Southwestern to Southwest

Last week in the high name of Texas pride three smart Dallas lawyers put over a deal which was reminiscent of the Van Sweringens at their best. With $100,000 in cash they gained control of two life insurance companies with total assets of $170,000,000. Leader of the legal triumvirate was Dexter Hamilton, a brusque, 56-year-old onetime Texas judge who is general counsel for Southwestern Life Insurance Co. However, the company he counseled was controlled not by fellow-Texans but by a Manhattan investment trust run by David Meriwether Milton, son-in-law of John Davison Rockefeller Jr.

"Southwestern Life is a Texas institution," thundered its president in defense of the deal last week. "It does business in Texas only, and it is important that control of the company shall be vested in Texas citizens." To get it back into the hands of Texas citizens, Lawyer Hamilton & friends dipped into their own pockets for $100,000, formed a private corporation with this cash as capital. Their corporation then borrowed $2,400,000 from none other than Southwestern Life, selling long-term bonds to the insurance company. With Southwestern having thus provided almost all the money to return control of itself to Texas, Lawyer Hamilton proceeded to the relatively simple task of buying stock.

The stock he bought was not Southwestern's but that of General American Life Insurance Co., which did indeed control Southwestern. General American got Southwestern's stock by way of Missouri State Life, which failed in 1933. General American had later been formed by David Milton's investment trust to take over Missouri State's business and assets. The corporate set-up which confronted Lawyer Hamilton last week was Mr. Milton's investment trust, which controls General American, which in turn controlled his coveted Southwestern. What Lawyer Hamilton did was to buy control of General American, thereby getting not one but two insurance companies.

To complete the deal he took the General American stock he bought from Mr. Milton's trust to Southwestern Life, pledging it as collateral for the $2,400,000 loan. If Southwestern were to foreclose on the loan, it would come into possession of control of itself.

At this point Missouri's State insurance superintendent. R. Emmet O'Malley, who has certain powers over General American, grew exceedingly alarmed, loudly called the whole deal a brazen violation of Texas insurance laws, declared he would ask the Texas insurance superintendent to join him in court action to set it aside. Moreover, said the jealous Missourian, Mr. Milton had coerced the Texans into buying the two companies by threats that control would otherwise be sold to "undesirable" persons. Meantime, Mr. Milton, having made a clear $830,000 profit for his investment trust on the deal, departed on a Bermuda vacation.

This file is automatically generated by a robot program, so reader's discretion is required.