This report is submitted by the Special Commission of the Supreme
Court of Illinois appointed under and pursuant to the Order entered by
this Court on June 17, 1969.
1. The Supreme Court of Illinois on June 17, 1969 entered an
order under the caption of "People v. Isaacs, No. 39797" (herein
called the "Order") referring to a motion (herein called the "Motion")
filed with the Clerk of the Court on June 11, 1969 by one Sherman H.
Skolnick and one Harriet Sherman requesting that the Court investigate
its decision in People v. Isaacs, No. 39797 (37 Ill. 2d 205).
2. In its Order, the Court, on its own motion, appointed a
Special Commission (herein called the "Commission") to investigate the
charges contained in the Motion insofar as they relate to the integrity
of the judgment entered by the Court in People v Isaacs, No. 39797; and
in said Order the Court provided for the method of selection of the
Commission and for completion of the work of the Commission on or
before August 1, 1969.
3. On June 18, 1969, the day following the entry of the Order, the Court issued a statement in explanation of "the reasons why
the Supreme Court did not convene the Illinois Courts Commission with
respect to the charges attacking the integrity of the judgment entered
in the case of People v. Isaacs." The Court in this statement, which
was furnished to the members of the Commission and to the press and
news media, said, among other things, that the Court regarded of
paramount importance the fact that the confidence of the Bar and the
public in the integrity of this Court not be further impaired.
4. Under the authority contained in the Order, Henry L. Pitts
selected Mason Bull of Morrison, Illinois to be a member of the
Commission; Frank Greenberg selected Edwing C. Austin of Chicago,
Illinois to be a member of the Commission; and Henry L. Pitts and Frank
Greenberg, acting jointly, selected Daniel M. Schuyler, Sr. of Chicago,
Illinois to be a member of the Commission.
5. As evidenced by the Report on the Organization of the special
Commission heretofore filed with the Clerk of the Court, all five
commissioners so designated accepted appointment to serve as
Commissioners under the authority contained in the Order and within the
limitations therein set forth.
6. The organization of the commission was completed and it held
its first formal meeting, on Saturday, June 21, 1969.
7. The Commission selected Frank Greenberg to serve as its
Chairman and Henry L. Pitts to serve as its Vice Chairman.
8. Promptly upon its organization, the Commission selected John
Paul Stevens of Chicago, Illinois to serve as its counsel. With the
consent and approval of the Commission, Mr. Stevens called to his
assistance, to serve as assistant counsel, Jerome H. Torshen of
Chicago, Illinois, and to serve as associate counsel Kenneth Manaster,
William J. McNally, Nathaniel Sack and Joseph E. Coughlin.
The Commission appointed James G. Nussbaum of Price Waterhouse &
Co. as its accounting consultant.
The Commission also engaged the services of such investigators and
other staff as it deemed requisite for the carrying out of its
9. All of the Commissioners, counsel to the Commission, and all
of the members of the legal staff of the Commission serve without
compensation. Mr. Nussbaum, as accounting consultant, serves without
The members of the Commission and counsel have advanced from their
own funds, subject to reimbursement by the Court in due course,
expenses of the investigation.
10. Through the courteous cooperation of Chief Judge John S.
Boyle of the Circuit court of Cook County, Roy O. Gulley, Director of
the Administrative Office of the Illinois Courts, and Sheriff Joseph I.
Woods of Cook County, the Commission was enabled to borrow a courtroom
in the Civic Center Building in which to conduct its public hearings.
The Chicago Bar Association and the Illinois State Bar Association have
also furnished services and facilities to the work of the Commission.
11. The commission adopted Rules of Procedure, a copy of which is
included in the record of the investigation. The rules provided, inter
alia, for the designation of certain persons as "interested parties" in
13. Sherman H. Skolnick applied to the Commission for leave to be
designated an "interested party." A copy of his application is part of
the record of the investigation. His application was denied by the
14. The Commission invited Justice Roy J. Solfisburg, Jr.,
Justice Ray I. Klingbiel, Theodore J. Isaacs and Robert M. Perbohner to
apply for leave to be designated an "interested parties." Such
applications were made orally on July 14, 1969 by Justice Solfisburg,
Justice Klingbiel and Theodore J. Isaacs and their applications were
granted by the Commission.
15. Justice Solfisburg and Justice Klingbiel were represented in
the public hearings held by the Commission by Mr. Lambert M.
Ochsenschlager and Mr. William C. Murphy of Aurora.
