In Williams’ suit against National Dance Club, Schad was represented by attorney Irwin Paul. There were a few hearings, arguments by both sides, moves for further hearings, but no settlement.
Meanwhile Schad’s dance club went on its profitable way, luring the old, the bored, the refugees from loneliness. But Harry Karafin wrote no more stories about its continuing operations.
What had happened was that he had gone to see James Schad and they had had a long talk. Shortly afterwards, Karafin notified a partner in Zanvin’s law firm that he thought he could get Schad to agree to a settlement for poor old Edward Williams. Then things began to happen: Schad suddenly dropped Irwin Paul as his attorney, signed with the firm of Karafin’s close friend, Albert Gerber, and agreed to repay Williams $2400 — a fraction of the money he had charged him.
Despite the agreement, Schad has not settled completely with Williams and still owes him some money. He had, of course, settled with Karafin long ago. National Creations paid Karafin more than $2000 for "services rendered."
PERHAPS THERE IS no significance at all in the fact that settlement wasn’t reached until Albert Gerber’s law firm came into the picture. But attorney Gerber and reporter Karafin are very close associates and there is evidence that they have worked together in the past. Gerber, for instance, has been very deeply involved with mutual insurance companies writing fire and auto casualty policies.
"And Philadelphia," as one State Insurance Department investigator wistfully observed not long ago, "is the only city in the country where you can buy and sell mutual insurance companies." This despite the fact that its policyholders are supposed to be the legal owners of mutuals.
Nevertheless, dozens of companies have been "sold" by quick-buck operators and the loss to Pennsylvania policyholders has been fantastic. This has been done through the sale of a mutual’s "management contract." Normally such a contract is assigned to a team of top management experts who attempt to improve a company’s financial picture. But, in the mutual insurance game, smart contract owners have been able to turn many an investment into sizeable profits by such devices as renting offices to the company, charging it a fee for law services, and substituting its financial reserves with worthless stocks or de-bentures from another one of their companies.
This has left millions of luckless policyholders holding the bag, and if their defunct company was a so-called "assessable mutual," they are being held liable for part of its losses.
All-in-all, a messy sort of business — though there are some top quality small mutuals operating in the state.
Attorney Albert Gerber, along with banking executive Raymond Freudberg, successfully operated Empire Mutual Insurance for a number of years. Then suddenly in 1959 they decided to sell its management contract to a financial wizard named Seymour Rosenfield.
Not too long afterwards the State Insurance Department ordered Empire to close its doors and Rosenfield was charged with fraud and embezzlement.
The Empire case stunk. And so did the cases of Wissahikon Mutual and Lawn Mutual and Palmyra Mutual and Commonwealth Mutual and the dozens of others involving small mutuals which were taken down the river.
By last summer the stink had gotten so bad — with losses to Pennsylvania policyholders alone topping the $30 million mark — that a house investigating committee in Harrisburg started looking into the matter. One of the witnesses called was Leopold Weiner, the operator of Safeguard Mutual, a firm that seemed to be having its troubles.