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Additional information Continued
Documents submitted for record January 28 and 29, 1970–Continued
2. January 29, 1970—Continued

Letter, dated September 17, 1968, to Bernard Kaufman,

National General Corp., from Richard E. Sobelle.---
Letter, dated September 17, 1968, to Securities and

Exchange Commission, from Jerald S. Schutzbank, re
National General Corp. (“National") amendment No.

3 to registration statement (Registration No. 2-29818) -
Letter, dated September 14, 1968, to Stanley Sporkin,

Esq., associate director, Division of Trading and Mar-
kets, Securities and Exchange Commission, from
Jerald S. Schutzbank, re AMK Corp. (“AMK”) Great
American Holding Corp. (“GAH") National General

Corp. (“NGC”)
Article from the Wall Street Journal, dated July 16,

1968—"Heard on the Street”.
Article from the Wall Street Journal, dated September

13, 1968—"Heard on the Street”.
Letter, dated December 20, 1968, to Stephen Silbert,

Wyman, Bautzer Finell & Rothman, from Harold A.

Lipton, with enclosure...
Agreement, dated December 23, 1968, between Great

American Holding Corp. and National General Corp..
Letter to stockholders, Great American Holding Corp.,

dated January 2, 1969, from W. E. Newcomb, chair

man of the board and president.
Great American Holding Corp.-Notice of special meet-

ing of stockholders, January 14, 1969-
Letter, dated February 11, 1969, to Securities and Ex-

change Commission, attention William S. Clarke, Esq.,

from Jerald S. Schutzbank, re National General Corp-
Documents from letter of January 26, 1968.
Memorandum, dated May 20, 1968, use of appreciated

securities for repurchase of outstanding Great American
Holding Corp. common stock
Memorandum, dated February 8, 1968, transfer of excess

surplus to holding company -
Letter, dated March 15, 1968, to Hon. Richard E.

Stewart, superintendent of insurance, from William E.

Newcomb...
Repurchase of capital stock of Great American Insurance

Co..
Letter, dated May 27, 1968, to Commissioner of Internal

Revenue, from Great American Holding Corp-
Declaration of Allan Comrie in support of motion for order

requiring security, dated February 6, 1969.
Press release, dated January 14, 1969, Wall Street Con-

sultants, Inc.
Press release, dated February 12, 1969, Wall Street

Consultants, Inc.---
Minutes of meeting of the board of directors of Great

American Insurance Co., dated January 14, 1969.
Exhibit B-Transfer of $170 million market value of

securities to Great American Holding Corp.
Press release, dated February 25, 1969, Wall Street

Consultants, Inc.
Letter, dated April 23, 1969, to Richard A. Lydecker,

president, Great American Insurance Co., from
Richard E. Stewart, Superintendent of Insurance;
Jack Lavanhar, assistant chief-Property Bureau, State
of New York Insurance Department, re report on
special examination of declaration of extraordinary

dividend on January 14, 1969, dated April 2, 1969---
State of New York Insurance Department report on

special examination of Great American Insurance Co.
of New York after declaration of extraordinary divi-
dend of January 14, 1969, dated April 2, 1969.

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Additional information Continued
Document submitted for record January 28 and 29, 1970—Continued
2. January 29, 1970—Continued

Letter, dated April 25, 1969, to Hon. Richard E. Stewart,

from RAL, president, Great American Insurance Cos.,
re report on special examination of declaration of ex-

traordinary dividend on January 14, 1969..
Extracts from exchange offer to holders of common stock

of Great American Holding Corp., prospectus dated
September 30, 1968.-
Kaufman, Bernard R., Asst. General Counsel for Cor-

porate Matters, National General Corp., letter dated
July 2, 1970, to E. Weinberg, Wyman, Bautzer, Finell,

Rothman, and Kuchel..
3. Additional documents submitted for record:

