UNITED STATES DISTRICT COURT
        WESTERN DISTRICT OF NORTH CAROLINA
	BRYSON CITY DIVISION

        ____________________________________________
                                                   |
             WILLIAM C. HAMMEL,                    |
             ALAN J. BELLAMENTE,                   |
             et al.,                               |       MEMORANDUM ON
                                                   |  THE RELATIONSHIP BETWEEN
                  Plaintiffs                       |          BETWEEN          
                                                   |    STATE FARM MUTUAL AND
                   vs.                             |     STATE FARM INDEMNITY
                                                   |        (Attachment 2)
             STATE FARM MUTUAL AUTOMOBILE          |
             INSURANCE CO.,                        |      No. 2:99:CV-44-T
             STATE FARM INDEMNITY COMPANY,         |
             et al.                                |
                                                   |
                  Defendants                       |
        ___________________________________________|

        SHORT CAPTION: HAMMEL v STATE FARM



	Memorandum Concerning the Relationship between State Farm Mutual
	Automobile Insurance Company (Parent) and State Farm Indemnity
	Company (Subsidiary).


	I.  Facts Alleged

	1) State Farm Mutual Automobile Insurance Company provided
	   automobile insurance in the State of New Jersey for a number
	   of years until 1993.

	2) In 1991, State Farm Mutual Automobile Insurance Company
	   organized and caused to be incorporated State Farm Indemnity
	   Company, for the purpose of isolating its automobile insurance
	   business in the State of New Jersey.

	3) State Farm Indemnity is a wholly owned subsidiary of State
	   Farm Mutual Automobile Insurance Company, both being
	   incorporated in the State of Illinois.

	4) State Farm Mutual Automobile Insurance owns all, or a majority,
	   of the outstanding stock in State Farm Indemnity Company.

	5) In 1993, State Farm Mutual Automobile Insurance informed its
	   customers that it would no longer be providing auto insurance
	   in New Jersey.

	6) In 1993 State Farm Mutual Insurance Company offered to
	   provide auto insurance by its new company, State Farm
	   Indemnity Company.

	7) State Farm Mutual Automobile Insurance Company informed its
	   customers that they would still have their State Farm agent
	   and the same "good neighbor" service.
	
	8) State Farm Indemnity Company holds itself out to be a
	   totally separate and distinct operation from State Farm
	   Mutual Automobile Insurance Company and/or State Farm
	   Insurance Company.

	9) State Farm Mutual Automobile Insurance Company and State
	   Farm Indemnity Company share main offices at the same address,
	   with the same telephone number, specifically: One State Farm
	   Plaza, Bloomington, Illinois, with the common telephone number
	   309-766-2311.  They also share a World Wide Web Site, namely:
	   http://www.statefarm.com.

       10) Subsidiary, State Farm Indemnity Company and parent, State
	   Farm Mutual Automobile Insurance Company correspond with
	   their customers on stationery bearing the same letterhead,
	   and identical trade and/or service mark.

       11) State Farm Indemnity Company and State Farm Mutual Automobile
	   insurance Company share a sophisticated electronic "internal"
	   communication system, called "DESK".

       12) Terence Welsh, President of State Farm Indemnity Company
	   is also Regional Vice President of the parent, State Farm
	   Mutual Automobile Insurance Company.

       13) Laura P. Sullivan, a Director of subsidiary, State Farm
	   Indemnity Company is also Vice President and Actuary of
	   the parent, State Farm Automobile Insurance Company.

       14) State Farm Mutual Automobile Insurance Company and State
	   Farm Indemnity Company share a common Corporate Law Department.

       15) State Farm Indemnity Company, as a subsidiary, exists
	   solely for the purpose of offering State Farm Mutual
	   Automobile Insurance Company's product to customers in
	   the State of New Jersey.

       16) State Farm Indemnity Company freely shares claims
	   handling duties with its parent, State Farm Mutual
	   Automobile Insurance Company.

       17) Subsidiary State Farm Indemnity's employees are authorized
	   to, and do close out and/or terminate State Farm Mutual claims.

       18) Parent, State Farm Mutual Automobile Insurance Company uses
	   its subsidiary, State Farm Indemnity Company to promote fraud
	   and injustice toward the subsidiary's customers.


