Mr. HARKINS. At that time, Mr. Finell was chairman of the board of Republic? Mr. LIPTON. To the best of my knowledge, that is correct. Mr. HARKINS. Mr. Chairman, I will offer that document for the record. (The document referred to appears at p. 139.) The CHAIRMAN. I think we will recess the meeting at this point. We will resume tomorrow morning at 9:30 instead of 10 o'clock. (Whereupon, at 12 o'clock noon the subcommittee recessed, to reconvene at 9:30 a.m., Thursday, January 29, 1970.) INVESTIGATION OF MERGERS AND ACQUISITIONS BY CONGLOMERATE CORPORATIONS: NATIONAL GENERAL CORP. THURSDAY, JANUARY 29, 1970 HOUSE OF REPRESENTATIVES, The subcommittee met at 9:30 a.m., pursuant to recess, in room 2141, Rayburn House Office Building, Hon. Emanuel Celler presiding. Present: Representatives Celler, Donohue, Edwards (Calif.), 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; O. Delk Simpson, investigator; and Howard W. Fogt, Jr., associate counsel. Mr. DONOHUE (acting chairman). The committee will please come to order. Counsel, will you proceed with your questions. Mr. KUCHEL. May I most respectfully, Mr. Chairman, ask a question at the beginning? Mr. DONOHUE. Yes. Mr. KUCHEL. Chairman Celler will be here shortly? There were some matters that we hoped to proceed with in his presence. Mr. DONOHUE. The Chair is informed that Chairman Celler is on his way and should be here shortly. Mr. KUCHEL. Thank you. 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. Mr. HARKINS. Mr. Chairman. Mr. Klein, today we will start with an examination of the Great American Holding Corp. acquisition. On May 28, 1968, the National General executive committee met, to consider acquiring stock of the Great American Holding Corp.; (35) is that so? This question is based on minutes of a meeting of the executive committee of the board of directors. Mr. KLEIN. I am questioning the dates. I am sure that is correct. Mr. HARKINS. On that date, the executive committee was composed of Eugene V. Klein, Irving H. Levin, Samuel Schulman, Jack M. Ostrow, and Seymour F. Simon? Mr. KLEIN. That is correct, sir. Mr. HARKINS. And Mr. Lipton was present as secretary at that meeting? Mr. KLEIN. That is correct, sir. Mr. HARKINS. Now, customarily, do Mr. Ostrow and Mr. Simon attend executive committee meetings? Mr. KLEIN. Customarily all members of the executive committee make every attempt to attend every executive committee meeting. There is only one member of the executive committee who does not reside on the west coast-Mr. Seymour Simon-so he is absent more than the other members. Mr. HARKINS. At this particular committee meeting, Mr. Ostrow and Mr. Simon were not at the meeting? Mr. KLEIN. Yes. Mr. HARKINS. Do you have copies of the minutes before you? If you do not, I will hand you this document. The minutes state: Mr. Klein advised the meeting that investigation had been made of Great American Holding Corporation, with a view to making an investment on behalf of the Corporation by the purchase of shares of common stock of Great American Holding Corporation. The last paragraph on page 1 states. Mr. Klein presented information about the operations and investment portfolio of Great American Holding Corporation. Its annual report for the year ended December 31, 1967, and proxy statement for a stockholders' meeting which was scheduled for and held on April 23, 1968, were also discussed. Mr. Klein pointed out that it was of the utmost importance that the information being discusssed here today be zealously guarded so as to endeavor to prevent speculation or unusual activity in the stock of Great American Holding Corporation or National General Corp. Mr. Klein further stated in order to avoid a runaway market in the price of stock of Great American Holding Corporation he suggested that the information of the corporation's stock purchases be given only to the directors on the Executive Committee, and only to those officers and employees actually involved in effectuating the purchase. Is that a correct reading of the minutes, sir? Mr. KLEIN. Yes, sir. Mr. HARKINS. As of that date, May 28, 1968, what investigations of the Great American Holding Corp. stock investment portfolio had been made? Mr. KLEIN. A review of their entire holdings which was obtained from the annual reports of Great American Holding company and from the various statements filed with State insurance commissioners throughout the Nation. Mr. HARKINS. Was the size of the investment portfolio an important consideration at this meeting? Mr. KLEIN. Yes, it was an important consideration, as was all of the other financial information of the company. Mr. HARKINS. Why was it important to keep the decision regarding the acquiring of Great American Holding Corp. stock secret? Mr. KLEIN. I think the answer to that is perhaps obvious. I believe it would be very bad practice, and I am sure that in keeping with SEC regulations and all disclosure regulations, we have been advised by counsel that at all times