Mr. Albert E. Jenner, Jr. and Mr. Robert F. Hanley of Chicago,
Illinois appeared for Theodore J. Isaacs. An earlier appearance by Mr.
Harry J. Busch of Chicago, Illinois for Theodore J. Isaacs was
withdrawn with the consent of the Commission.
16. The Commission held public hearings for the taking of
testimony and other evidence in Courtroom 1501 of the Civic Center
Building on July 14, 15, 16, 1969 and on July 21, 22 and 23, 1969.
Oral summations were presented by Mr. Stevens, as counsel to the
Commission, and by Mr. Ochsenschlager and Mr. Murphy, on behalf of
Justices Solfisburg and Klingbiel, on July 24, 1969 in open hearing.
Leave was granted to counsel for Isaacs to submit a written summation
and a copy of the statement presented by his counsel at 5:27 p.m. on
July 29, 1969, together with a copy of a "Corrected and Amended"
statement submitted as a substitute therefor at 4:00 p.m. on July 30,
1969, is being filed with the exhibits received by the Commission.
17. In preparation for the public hearings, counsel to the
Commission and the staff took the depositions of 26 prospective
witnesses, and interviewed a large number of additional witnesses, or
potential witnesses, and examined books, documents and records at the
Civic Center Bank and elsewhere.
18. In the course of the public hearings the Commission examined
21 witnesses and received over 100 exhibits. A list of the witnesses
examined by the Commission is open hearing and a list of the exhibits
received by the Commission appear in Appendix A and Appendix B to this
20. In accordance with the Order, the copies of the Statements of
Economic Interests and the copies of retained income tax returns of
Justice Solfisburg and Justice Klingbiel have not been made a part of
the public record of the investigation but have been considered and
examined by the Commission. In accordance with the Commission's
interpretation of the Order, copies of these documents are not filed
with this Report but will be made available by the Commission to the
Court upon its request.
21. The Order appointing the Commission made reference to the Motion filed by Sherman H. Skolnick and Harriet Sherman on June 11, 1969 and the amendment filed on June 19, 1969.
22. The Order appointing this Commission directed it "to investigate the charges contained in the [Motion] insofar as they relate to the integrity of the judgment" entered by the Court in the case of People v. Issacs.
23. We have referred at paragraph 3 above to the statement issued
by the Court on June 18, 1969. The Commission has regarded the
statement as an explanation of the action taken by the Court in
appointing the Special Commission under the Order of June 17, 1969. A
copy of the statement appears as Appendix E to this Report.
24. In accordance with our understanding of the mandate given to
us by the Court, we have focused our investigation on those charges
made in the Motion that can fairly be said to relate to the integrity
of the judgment in the Isaacs case. We have construed the reference to
the "integrity of the judgment in People v. Isaacs," as a method of
differentiating those charges in the Motion that are germane to our
investigation from other charges and allegations---largely of a
"shotgun" variety---made by Mr. Skolnick and Mrs. Sherman.
In the course of investigating the pertinent charges, other
information came to our attention which we deemed to be equally
relevant to the integrity of the judgment in People v. Isaacs and we
have not hesitated to include such information in the Commission's
25. We deem the Commission's function to be investigatory and not
adjudicatory. Therefore we do not intend that this Report be
interpreted as a determination of the rights or liabilities of any
person. However, we consider that the thrust of the charges we have
been called upon to investigate is that Justice Solfisburg and/or
Justice Klingbiel were guilty of such acts of impropriety, or gave such
an appearance of impropriety, as to create a substantial doubt of their
impartiality, fairness and integrity in the decision in the Isaacs
case; and that their conduct was such as to seriously compromise the
confidence of the public in the integrity of the decision. In that
sense, the integrity of the judgment in the Isaacs case is inseparable
from the question of whether Justice Solfisburg and/or Justice
Klingbiel have so conducted themselves as to raise substantial doubt of
their own impartiality, fairness and integrity in participating in the
26. The Commission, understanding the importance of the fact that
the confidence of the Bar and the public in the integrity of the Court
should "not be further impaired," determined that its function could
properly be discharged only by the taking of testimony and evidence in
the public hearings, and it made this determination in accordance with
the discretion given to it in this Court's Order of June 17, 1969.