Memorandum from Alan D. Alan, Carter, Berlind &

Weill, Inc., addressed to Gene, with attachments--
National General press release, dated September 2, 1968.
National General press release, dated September 26, 1968.
Clippings from the Wall Street Journal -
"Looking Ahead to '78,The Spectator .-
Excerpts from Regulation T of he Board of Governors

of the Federal Reserve System, as amended, effective

March 11, 1968 (12 CFR 220).
Alan, Alan D., Carter, Berlind & Weill, Inc., interoffice

memorandum, dated June 11, 1968, to Ed Netter, re

Gene Klein and GAH Order..
Lipton, Harold A., vice president and general counsel,

National General Corp., letter, dated September 26,

1968, to Carter, Berlind & Weill, Inc.-
Shilson, Thomas H., assistant vice president and asso-

ciate director, New York Stock Exchange, dated August
21, 1968, to Carter, Berlind & Weill, Inc., with en-

closure
Carter, Arthur L., president, Carter, Berlind & Weill,

Inc., letter, dated September 3, 1968, to New York

Stock Exchange.
Finding of advisory Committee of board of governors

of the New York Stock Exchange relating to violation of
Regulation T by Carter, Berlind & Weill, Inc.----

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INVESTIGATION OF MERGERS AND ACQUISITJONS BY CONGLOMERATE CORPORATIONS: NATIONAL GENERAL CORP.

WEDNESDAY, JANUARY 28, 1970

HOUSE OF REPRESENTATIVES,
ANTITRUST SUBCOMMITTEE (No.5)
COMMITTEE ON THE JUDICIARY

Washington, D.O. The subcommittee met at 10 a.m., pursuant to call, in room 2141, Rayburn House Office Building, Hon. Emanuel Celler (chairman of the committee) presiding.

Present: Representatives Celler, Rodino, Rogers, Donohue, Edwards of California, McCulloch, McClory, and Railsback.

Staff members present: Kenneth R. Harkins, chief counsel, Antitrust Subcommittee; James J. Faris, counsel; William B. Forti, economist; R. Frederick Jett, counsel; 0. Delk Simpson, investigator; and Howard W. Fogt, Jr., associate counsel.

The CHAIRMAN. The committee will come to order. The Chair wishes to read a statement. National General Corp. is the fourth company to be the subject of hearings by the House Antitrust Subcommittee in its investigation, of mergers and acquisitions by conglomerate corporations.

In August, the subcommittee studied Gulf & Western Industries, Inc.; in September, the activities of Leasco Data Processing Equipment Corp. were examined; and in November, the subcommittee heard representatives from International Telephone & Telegraph Corp. After the hearings on National General are concluded, two companies in the subcommittee's sample selected for intensive study will remain : Ling-Temco-Vought, Inc. and Litton Industries, Inc. Dates for public hearings on these companies will be announced subsequently.

National General Corp., although still a relatively small company, was selected for inclusion in the subcommittee's six company sample primarily because of its acquisition of Great American Holding Co. in the latter part of 1968. National General's acquisition of Great American Holding Co. is an example of a minnow swallowing a whale. In 1967, the Great American group was ranked 24th among the stock, mutual, and reciprocal fire and casualty groups in the United States. As of June 25, 1968, prior to its acquisition of Great American, National General had total assets of less than $207 million. A year later, after it acauired Great American, National General's assets increased to $1.05 billion, more than five times.

(1)

Another facet of the Great American acquisition involves the exploitation of the financial services holding company concept which the subcommittee examined in its hearings on Leasco. After National General acquired the Great American Insurance Group, it proceeded to apply the concept of "surplus surplus” in fire and casualty insurance company reserves which had been developed by Cogan, Berlind, Weill & Levitt. The investment portfolio of Great American, when it was acquired by National General, had securities in the amount of $525,356,339. After it was acquired by National General, Great American Insurance paid a dividend consisting of securities having a market value on February 8, 1969, of approximately $173 million. Ninety-nine percent of this dividend went to National General Corp. The subcommittee intends to scrutinize this transaction closely.

National General Corp. was founded in 1952 to acquire the motion picture theater circuit of National Theaters, Inc., whích was required to be divested by Twentieth Century-Fox Film Corp. pursuant to the 1951 antitrust case, United States v. Paramount Pictures Corp. Until 1961, when Eugene V. Klein became its president, the primary business of National General was the operation of motion picture theaters. In the period since Mr. Klein took over the company, to January 1, 1969, National General has had an active acquisition program. During this period, National General acquired 12 corporations and sold nine.

