Old Man Comes Home

(See front cover) In the cool grey light of dawn S. S. Exilona lay at anchor near Ambrose light ship outside New York Harbor. A coast guard cutter and a bevy of tugs drew near. A passenger, Mrs. Louise Dvorak, stood on deck talking to a white-haired septuagenarian. The old man told her: "This is the first time in 30 years I have returned to New York without some one of my family to meet me.'' "But your son is on one of these boats." "My son is here? Where?" The old man rushed to the rail. Suddenly he spied the figure of a short bespectacled young man on the cutter Hudson below. "Oh, Junior! Junior!" he cried. "Hello, pop. How are you doing?" came the robust-voiced reply. Thus the Samuel Insulls met last week for the first time since they parted nearly two years ago in Milan. As the younger man climbed up the ship's side, his father rushed forward, embraced him. Senior Insull, trembling with excitement, turned to his fellow passengers and said: "Gentlemen, my brother--I mean, my son." Photographers began to take pictures from the tugs below. Father and son posed readily at the rail of the ship, again on the cutter after the old man had climbed down a vertical ladder. "Let go my arm," he said to a sailor who tried to help him. He himself kept order among the overeager photographers. "You'll get all the pictures you want," he said, "so don't get in front of each other and get in each other's way." And again to a man who tried to butt in: "Get away, I'll run this. This is my show and this is my mug. I've got a proprietary interest in it." Before leaving the cutter Samuel Insull gave newshawks a prepared statement: "I have erred, but my greatest error was in underestimating the effect of the financial panic on American securities and particularly on the companies I was working so hard to build. "I worked with all my energy to save those companies. I made mistakes, but they were honest mistakes. They were errors in judgment but not dishonest manipulations. ". . . You only know the charges of the prosecution. Not one word has been uttered in even a feeble defense of me. And it must be obvious that there also is my side of the story. "When it is told in court, my judgment may be discredited, but certainly my honesty will be vindicated." The cutter bore the Insulls to Fort Hancock on the tip of Sandy Hook. They were motored under guard to Princeton Junction, N. J. and by 10 a. m. were aboard a westbound Pennsylvania train. Next day in Chicago, after being fingerprinted and suffering a slight heart attack, the Elder Insull was arraigned in Federal Court. Judge John P. Barnes promptly announced that bail would be $200,000. Insull stiffened. Said Junior Insull: "We won't even try to raise that. It's impossible." By 2 p. m. the old man was lodged in the hospital ward of Cook County Jail. Before him lay the possibility of several months behind bars awaiting trial.

