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The result was an agreement signed with Viscount on February 27, 1970, covering Severance Funds of Local 447 ĨAMAW District 15, Production Sales & Service Severance Fund, Local 110 Severance Fund, Industrial Production Employees Severance Fund, and any other severance programs of similar design. This agreement reduced the first year's compensation to 60% of premium which was approximately one half of what had formerly been paid. However, it increased compensation to the general agent from the second through the tenth years through the means of a persistency bonus of 15% of premiums in the second through fifth years, and 5% of premiums in the sixth through tenth years. Another advantage of this persistency bonus agreement would be that no compensation would have to be paid on terminations, some of which are inevitable under severance plans. Taking all things into consideration, the total payout was approximately the same as under the old agreement. However, the drain on current surplus was not nearly as heavy as where it was all paid out the first year.

Change to Dina Gelman Agency

About the middle of November 1971, Mr. Greenfield requested that we appoint Dina Gelman as general agent for the Local 295 business in lieu of his Viscount Agency. There had been no mention of such a possibility at any prior meeting. However, he explained that Dina Gelman was general agent for the first tier of the Local 295 Severance Plan for Executive and that it would be consistent to keep her as general agent on the second tier with Trans World. I was initially reluctant about switching general agents on the Local 295 business, as this was against our general policy. However, Dina Gelman was a duly licensed agent for Viscount with Trans World. She had also been a general agent since December 1, 1970 with Executive, and we had also received a favorable Retail Credit report. In view of the above and since Viscount itself made the request and Local 295 approved, we agreed to the change in general agents.

Compensation to Dina Gelman

A general agents agreement with Dina Gelman Agency now became necessary. We would have preferred to write it in the same form as the persistency bonus agreement signed with Viscount on February 27, 1970. However, on November 26, 1971, the State of New York Insurance Department expressed its view that persistency bonus agreements were contrary to the insurance law. We took issue with the Department's view; but, until the matter was resolved, we necessarily could not write a persistency bonus agreement with the Dina Gelman Agency. Instead, the agreement, signed on and effective as of December 1, 1971, provides for 55% of first year's premiums as commissions, along with an additional 63.5% of the 55% commissions as an agency development allowance, for a total compensation of about 90% of premiums in the first year. Agency development allowances are customarily given in cases where the general agency has been in business less than five years.

The total compensation of 90% to Dina Gelman is less than that normally given in the first year under Trans World's usual practice with its general agents for comparable whole life insurance. Moreover, Dina Gelman felt that since negotiations on the Local 295 business had begun in September 1971, prior to the Department's taking its position on persistency bonus agreements on November 26, 1971, she should not be affected by that decision and should receive compensation similar to and equal to that received by Viscount under the February 27, 1970 agreement. She has expressed her unhappiness with the current agreement to Trans World in writing, and we have forwarded a copy of her letter to the State of New York Insurance Department.

Advances

We have advanced Dina Gelman Agency a total of $481,724.25 as per the attached schedule (Attachment #1). Those advances through January 1972, totalling $460,000 represent annualization of the commissions on estimated first year premiums. These premiums were anticipated to be about $43,000 per month, or $516,000 per year, which would mean that the general agent would receive 90% or $464,400. However, it was not advanced all at once, but in several payments to match the availability of funds at Trans World. The first $140,000, was originally paid to Viscount. Subsequently, when Dina Gelman became the general agent, she assumed liability for this $140,000. After January 1972, we advanced a further $21,724.25 in two payments in May 1972, for the annualization of commissions due on new employee members of Local 295, making a grand total of $481,724.25.

In addition, two payments totalling $75,000 ($50,000 on January 14, 1972 and $25,000 on January 27, 1972) were given as advances on the third tier of the Severance Plan beginning on December 31, 1972. However, in checking with the Local 295 Severance Fund, we learned that the Local 295 Severance Fund had not yet decided which insurance company would write the insurance for the third tier of the plan. Accordingly, we requested Dina Gelman Agency to refund this $75,000; and they repaid it in two checks dated April 26, 1972, of $50,000 and $25,000.

As I have previously stated, Seymour and Bertha Greenfield, as principals of Viscount Agency, signed promissory notes for the $140,000 advanced to them, personally guaranteed the loans and pledged all the issued and outstanding stock of Viscount. It is now our intention to return the notes and stock to Viscount since Dina Gelman assumed this liability when she became general agent of record. Her assumption of liability is evidenced by her signing a confirmation request from our auditors, Peat, Marwick, Mitchell & Company, for a sum which included the $140,000 as an advance to her. Although she signed promissory notes for the $100,000 advance on December 1, 1971, and the $60,000 advance on December 3, 1971, our counsel feels that further notes for the additional $181,724.25 are unnecessary in view of paragraph 10 of the general agents agreement which permits offsets against commissions earned by general agents.

After Mr. O'Brien and I signed the first advance check payable to Dina Gelman, drawn on Bank of Commerce ($100,000 on December 1, 1971) she picked it up at Trans World offices. She went to the Bank of Commerce; and Mr. Hertrick of the Bank called me and said that she was there and had requested to take some of this money out in cash immediately. He asked me to verify the signature of Dina Gelman on the check. She returned with the check and I affixed "Signature O.K.— J. J. Warren" on the back of the check.

In order to preclude a similar occurrence from happening in the future, either Mr. O'Brien or I, as a matter of routine, affixed the "Signature-O.K." on the back of several later advance checks. I have no knowledge as to what Dina Gelman did with any of these later checks, nor do I remember any other facts concerning them. She merely picked the checks up here at Trans World, usually alone, although I do remember her being accompanied once by Mr. William Kilroy, who is an agent of Viscount Agency and licensed with Trans World. The most recent check of $6,724.25, dated May 11, 1972, was picked up by Dina Gelman's son, William.

At present, our procedure is to make up the monthly invoice which we turn over to Dina Gelman for transmittal to the Local 295 Severance Fund. At a later date, Dina Gelman remits the premiums invoiced to Trans World. In addition, Dina Gelman handles the routine billing and administrative procedures in connection with the Local 295 Severance Fund and Trans World.

The only contact Trans World has with Mr. Louis Ostrer is when administrative matters assumed larger significance. He appears to act as a spokesman for the Fund in such situations.

So far, gross claims have been about $50,000 for Local 295 Severance Fund of which Trans World has paid $40,000. The remainder has been paid by Security Benefit Life Insurance Company of Topeka, Kansas under a reinsurance treaty.

A. Dina Gelman Agency

NEW BUSINESS

This Agency has not as yet written any additional business with Trans World aside from Local 295. Since we are paying the Agency a development allowance, we expect it to develop not only additional severance fund business, but to expand in all fields of general insurance. To that end, the Dina Gelman Agency has recently licensed a new writing agent, and we are pressing for additional agents. B. Viscount

We have recently begun writing insurance for the International Production Sales and Service Employees Union Severance Fund with Viscount as our general agent. Mr. Greenfield has informed us this Union has a potential of 12,000-18,000 lives within a period of three years. At present, we have advanced $216,000 to Viscount against first year commissions and allowances for the following locals of this union: Locals 222, 719, 517, 422, 815, and 106. This severance fund is based on contributions of $.05 per hour.

The above statements are true and correct to the best of my knowledge. JOSEPH J. WARREN.

Sworn to before me this 19th day of June in the year 1972.

ARTHUR B. FREELAND, Notary Public, State of New York.

Qualified in Queens County, Commission Expires March 30, 1974.

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