This is all information which was provided to us by National General, and includes:

A list of subsidiaries in 1960, together with a list of subsidiaries on January 1, 1969.

A statement that the persons responsible for evaluating mergers are Eugene V. Klein, Irving H. Levin, Samuel Schulman, Harold Lipton and Alan May, the persons primarily responsible in the period of this committee's study for the identification, development, evaluation and final decision on mergers and acquisitions.

And a list of the geographic localities in which National General does business in the United States and abroad. This list shows business operations at locations in a total of 47 States, with 255 such locations in the United States. That is, there are 255 cities in which you operate, with a total number of facilities of 343.

You have facilities in Canada, England, and Italy; a total of 16 facilities in 12 foreign cities.

Mr. KLEIN. Correct.

Mr. HARKINS. Mr. Chairman, I offer these documents for the record.

The CHAIRMAN. Accepted for the record.

(The documents referred to appear at pp. 100-110. In addition, the exchange of correspondence between the subcommittee and National General appear at pp. 414-479.)

Mr. HARKINS. Now, Mr. Klein, I would like to move to another topic. This will be concerned with interlocking relationships.

First of all, the law firm that represents you is Wyman, Bautzer, Finell, Rothman & Kuchel. Its predecessor was Wyman, Bautzer, Finell & Rothman.

They are National General's counsel.

Mr. KLEIN. Yes, sir.

Mr. HARKINS. In addition to providing general legal services, some members of this firm are engaged in National General's management, is that right?

Mr. KLEIN. One member, sir.

Mr. HARKINS. Mr. Finell?

Mr. HARKINS. He is a director of Great American Insurance Co. and chairman of the operating committee of the Great American Insurance Co.

Is Mr. Finell a house counsel or is he general counsel in that he is a partner in the firm? He is also general counsel of National General? Mr. LIPTON. Mr. Finell is a partner in the firm you referred to. He is not employed by National General Corp. as an employee. We retain the services of the law firm on occasions when needed. Mr. Finnell has been designated as the chairman of the operating committee, namely, Great American Insurance Corp.

Mr. HARKINS. Are there any other members of the law firm who are officers of any of the subsidiaries of National General?

Mr. KLEIN. No.

Mr. FINELL. I am the chairman of the board of directors of Republic Indemnity and have been for some time.

Mr. HARKINS. The law firm holds securities in National General? The CHAIRMAN. They were paid securities for fees, were they not? Mr. KLEIN. Yes, sir.

Mr. HARKINS. For example, the firm holds 12,195 $40 warrants This is in your April 3, 1969, prospectus.

Mr. KLEIN. Yes, sir.

Mr. HARKINS. Does the law firm hold other National General securities?

Mr. KLEIN. Not to my knowledge, sir.

I will ask Mr. Finell.

Mr. FINELL. Not that I know of. It may be that individual members of the firm have stock. I wouldn't necessarily know about it.

Mr. HARKINS. The 12,195 $40 warrants, are they owned by the firm or are they owned by members of the firm?

Mr. FINELL. They have been distributed to members of the firm. Mr. HARKINS. The law firm and some of its members have actively participated in the merger activities of National General, is that right? Mr. KLEIN. Only as counsel, sir, with the exception of Mr. Finnell, and that on one instance only.

Mr. HARKINS. And that was in the insurance company acquisition? Mr. KLEIN. Yes, sir.

Mr. HARKINS. Would you characterize the relationship between National General and this law firm as a routine lawyer-client relationship or is it an operating relationship?

Mr. KLEIN. It is absolutely a routine client-lawyer relationship, sir. Mr. FOGT. Mr. Finnell, Great American is the primary contributor to National General's earnings; is that correct, or if not more than half, approximately half?

Mr. FINELL. I am in an executive capacity with Great American, Mr. FOGT. You are an operating executive of the company.

Mr. FINNELL. I am in an executive capacity with Great American, but I have no capacity as an officer, director, executive or otherwise, of National General. Hence, the integration of Great American operations into National General would be something beyond my scope and knowledge.

Mr. FOGT. You are the operating officer for the Republic Indemnity, also?

Mr. FINELL. Yes, sir.

Mr. FOGT. Would you say the earnings of the two insurance companies comprise a substantial portion of National General's earnings? Mr. FINELL. I am certain that they do.