Behind Samuel Insull lay 23 idle days of voyaging on the blue waters of the Mediterranean and the Atlantic. Behind that voyage lay nearly two years of lonely exile when he was hunted like a rat in a hole. Behind that exile lay three years of fear ful struggle to preserve a utilities empire in which thousands and thousands of people had sunk their life savings. Behind that struggle lay nearly 50 years of hard work during which, at first acre by acre and later province by province, Samuel Insull had built that empire. On the Water. In all his active life Samuel Insull never took a regular vacation. His periods of relaxation came at sea, usually two or three times a year, crossing the ocean on business. On the water his time was spent sunning himself on deck, talking to fellow passengers. The voyage which he began at Smyrna in mid-April was such a trip except that he traveled on a smaller, slower ship, in titular custody of a young Third Secretary of Embassy and watched over by traveling correspondents. While the ship was at Casablanca he suffered a brief heart attack, but otherwise his health was good for a man of 74. He talked readily enough with fellow passengers, groused a bit at being photographed, read a good deal, was delighted to get back copies of the Saturday Evening Post in Sicily. Apparently he worried little over what lay ahead until the last day or two before landing. When he spoke of himself he philosophized like many a retired businessman: "I never took pride in the fact that I made money. It was a pride in accomplishment. . . ." In Exile. Samuel Insull did not come back the same man who sailed from Quebec on the Empress of Britain in June 1932. His wealth lost, deprived of power but not yet humiliated, he first settled down in Paris on an $18,000-per-year pension granted him by his old companies. But humiliation followed. In Chicago a grand jury indicted him for embezzlement. Newshawks began to hound him in the streets. Finally, just before his arrest could be requested, he stole away in the night. His son Samuel Jr. went with him as far as Milan whence the old man fled alone to Athens. Instead of bravely facing the music, he had elected to become a hounded man, to ask hospitality of aliens, to finagle with outlandish courts and people, to flee on a scummy little freighter, to lie in shabby hotels, and finally to be cornered in a common jail in Istanbul and carried home captive. The Crack Up. Such disgrace followed, by only a few years, public honors. In 1931, on the 50th anniversary of Insull's arrival in the U. S., Owen Young, John Barton Payne, Charles Gates Dawes, Reginald McKenna (chairman of Britain's Midland Bank), Charles Steele (Morgan partner), Frederick H. Ecker (insurance). Gerard Swope and James A. Farrell sent tributes to the English-born immigrant who had achieved great things in his adopted country. But even then Sam Insull's pedestal of fame and fortune was tottering. His trouble dated back to 1928 when Capitalist Cyrus Eaton of Cleveland, through Continental Shares, his investment trust, now in receivership, decided to buy working control of a number of Insull utilities. Sam Insull was probably worth $100,000,000, but he did not own any great fraction of his companies' stock. He ruled them because he had built them. To head off Mr. Eaton's raid--a raid the courts have called piratical--he formed a holding company, Insull Utility Investments, in which he put his family holdings and sold stock to the public. Later he founded another such company, called it Corporation Securities. Thus Samuel Insull entered on the great game of 1929, building towering corporate pyramids, buying and selling stock. He had been right so long the public thought he could never be wrong and so followed him blindly down the road to ruin. He built his tower of stock certificates so high that it cracked and crumbled. Bidding against Eaton. Insull's holding companies paid not only regular 1929 prices, but battle prices for the shares of his operating companies--$384 a share for Commonwealth Edison, $296 a share for Peoples' Gas. Then came the crash. Eaton backed off without control but Samuel Insull had not won. A good part of his fortune had disappeared in the fight. The rest disappeared in trying to keep his fantastic holding companies from tumbling. He had wrecked his own empire. April 10, 1932 was his Waterloo. He and Sam Jr. conferred with the bankers at the exclusive Chicago Club. They did not dare meet elsewhere for fear the dreadful news would leak out. At that meeting a receivership was agreed upon. Samuel Insull, Charles A. McCulloch and Edward N. Hurley (now deceased) were to become the three receivers of the downfallen domain. Less than a month later Mr. McCulloch went to Samuel Insull and told him that his brother Martin would have to give up his job as president of Middle West Utilities; there was evidence that Martin had used the company's money to bolster up a private brokerage account. Sam Insull pleaded with him not to oust Brother Martin, saying, "He has not a dollar left." But Receiver McCulloch was adamant. He was equally adamant when, on June 3, he went to Samuel Insull and demanded his resignation because he sanctioned two of Martin's alleged pilferings. Empire Building. That was the end of Samuel Insull's power. Almost forgotten in the ensuing uproar was the fact that the same hands that rocked the boat of public trust had also rocked the cradle of electrical development in the Midwest. In 1879 Samuel Insull. a young clerk in London, read an advertisement in the Times for a part-time stenographer. He got a job with the London agent of Thomas Edison. Later Edison's chief engineer, E. H. Johnson, visited London. Like most Americans he was distressed at the British habit of working only in business hours. He suggested that Stenographer Insull work for him evenings. Insull agreed. Impressed with him Johnson finally said, "Young man, you ought to come to America." Insull answered: "I'd only go to America if I could be private secretary to Mr. Edison." Johnson promptly wrote a letter of recommendation to Edison. The same letter came back to London with a scrawl across it in Edison's writing: "Send him over." In February 1881, Insull sailed; 14 days later he arrived after dark at Menlo Park. Edison began dictating at once, finally stopped at midnight and said "You'd better get some sleep. I'll need you again at six in the morning." Thus began Insull's U. S. career. For a time he bought Edison's clothes, wrote his checks. Ultimately he managed Edison's business affairs. He helped organize Edison Machine Works and later laid out its plant at Schenectady where it became Edison General Electric (now General Electric). In 1892, Insull, aged 32, was its vice president, earning $35,000 per year. He was asked to suggest a head for the struggling Chicago Edison Co., a $12,000-a-year job. He suggested himself and his offer was snapped up. Edison was only one of several primitive electric companies in Chicago. After three years Insull left it to join a rival named Commonwealth. Later he merged the two into Commonwealth Edison. When he went to Chicago electric power was about as reliable as the automobiles of 1905. He undertook to make it into the efficient thing it is today. He it was who bought and installed the first steam turbine generator ever made. It stands today in the General Electric plant in Schenectady, marked "A Monument to Progress.'' From Chicago he spread his activities out and out until they blanketed 200 neighboring cities and towns. In place of small local operating plants he built big utilities--and built them well, for they still stand, still make money. Ultimately his domain of well-managed power plants stretched across 32 states into Canada, served 5,300 towns and cities, furnished electricity to 10,000,000 people. In 1899 he married Margaret A. Bird, an actress who had been a star with Daly. Her stage name was Gladys Wallis and her husband always called her Gladys. Their home was at No. 23 Lake Shore Drive (now No. 1,100) in one of the first apartment buildings built on Chicago's Gold Coast. There they reared their son Sam who probably had the finest set of electric trains in existence at the time. Later they sent him to St. Paul's School for polish, to Sheffield Scientific School at Yale to prepare for his job as crown prince of the Insull empire. Meanwhile Samuel Insull, a forbidding man in dealing with his public but well liked by his immediate associates, used to go to his mahogany-panelled office in Commonwealth Edison Co. at 7:10 every morning. Being English, he could not stand steam heat and had a log fire to keep him warm. Sometimes in a busy morning he stopped to write long letters in longhand to his favorite correspondent, his sister Emma (now dead) who lived in London. At 12:30 sharp he lunched at the Chicago Club, often with his friend Harry Stuart. Afterwards he sometimes visited his other offices in the Peoples Gas Building and in the Chicago Civic Opera House, which he built. At 7:00 sharp he dined at home and either went with Mrs. Insull to the opera, of which he was presiding angel, or stayed at home, smoking a cigar, dozing in his chair and going to bed at 9:30 or 10. For the last 20 years he never took any exercise. He never touched alcohol. His only other notable divertissement was his elaborate Hawthorne Farm at Libertyville. It broke his heart that, when he stayed out in the country, the first train that he could catch in the morning did not get him to his office until 8:20. Such was his model life. Aside from his middle-class English hatred of publicity, which led him sometimes to wave a gold-headed cane at photographers, he was not an ominous figure. Some industrial opponents hated him, but as a successful manager of utilities he had the admiration of most businessmen. All that was undone by his bad management as a corporate manipulator which cost investors some $750,000,000. After the debacle came the nemesis of the Law. The Charges. First the State of Illinois got busy. It indicted Martin Insull thrice for embezzlement. Samuel Insull twice for having permitted it. The details of these charges are known for they had to be explained in order to extradite Brother Martin from Canada. One typical accusation: Washington Flexner had a private brokerage account through which he performed various trades for his business associate Martin Insull. In October 1931 the brokers objected to the use of Insull Utility Investments & Corporation Securities stock as collateral behind Martin Insull's transactions. Flexner went to Martin Insull, who had Middle West Utilities Co., of which he was president, give Flexner checks for $344,000 to buy the collateral. Thus Martin Insull's brokerage account was cleared and Middle West Utilities was left holding stock now worthless.