27. Several days prior to the date (July 14, 1969) scheduled for
the opening of the public hearings, Theodore J. Isaacs filed a motion
with the Court stating, in essence, that the Commission had no right to
hold public hearings and asking that the Court direct the Commission to
maintain its investigation as confidential. The Commission responded
to Isaacs' motion and respectfully asked that its discretion in the
matter of holding public hearings should not be interfered with by the
Court. The Court entered an order dismissing the motion of Theodore
27-A. On July 28, 1969, counsel for Justices Solfisburg and
Klingbiel filed with the Court a "Motion for clarification of prior
court order and for instructions to Special Commission," asking that
the Court inform the Special Commission "to avoid conclusions and the
recommendation of sanctions;" and that the Court order the Commission
"to keep its findings confidential until a complaint, if any, is filed
in this cause." The Commission responded with a brief answer. On July
29, 1969, the Court denied the motion in a minute order. The
Commission has informed the Court that it never has had any intention
of releasing its report to anyone except by filing it as directed in
the Order of June 17, 1969.
28. Except as the Commission has examined and considered the
Statements of Economic Interests filed by the Justices of the Supreme
Court and the copies of retained income tax returns of Justice
Solfisburg and Justice Klingbiel (and except for certain biographical
data contained in Section A), this Report is based entirely upon the
testimony and evidence, oral and written,taken and received in the
course of its public hearings.
Section A. The Principals in the Investigation
(1) Theodore J. Isaacs of Chicago, Illinois is an attorney at law and a member of the firm of Burton, Isaacs, Bockelman & Miller, with
offices at 111 West Washington Street, Chicago, Illinois. He is 57
years of age. He was admitted to the Bar in Illinois in 1934.
Mr. Isaacs served as campaign manager in the successful campaign of Otto
Kerner for the office of Governor of Illinois in 1960. Mr. Isaacs
served as Director of Revenue of Illinois from January or February of
1961 until September 1963.
(2) Robert M. Perbohner, a former resident of Chicago, who has
maintained his residence at the Faust Hotel in Rockford, Illinois in
recent years, is 69 years of age. He has participated in political
activities since the 1920's when he was associated with William Hale
Thompson, a Republican, and is presently serving as a member of the
Illinois Commerce Commission pursuant to appointment by Governor Otto
Kerner. He is not a lawyer. He is presently convalescing from a hip
operation performed in early June, 1969, in Woodruff, Wisconsin.
(3) Robert E. Dolph was a member of the Illinois Commerce
Commission at the time of his death in June 1968, at the age of 51. He
was admitted to the Illinois Bar in 1940 and served as campaign manager
for Justice Solfisburg in 1960. He was a resident of Aurora, Illinois.
He was appointed to the Illinois Commerce Commission in August, 1963 by
Governor Otto Kerner and reappointed for a five-year term in 1968.
(4) Roy J. Solfisburg, Jr. of Aurora, Illinois is the Chief
Justice of the Supreme Court of Illinois. He is 53 years of age and
was admitted to the Bar in Illinois in 1940. He was elected to the
Supreme Court from the Sixth District (an area now included in the
Second District) in June, 1960.
(5) Ray I. Klingbiel of Moline, Illinois has served as a Justice
of the Illinois Supreme Court since July 24, 1953. He previously
served as city attorney of Moline for 12 years and as Mayor of East
Moline for 6 years. He was most recently elected to the Court on
November 5, 1966. He is 68 years of age.
Section B. The Judgment in People v. Isaacs
(6) On December 16, 1964, certain indictments were returned by
the Sangamon County Grand Jury against Theodore J. Isaacs, et al., in
Case No. 3549-64. These indictments were nolle prossed on April 28,
1965 (Tr. 1282).
(7) On April 29, 1965 certain indictments were returned by the
Sangamon County Grand Jury against Theodore J. Isaacs and John J. Lang in Case No. 1249-65 (Tr.1282).
(8) On November 12, 1965 the Circuit Court of Sangamon County
entered an order sustaining motions to dismiss the indictments of both
defendants Isaacs and Lang. On December 9, 1965 a Notice of Appeal to
the Illinois Supreme Court from the order of the Circuit Court of
Sangamon County was filed by the State's Attorney of the County (Ex.1).
(9) On February 7, 1966 the appeal was docketed in the Illinois
Supreme Court as Case No. 39797 (People v. Isaacs, et al.) (Ex. 4).
(10) On September 15, 1966 oral argument was heard by the Supreme
Court in the Isaacs case (Ex. 4).