the only people to know about moves of this nature are to be the top executives of the corporation, and we try to keep the information in as small a group as possible so as to stop any rumors, to stop any speculation, and to stop any gossip. Mr. HARKINS. Were you purchasing this stock with a view toward acquisition of the company? Mr. KLEIN. We purchased the stock initially for investment, sir. Mr. HARKINS. If you were making an investment, would it be advantageous to have the stock go up? Mr. KLEIN. Our purpose is not to make stock go up or down but to keep the market at an even keel and just buy and/or sell on an orderly basis. Mr. HARKINS. At this meeting, did the executive committee decide to acquire 500,000 shares of Great American stock at a price not to exceed $55 per share? Mr. KLEIN. They decided, as the minutes state, that they would authorize the officers of the company to purchase the common stock of Great American Holding Co. in an amount not to exceed 500,000 shares and at a price not in excess of $55 a share. They gave us the authorization to proceed to purchase up to a half a million shares of stock with a ceiling price. Mr. HARKINS. And at that meeting did the committee decide "to employ one or more brokerage firms.. "? Mr. KLEIN. No, sir. That was left to the discretion of management. Mr. HARKINS. What was the meaning here, then? Mr. KLEIN. The meaning is that it was within the discretion of management. Mr. HARKINS. Were any brokerage firms discussed? Mr. HARKINS. Who were your customary brokerage firms on May 28? Mr. KLEIN. We used a few brokerage firms. Allen & Co. was a brokerage firm used by the corporation; Kleiner, Bell was a brokerage firm used by the corporation: White Weld was a brokerage firm used by the corporation. I believe Lehman Bros. was a brokerage firm used by the corporation. Oppenheim was a company. We used many. Mr. HARKINS. Carter, Berlind? Mr. KLEIN. The corporation, no, sir. Mr. HARKINS. Have you used, or members of the executive committee used, Carter, Berlind in a personal capacity, to your knowledge? Mr. KLEIN. Yes. I think that I personally used Carter, Berlind for some transactions. Mr. HARKINS. Mr. Klein, May 28, 1968, you knew, did you not, that AMK Corp. was negotiating a merger agreement with Great American Holding Co.? Mr. KLEIN. I did not. Mr. HARKINS. When did you first find out about negotiations between AMK and Great American Holding? Mr. KLEIN. At the time the board tape announced the AMK merger. That was the first inkling I had AMK was involved. Mr. HARKINS. Until that public announcement, you had no discussions with any persons concerning the fact that AMK Corp. was negotiating with Great American Holding Co. ? Mr. KLEIN. That is correct, sir. Mr. HARKINS. On May 28, 1968, were you familiar with the document prepared at that time by Carter, Berlind entitled "Financial Services Holding Co."? Mr. KLEIN. Yes, sir. Mr. HARKINS. Í hand you the document, sir. Do you have a copy of the document that was prepared by Carter, Berlind? Mr. KLEIN. Yes, sir. Mr. HARKINS. When did you first see this document? Mr. KLEIN. Approximately a month before the executive meeting. Mr. HARKINS. Would it have been in February or March or April? Mr. KLEIN. I would approximate March or April, sir. Mr. HARKINS. What were the circumstances under which you saw this document? Mr. KLEIN. I received a call from a Mr. Alan Alan, who was a registered repesentative of Carter, Berlind and Weill, who stated to me that Mr. Arthur Carter, the head of the firm, would like to call me to discuss some ideas and thoughts about a proposed line of endeavor for National General. I told him to have Mr. Carter call me. Mr. Carter called me and said he thought it would be very interesting if National General would look into the insurance field and look at some companies in the insurance business, in the insurance industry, with a view toward making a possible investment and perhaps a view toward a possible acquisition. I asked them to submit what information he had to me in writing so that I could study the information. Shortly thereafter, I received this report. Mr. HARKINS. The document bears a stamp that reads "Transmitted with the compliments of Alan D. Alan." Mr. KLEIN. Yes. Mr. HARKINS. And Mr. Alan D. Alan is the gentleman that you have been testifying was having conversations with you? Mr. KLEIN. Mr. Alan Alan was the gentleman that asked me for permission for Mr. Carter to call me re this. That is the gentleman, yes, sir. Mr. HARKINS. Do you know Mr. Edward Netter? Mr. KLEIN. Yes. Mr. HARKINS. When did you first meet with Mr. Netter? Mr. KLEIN. On or about June 10, 1968. Mr. HARKINS. You talked with Arthur Carter first about the socalled Netter report, and this was before the executive committee meeting? Mr. KLEIN. Yes. Mr. HARKINS. At that time, you did not talk with Mr. Netter? Mr. HARKINS. In the conversation with Mr. Carter, did he outline the theories of the document? Mr. KLEIN. No, sir. |