Mr. FOGT. One further question.

Mr. Klein, when did the Wyman firm become your general counsel ? Mr. KLEIN. Approximately 3 years ago.

Mr. FOGT. In 1967?

Mr. KLEIN. I believe so.

Mr. FOGT. Before that it was Hindin, Sterling, McKittrick & Powsner?

Mr. KLEIN. Yes.

Mr. HARKINS. On August 9, 1964, National General acquired Columbia Savings & Loan Association through an exchange where one share of Columbia stock was obtained for a $15 principal amount five percent subordinated debenture of National General, plus a 10-year warrant exercisable at a price of $15; is that right?

Mr. KLEIN. That is right.

Mr. HARKINS. National General acquired 95 percent of the stock of Columbia Savings. The total value of the acquisition was approximately $9.7 million?

Mr. KLEIN. Yes, sir, that is correct.

Mr. HARKINS. National General's board of directors had authorized a tender offer for the purchase of Columbia on February 18, 1964, did it not?

Mr. KLEIN. I believe so, yes, sir.

Mr. HARKINS. At that time, you, Mr. Klein, were chairman of the board of directors of Columbia?

Mr. KLEIN. Correct.

Mr. HARKINS. And you had been chairman of the board of Columbia since 1962, is that right?

Mr. KLEIN. I am not sure. I believe that is correct. If the record shows it, I am sure it is correct.

Mr. HARKINS. On December 8, 1961, there was a merger of Superior Savings & Loan Association, Pyramid Savings & Loan Association, and Columbia Savings & Loan Association.

Do you recall that?

Mr. KLEIN. Yes, sir.

Mr. HARKINS. Át that time you were president and chairman of the board of Pyramid?

Mr. KLEIN. That is correct, sir.

Mr. HARKINS. And with you on Pyramid's board was Jack M. Ostrow and Nathan Kates?

Mr. KLEIN. I do not believe-my memory may be fallacious, sir. Jack Ostrow was a director. I do not believe Nathan Kates was a director at that time.

Mr. HARKINS. I hand you a document, a proxy statement for a special meeting of stockholders.

Mr. KLEIN. Yes, I am sorry. Right before the merger, when we knew the merger was going to go of the three associations, Mr. Kates was put on as a director. He only served for 2 months

Mr. HARKINS. So at that time, December 8, 1961, he was a director? Mr. KLEIN. Yes, sir, that is correct.

Mr. HARKINS. And this Jack Ostrow listed there is the person who has been associated with National General since 1960?

Mr. KLEIN. Correct.

Mr. HARKINS. In 1962, Mr. Klein and Mr. Ostrow became directors of Columbia?

Mr. KLEIN. Correct.

Mr. HARKINS. On February 18, 1964, you and Mr. Ostrow were on the board of directors of Columbia?

Mr. KLEIN. Correct, sir.

Mr. HARKINS. Was Mr. Kates a member of Columbia's board of directors on February 18, 1964?

Mr. KLEIN. Yes, sir.

Mr. HARKINS. On February 18, 1964, National General had 11 directors. Would you dispute that statement?

Mr. KLEIN. No, sir. I was just trying to think.

Mr. HARKINS. According to your annual report, there are 11 listed. Mr. KLEIN. Yes, sir.

Mr. HARKINS. Of these 11, the following four were stockholders in Columbia: Mr. Klein, Mr. Levin, Mr. Ostrow, and Mr. Hersch. Mr. KLEIN. Yes, sir.

Mr. HARKINS. Mr. Klein owned 5.4 percent, 488,286 shares of the stock in Columbia. Mr. Levin owned 0.6 percent, which was 5,365 shares. Mr. Ostrow owned 0.7 percent, and Mr. Hersch owned 0.5 percent.

Mr. Levin had formerly been on the board of directors of Pyramid Savings & Loan prior to its merger with Columbia Savings & Loan. Mr. KLEIN. Yes, sir.

Mr. HARKINS. In connection with the offer for Columbia Savings & Loan guarantee stock, on February 20, 1964, National General entered into an agreement with certain shareholders who held 38.52 percent of the stock of Columbia; is that right?

Mr. KLEIN. Yes, sir.

Mr. HARKINS. You were a signatory to this agreement?

Mr. KLEIN. I believe so, sir.

