers, Goldster. James, Naddeo, and Friedlander.

The subcommittee feels strongly that the activities of Haines B Wickes throughout this entire case have been most unethical and subject to serious question. As vice president of Security Mutual Life Insurance Co., Wickes was in intimate contact with this case. It appears that it was through him that Eugene C. James and Louis B. Saperstein arranged for the payment of special service fees amounting to $82,500, which money apparently has disappeared. He was fully cognizant of the exorbitant insurance commissions being paid to Sap erstein. Wickes unquestionably utilized his position with Security Mutual and his knowledge of the LWIU insurance account to his ow personal advantage. While still an officer of Security Mutual. he in stigated negotiations which ultimately led to the transfer of the insur ance policy from his company to California Life. He invested per sonal funds, along with Messrs. Saperstein and Dooley and the LWIT group in purchasing control of California Life. By prearrangement. he became consulting actuary of California Life and then accepted position as consulting actuary for the LWIU social security depart ment at salaries of $12,000 and $10,000 per year, respectively. In his dual capacity as LWIU consultant and as one of the group which con trolled California Life, he recommended to the LWIU social security department that its insurance business be placed with the Califor Life Insurance Co.

The subcommittee is of the opinion that it was a most fortuitous cir cumstance that involved Saperstein in other serious insurance irregu larities and adverse publicity in early 1954, and is inclined to attribute to that the fact that the LWIU fund suffered no greater losses.

COMMENTS

t to Eugene C. James and Louis Saperstein, the subcomhat the facts in this case speak for themselves. It is that Saperstein played a dominant role in the entire sitver, the gouging of the welfare funds could only have cause of concessions made to him by the trustees of the Security Mutual Life Insurance Co. It is equally clear James and/or Saperstein $900,000 in premiums and cial service fees, and $26,000 in proceeds of the local 46 fund were embezzled. The subcommittee feels that it ut that the eventual disposition of those diverted funds raced and the possibility exists that other parties shared

mittee condemns the activities in this case of James, a official of the international union. James, who did not t connection with the welfare fund, must bear the ultir having looted it of substantial moneys rightfully bebeneficiaries, his own fellow union members. He rerate with the subcommittee staff members or to testify concerning arrangements between Saperstein and himing the disposition of the money in the LWIU Chicago Lacking any explanation, the subcommittee must ases used his official position solely to feather his own nest, of the welfare fund of his own union.

mittee recommended that James be cited for contempt. t during the hearings, and on July 19, 1955, the Senate , cited him for contempt and referred the matter to the ttorney for the District of Columbia.

, CLEANERS, AND CAULKERS UNION LOCAL No. 52

SUMMARY OF FACTS

s, Cleaners, & Caulkers Union Local No. 52, Chicago, oximately 911 members employed by firms doing busiid outside the State of Illinois, began the operation of in October 1950.

o evidence introduced at the subcommittee hearings, of the union, Edward J. Gallagher, demanded that e contributions to the welfare fund at the rate of 712 er employee and the employers agreed. No trust agreeentered into, although the attorney for an employers' ified to having made a number of unsuccessful attempts l for the union to have such an agreement prepared. ober 1950 and November 1954, bank records and other d that an amount of $213,381.97 had been received in rom the employers. These payments were sent by the ers periodically to the welfare fund, the office for which rom union headquarters and managed by Charles J. n receipt, the contributions were deposited in an Mercantile National Bank of Chicago called Pointers, lkers Local 52 Welfare Fund. Edward J. Gallagher, e union, was the only person authorized to draw upon

There were no welfare claims paid from this account. All drawals consisted of transfers to a fund account and to the gen union account which were in the same bank. $85,000 was transferr from the welfare fund account to the fund account and a net t of $120,000 was transferred from the welfare fund account to general union account. As of November 30, 1954, $7,339.23 remai in the welfare fund account.

From the records of the bank and testimony received at the hear 15 it appears that the transfers from the welfare fund account to fund account, for the most part, were made to replenish the bak in the fund account. There was also evidence that since local expenses were greater than its income, this was the reason for tr ferring the $120,000 to the general union account.

The fund, as distinguished from the welfare fund, was establis in 1949 as the result of union action causing 5 cents per hour to deducted from each union employee's pay. Testimony was rece from employer representatives that written authority for these dedt. tions was not received from their employees. The fund was comm called the defense fund. According to the evidence, it was created aid the members of the union when they were having legal troubles but was used for many purposes.

Between December 1949 and November 30, 1954, $227,008.46 deposited in the fund or defense fund account, including, of cour the $85,000 transferred from the welfare fund. The balance in th defense fund account as of November 30, 1954, was $5,509.85. T signatures of both Gallagher and John P. Ryan, secretary-treasure of the local union, were required to draw upon the defense fun account. The evidence, however, reflected that Ryan signed great numbers of checks in blank and turned them over to Gallagher at the latter's request.

The evidence clearly showed that Gallagher, president of the un actually had complete authority over all the accounts, withdrew to money as he saw fit and made no accounting to anyone. A total of $221,498.61 was withdrawn from the fund account. This was acco plished through 1167 checks drawn on the account during the perio December 1949 through November 30, 1954. One hundred and si or less than 10 percent, of these checks accounted for $132,602, or a proximately 60 percent, of the total withdrawals. These 106 checks were all drawn to cash, for even amounts ranging from $100 to $1000 Twenty-eight of these checks bore the endorsement of Charles Vokour, who said he either gave the proceeds to Edward Gallagher or use the moneys to pay salaries and expenses of the welfare fund offe Of the remaining 78 checks drawn to cash, totaling $74,602, some were cashed by Edward Gallagher, some by his brother William and Mrs Sielski (employees of local 52), while still others were endorsed br local 52, a Florida hotel and motel, bars and grills, an executives' club, a cigarstore, a furrier, and a tailor. Another 2 percent of the tota withdrawals consisted of 26 checks totaling $7,799.59; these checks through their endorsements were identified as being used for the pur chase or repair of a Cadillac, repairs to a Chrysler, an airline ticke to Miami for an employee of the city of Chicago, dinners at an athletic club, and clothes.

Mr. Gallagher admitted receiving all of the moneys which it was testified were given him. However, under oath he denied using any