(11) On September 15, 1966, following the oral argument, an
impression vote was taken by the members of the Court. The results,
according to the agenda book of Justice House, were as follows
|Underwood|| - ||"?"|
|Solfisburg|| - ||"Affirm" (the action taken by the lower court)|
|House|| - ||"Affirm"|
|Klingbiel|| - ||"Affirm"|
|Schaefer|| - ||"Reverse?" (the action taken by the lower court)|
(12) Justice Hershey was present at the oral argument but did not
vote. The impression vote is intended only as a preliminary indication
of the views of the members of the Court following the oral argument
(and in most cases before any real study is given to the briefs or
record in the case) and is not meant to be binding upon any of the
Justices. The writing of the opinion in the Isaacs case was assigned
to Justice Underwood pursuant to the normal rotation which is used by
the Court in the assignment of the writing of opinions (Tr. 40, 138).
(13) Justice Underwood's opinion was not prepared in time for it to be discussed at the November, 1966 term (Tr. 40, 138).
(14) Justice Underwood's opinion was discussed at the January,
1967 term (which began on January 9, 1967) and was rejected by a 4 to
2 vote (Tr. 48, 139, 831). The Underwood opinion would have required
both defendants Isaacs and Lang to stand trial as to Counts V, XI,
XXVI-XXIX and XXXI-XXXIV of the indictment (Ex.12).
Justices Ward and Kluczynski originally joined the Court at the
January, 1967 term. The briefs and abstracts, and a recording of the
oral argument, in the Isaacs case were made available to them. Justice
Ward disqualified himself from the Isaacs case since he had been the
State's Attorney for Cook County and had done work in that capacity
relating to the Isaacs case.
Justice Kluczynski passed when the first vote was taken on the
Underwood opinion. When that vote turned out to be 3 against adoption
of the Underwood opinion and 2 in favor of adoption of the Underwood
opinion, Justice Kluczynski voted against the adoption of the Underwood
opinion, making the vote 4 to 2 and thus rejecting the opinion (Tr.
The vote was as follows (Tr. 48, 831):
|Ward|| - ||Not participating|
|Kluczynski|| - ||Against (adoption of Underwood opinion)|
|Underwood|| - ||For (adoption of Underwood opinion)|
|Solfisburg|| - ||Against|
|House|| - ||Against|
|Klingbiel|| - ||Against|
|Schaefer|| - ||For|
(15) Under the normal rotation system the drafting of a new opinion in the Isaacs case would have fallen to Justice House. The drafting of the new opnion was, however, assigned to Justice Klingbiel, who was next after Justice House in the rotation (Tr. 57, 147). While no satisfactory explanation appears as to why the opinion was assigned to Justice Klingbiel out of the normal order of rotation, we do not attribute any particular significance to this circumstance.
(16) Justice Klingbiel's opinion was adopted by a 4 to 2 vote at the March, 1967 term (which began on March 13, 1967) (Ex. 2). The vote was as follows:
|Ward|| - ||Not participating|
|Kluczynski|| - ||For (adoption of Klingbiel opinion)|
|Underwood|| - ||Against (adoption of Klingbiel opinion)|
|Solfisburg|| - ||For|
|House|| - ||For|
|Klingbiel|| - ||For|
|Schaefer|| - ||Against|
The Klingbiel opinion required defendant Lang to stand trial as to
Counts XXVI-XXIX and XXXI-XXXIV and affirmed in all other respects the
quashing by the Sangamon County Circuit Court of the other Counts of
the indictment (Ex. 2).
(17) On April 12, 1967 the State's Attorney for Sangamon County
filed a petition for rehearing with respect to Count X of the
indictment (Ex. 10). The Underwood and Klingbiel opinions did not
differ as to the disposition of Count X (Ex. 12. 2). The petition for
rehearing was denied on May 16, 1967, and the mandate issue on May 27,
1967 (Ex. 3, Ex.5). The Justices voted on the petition for rehearing
|Ward|| - ||Not participating|
|Kluczynski|| - ||Against rehearing|
|Underwood|| - ||For rehearing|
|Solfisburg|| - ||Against rehearing|
|House|| - ||Against rehearing|
|Klingbiel|| - ||Against rehearing|
|Schaefer|| - ||For rehearing|
(18) Justice Schaefer prepared a dissenting opinion (at least in part) to the majority opinion in People v. Isaacs (Tr. 186; Ex.16).