Mr. HARKINS. And also Mr. Levin, Mr. Hersch, and Mr. Ostrow. Mr. KLEIN. I believe so, sir.

Mr. HARKINS. In the May 6, 1964, notice of special meeting of stockholders in connection with this acquisition by National General, on page 21 it states that Messrs. Klein, Levin, Hersch, and Ostrow are among those who executed the agreement.

The reason I am asking the question is that a copy was provided but it does not have your signature on it. It does have the other signatures.

Mr. KLEIN. We will so stipulate, sir.

Mr. HARKINS. This agreement embodies the same terms as far as the amount of subordinated debentures and warrants are concerned that were ultimately offered to the other shareholders; is that right? Mr. KLEIN. Yes, sir.

Mr. HARKINS. What was the purpose of this agreement?

Mr. KLEIN. I believe, and I am trying to refresh my memory, sir, that the purpose of the agreement was to lock in the other shareholders and know that we had a definitive, definite deal with them since those shareholders controlled approximately one-third of the stock of Columbia Savings & Loan, and when we solicited other shareholders I think we could represent, and truthfully represent, that we had a signed agreement with people who owned one-third of the shares and they were going to tender to us one-third of the shares.

I believe that would be the purpose of the agreement, sir.

Mr. HARKINS. This would mean that the sale of 38 percent of the stock was already agreed upon?

Mr. KLEIN. Was firmly committed to the transaction; yes, sir.

Mr. HARKINS. This block of shares had an important position in regard to the obtaining of control of the company and therefore as far as the other stockholders were concerned.

Mr. KLEIN. Yes, sir.

Mr. HARKINS. At the meeting on February 18, 1964, when the board of directors of National authorized the offer for Columbia stock, the four directors whom we mentioned, Mr. Klein, Mr. Levin, Mr. Hersch, and Mr. Ostrow, did not vote.

Mr. KLEIN. That is correct, sir.

Mr. HARKINS. Were they present at the meeting?

Mr. KLEIN. Yes, sir.

Mr. HARKINS. Did they participate in the discussions prior to the time of the vote?

Mr. KLEIN. I don't believe so, sir. That is 6 years ago.

As I recall, the meeting was turned over to someone else to discuss, and I believe the four directors who did not vote just sat by and listened to the discussion of the board of directors.

Mr. HARKINS. Were the other seven directors aware of the interests that the four non voting members had?

Mr. KLEIN. Yes, sir. That was explained in detail.

Mr. HARKINS. The four directors who have been named wanted the acquisition to take place; they were in favor of it?

Mr. KLEIN. Yes.

Mr. HARKINS. In fact, they even signed the agreement.

Mr. KLEIN. Yes, sir.

Mr. HARKINS. They also wanted National General's board to approve?

Mr. KLEIN. Yes.

Mr. HARKINS. And the board knew they wanted it to be approved? Mr. KLEIN. I don't know that the board would know. I don't know that they wouldn't know it either. They made an independent judgment as to the value of the Columbia shares vis-a-vis the securities that were offered for Columbia. Knowing that we had agreed to sell our shares, they would certainly know that we were for it both ways. I think it is important to note that the financial interests of the four directors who had financial interest in Columbia, their interests in dollar terms was very, very significantly less than their interest in National General.

All four people who were involved had a very significant equity stake in National General, and three of them still do. So their motivations were totally motivations to the benefit of National General. Yet, I believe everybody did everything possible to avoid any conflict of interest, and I believe it was properly done.

So I would say, in answer to your question--which is a long-winded answer for which I apologize-I must say that the board obviously knew we were in favor because we signed the agreement and we were going forward.

But I can truthfully say to you gentlemen that the board made an independent decision that it was an excellent deal for National General and the shareholders of Columbia made their decision.

The CHAIRMAN. Approximately how many individual shareholders were involved in Columbia, the company that was acquired?

Mr. KLEIN. To the best of my recollection, there were approximately 800 to 900 shareholders of Columbia Savings.

Is that correct?

Mr. LIPTON. That is approximately correct.

The CHAIRMAN. Did they really understand that there were common directors of both companies?

Mr. KLEIN. Yes, sir.

The CHAIRMAN. How would they get their information? Just from the prospectus?

Mr. KLEIN. The proxy material that was solicited, that was sent to them when we called a special meeting of all the shareholders of National General to vote on the merger.