In 1960, National General's total revenues amounted to $46.5 million. By 1968, total revenues had increased to $115.8 million, an increase of 149 percent. Net income during this period had increased from $972,000 to $5.7 million, a 487 percent increase. Total assets in 1960 amounted to $19.3 million, and in 1968, total assets were $557.8 million, an increase of 1030 percent.

During these hearings, in addition to the Great American acquisition, the subcommittee will pay particular attention to the methods by which National General accomplished its acquisitions, and to the effect of the interlocking relationships of its officers and directors.

Witnesses for National General Corp. are:
Eugene V. Klein, director, chairman of the board, and President.
Harold A. Lipton, director, vice president, and secretary.

Marvin Finell, chairman of the operating committee of Great American Insurance Co., and general counsel, National General Corp.

Mr. McCulloch.
Mr. McCULLOCH. Mr. Chairman, I have a very brief statement.

It is a pleasure, indeed, to welcome the witnesses here this morning. I see some that I have known for a long time.

Let me assure the witnesses and the people who will appear this morning that it is again the committee's intention, as it always is, that the hearings be fair, just and reasonable.

It is our aim to make the most incisive, relevant, and detailed study possible of the political and economic significance of conglomerate mergers so that our legislative judgments may rest on the sound bedrock of fact.

In a few months, we will finish with the examination of the six companies in our sample. It is too early for responsible conclusions to be firmly drawn. Nevertheless, there is some convincing evidence that some of the conglomerate mergers have been motivated not by the

a

desire to provide the consumer with a better product at a lower price, but perhaps by a greed for gold embodied in financial machinations which have proved detrimental to the shareholders of some of the companies involved, as well as the public at large.

I am most particularly interested in hearing the details of National General's acquisition of Great American Insurance Co., its subsequent dividend of $173 million and the role played by the investment banking community in the takeover.

With these preliminary remarks in mind, Mr. Chairman, let me again assure the witnesses this morning that it is our desire to be scrupulously fair lest the legitimate interests of the Congress, the enforcement agencies, and the companies involved be prejudiced.

Mr. CHAIRMAN. Mr. McClory? Mr. McClory. Mr. Chairman, I have listened to the statements with some interest. I just want to say for the benefit of the witnesses that I approach the entire hearing with an open mind and without prejudice one way or the other.

I expect to benefit from the testimony, from the examination and cross-examination of witnesses, and to determine at the conclusion of this hearing, and the other hearings, as to what impact this may have on our entire free enterprise system, and what may be indicated insofar as any amendments to the laws are concerned.

I might just add that I am vitally interested in protecting and advancing the entire principle of private enterprise, not only with regard to competition within our Nation, but also the subject of our competitive position relative to other nations of the world and the laws under which businesses operate there.

It is with a mind as free from prejudice or preconceived notions as possible that I approach this entire hearing.

I welcome the testimony which we are about to hear.

The CHAIRMAN. Mr. Klein, will you step forward with your associates to the witness table?

TESTIMONY OF EUGENE V. KLEIN, DIRECTOR, CHAIRMAN OF THE

BOARD, AND PRESIDENT, NATIONAL GENERAL CORP.; ACCOMPANIED BY HAROLD A. LIPTON, DIRECTOR, VICE PRESIDENT AND SECRETARY; MARVIN FINELL, CHAIRMAN OF OPERATING COMMITTEE OF GREAT AMERICAN INSURANCE CO., AND GENERAL COUNSEL, NATIONAL GENERAL CORP.; AND THOMAS H. KUCHEL, COUNSEL, NATIONAL GENERAL CORP.

The CHAIRMAN. I notice the presence of former Senator Thomas Kuchel, of California.

We welcome you here, Senator. We have known you, of course, over the years. We know you as an eminent former Senator, a truly eminent statesman, now practicing law, and we wish you well. We welcome you here this morning.

Mr. Kuchel. Thank you, Mr. Chairman.
The CHAIRMAN. You might proceed with your statement Mr. Klein.
Mr. Klein. Thank you, Mr. Chairman.

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