Meantime the Federal Government got busy, put 14 Government auditors on the books and records of the Insull companies hunting for crime, had photostatic copies made of numberless letters, envelops and documents. In February 1933, after five months' work, the U. S. got an indictment against Samuel Insull et al. The "al." included Sam Jr., Martin and 16 of their associates and friends. The charge was using the mails to defraud; that is, selling the securities of Corporation Securities Co. through the mails as "a good safe and sound investment," whereas they knew the securities were not as represented. The indictment is in general terms, the Government screening its detailed evidence until trial.

Later, since using the mails to defraud is not an extraditable offense in most countries, the Federal Government got another indictment under the Bankruptcy Act. The three Insulls and others were accused of knowing that Corporation Securities was insolvent six months before it failed and therefore of having acted "feloniously and fraudulently" in declaring preferred dividends and putting up additional collateral on bank loans.

Martin Insull was extradited from Canada on the State indictments for embezzlement. He can only be tried on one of three indictments and part of another because those were the only ones on which Canada agreed to his extradition. He cannot be tried on any of the Federal indictments unless he is released, sent back to Canada and re-extradited, an unlikely procedure.

If Samuel Insull had been extradited by the Federal Government from Greece, he could have been tried only on the fraudulent bankruptcy charge. Instead he was deported from Turkey as an undesirable alien. As his deportation was stringless, he can be tried on any and all of the indictments. This delights the Government attorneys because they intend to try him first for using the mails to defraud. If he is acquitted on that charge, he will be tried under the bankruptcy law. If that also fails he will be turned over to Illinois to see what that State can do with him in the way of punishment for empire wrecking.

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