'Tom's town' helped spur current exemptions for insurance industry from regulators

Tom Pendergast, Kansas City's infamous political boss of the '30s, wasn't brought down by vote rigging, patronage or ties to organized crime.

Blame bribes from insurance companies.

Kansas City and Pendergast played a critical, if overlooked, role in deciding how insurance would be regulated in America. Its impact is still felt today in legislation that largely exempts insurance from federal oversight and antitrust laws.

Only a few other industries and groups - ocean shipping, Major League Baseball and organized labor among them - have enjoyed similar exemptions. The insurance industry's exemption allows companies to share information and remain regulated by the states.

Pendergast ruled Kansas City for years, dispensing government contracts, commanding an army of supporters and directing a political machine that stretched all the way to Washington, D.C.

But his undoing was a $750,000 "fee" a group of insurance companies promised him in exchange for his support of their monopoly.

When news of the bribe reached Pendergast's political enemies, an investigation led to his 1939 indictment on charges of tax evasion. It also yielded evidence of widespread price-fixing and collusion in the insurance industry. Prosecutors charged the companies with violating antitrust laws.

But the industry appealed to backers in Washington. In 1945, Congress exempted the industry from almost all antitrust laws.

Pendergast got no such reprieve. His machine rusted while he served 15 months in prison. He died the same year one of his former supporters - Harry S. Truman - was sworn in as president.

-David Klepper/The Star