	II. Conclusions

	     While Plaintiffs can not, reasonably, challenge the legal
	corporate "personhood" of either State Farm Mutual or State Farm
	Indemnity, they can, and do question the reality of the separation
	of the two entities.  Plaintiffs believe, on information and
	reasonable investigation, that the purpose of the formation by
	the Parent of the Subsidiary was, and is, solely to insulate itself
	against any actions by its customers, while gaining an unfair
	advantage over, and systematically devising schemes to defraud and
	extort those very customers, through its patterns of racketeering
	activities, and other unlawful schemes. (See our accompanying
	Memorandum On The Racketeering Nature of State Farm's Misconduct,
	attachment 1 of the ammended complaint.)

	     As Esther Benevitz, an assistant to New Jersey State Assembly
	Woman Loretta Weinberg, rather bluntly put the relationship between
	the Parent and the Subsidiary, in conversation with Plaintiff
	Hammel: "That's right, because the reality is that, that they're
	a subsidiary, you know, this is a legal fiction.  The whole thing
	is a legal fiction, but it's legal and it does exist." (See
	Exhibit F of the amended complaint)
	
	     Based on the facts alleged above and Plaintiffs' experience
	in dealing with both State Farm Indemnity Company and, then,
	State Farm Mutual Automobile Insurance Company, not out of choice,
	but because the Subsidiary transferred Plaintiffs' claims to the
	Parent, and the Parent accepted them, there is no real separation
	between Parent and Subsidiary.

	     Indeed, internal documents of both the Parent and the
	Subsidiary show convincingly that the two, despite their status
	as separate persons, under the law, act as one.  The appearance
	of the veil of separation is an illusion, carefully conjured to
	allow either Parent, or Subsidiary, to perpetuate their schemes
	of fraud and extortion on their customers through their patterns
	of racketeering activities, and other unlawful schemes.

	     In U.S. v. BESTFOODS, No. 97-454 Cert 6th Cir, June 8, 1998,
	Justice Souter, in his opinion for a unanimous Court, after noting
	the general principle of corporate law, whereby a parent is not
	liable for the acts of its subsidiaries, says:

		"But there is an equally fundamental principle of
		corporate law, applicable to the parent-subsidiary
		relationship as well as generally, that the corporate
		veil may be pierced and the shareholder held liable
		for the corporation's conduct when, inter alia, the
		corporate form would otherwise be misused to accomplish
		certain wrongful purposes, most notably fraud, on the
		shareholder's behalf.  See, e.g., Anderson v. Abbott,
		supra, at 362 ("there are occasions when the limited
		liability sought to be obtained through the corporation
		will be qualified or denied"); Chicago, M. & St. P R. Co.
		v. Minneapolis Civic and Commerce Assn., 247 U.S. 490,
		501 (1918) (principles of corporate separateness "have
		been plainly and repeatedly held not applicable where
		stock ownership has been resorted to, not for the purpose
		of participating in the affairs of a corporation in the
		normal and usual manner, but for the purpose . . . of
		controlling a subsidiary company so that it may be used as
		a mere agency or instrumentality of the owning company");
		P. Blumberg, Law of Corporate Groups: Tort, Contract,
		and Other Common Law Problems in the Substantive Law
		of Parent and Subsidiary Corporations 6.01-6.06 (1987
		and 1996 Supp.) (discussing the law of veil piercing in
		the parent subsidiary context)."


	     THEREFORE, while both SFM and SFI, as separately
	incorporated "persons" as defined in 18 USCA 1961(3) may
	be treated as distinct persons under RICO, Plaintiffs
	maintain that because of the criminal activities of both
	the Parent and the Subsidiary; their unusual closeness, with
	State Farm Mutual Automobile Insurance controlling State Farm
	Indemnity Company as its "alter ego"; and in the general
	public interest, that the corporate veil should be allowed
	to be be pierced, between the Subsidiary, State Farm Indemnity
	Company, and its stockholder and controlling Parent, State Farm
	Mutual Automobile Insurance Company.


	Respectfully Submitted:


        William C. Hammel                     Alan J. Bellamente
        A-11 Moose Branch Road,               A-11 Moose Branch Road,
	Sweetwater Apartments 1A,             Sweetwater Apartments 8A,
        Robbinsville, NC 28771                Robbinsville, NC 28771
        (828) 479-1547                        (828) 479-1547


                   /S/                                  /S/
        -------------------------------      ------------------------------
        William C. Hammel                     Alan J. Bellamente

        DATE: February 4, 2000                DATE: February 4, 2000

	_______________________________________________________________