The dissent concludes that Counts VI and VII (denominated by the
parties as "the detailed Section 75 Counts") should not have been
quashed. This dissenting opinion was never completed or filed
(Tr.187). Neither Justice Underwood nor Justice Schaefer indicated
their dissent when the opinion was published (Tr. 187).
(19) It is not uncommon for Justices of the Illinois Supreme Court
to fail to note their dissent to opinions against which they voted.
The impression is thus given to the Bar and the public that an opinion
was unanimous when in fact it may have been adopted by a divided court
Section C. The Civic Center Bank and Trust Company
(20) In 1964 a group of persons conceived the idea of organizing
a bank in the Old Town area of Chicago. This group consisted
principally of David X. Meyers, Edward P. Meyers, Ronald Landsman and
Martin Gordon. Some time in the latter part of 1964 or the early part
of 1965, this group (which has sometimes been called in the testimony
the antecedent group ) decided that the proposed bank should have its
banking quarters in a building at the northeast corner of LaSalle and
Randolph Streets in Chicago, Illinois, adjacent to the Sherman Hotel
and immediately across the street from the Civic Center Building (Tr. 1387, 1390).
(21) In March or April of 1965 this antecedent group came to
Theodore J. Isaacs for help in organizing the proposed bank and
obtaining a charter from the Department of Financial Institutions of
the State of Illinois under the Illinois Banking Act. Isaacs had never
had any experience in organizing a bank or in the field of banking law,
and he disclosed this fact to the members of the antecedent group who
called upon him. Isaacs was nonetheless engaged to act as counsel for
the group in the proceedings which would be necessary for the
organization of the bank, the obtaining of a state charter, and
obtaining the necessary approval by the Federal Deposit Insurance
Corporation (Tr. 1389, 1390-91).
(22) Isaacs consulted with a number of persons, including officers
of The First National Bank of Chicago and an attorney or attorneys
experienced in the banking field. He then went to the Department of
Financial Institutions of the State of Illinois, headed by Joseph E.
Knight (who had served with Isaacs in the cabinet of Governor Otto
Kerner), in an effort---which proved successful---to obtain a charter
for the bank. The charter was issued to a group of persons who had
been formed by the "antecedent group" to act as the "organizing group"
for the bank. The antecedent group, the organizing group, and Isaacs
continued to have repeated contacts in the necessary work of organizing
the bank and obtaining a state charter and the approval of the FDIC
(Tr. 1391, 1402).
The bank which was thus organized and chartered is the Civic Center Bank and Trust Company in Chicago, Illinois and is hereinafter,
for convenience, sometimes referred to by the symbol "CCB".
(23) Although Isaacs has never been a director of CCB, he was
unquestionably an influential and important person in the organization
of the bank and has continued to be so. He did not limit his activity
in the management of the bank to purely legal services (Tr. 481, 503-04,
532, 1099, 1104, 1301-08, 1339-40, 1391-1402, 1405-06, 1461; Ex. 26-A -
16-I, 33-B, 33-D, 78, 81, 114,116-119).
(24) In July of 1965 an application to organize the Civic Center
Bank and Trust Company was filed with the Office of the Department of
Financial Institutions of the State of Illinois (Tr. 1389).
(25) On December 16, 1965 a meeting of subscribers to CCB stock
was held, at which a proposed Board of Directors was selected.
Following the meeting of subscribers, a meeting of the members of the
prospective board of Directors took place. Theodore J. Isaacs was
appointed "for an indefinite period" as general counsel for the bank.
He acted as Secretary of the Board and sat with the Board at a number
of its meetings (Tr. 1103-04, 1107, 1178; Ex. 115).
(26) Isaacs has acted as de facto "Secretary" of CCB since its
inception, although there is no indication in the bank records of his
appointment or election to this position (Tr.1179-80,1339-40, 1461).
(27) On January 21, 1966, Joseph E. Knight, the Director of Financial Institutions, issued a charter to CCB authorizing its
operation on the basis of the issuance of $1,000,000 of capital stock,
consisting of 100,000 shares at a par value of $10 per share, with a
$500,000 surplus and a $500,000 reserve account (Tr. 2713; Ex. 26-A-26-I).
(28) On January 21, 1966 a meeting of the Board of Directors of
CCB was held in the Directors' Room of The First National Bank of
Chicago. Isaacs was present at and acted as Secretary of the meeting
(Tr. 1082; Ex. 26-A-26-I).
(29) The eight page of the minutes of the January 21 meeting is
missing from the bank's copy of the minute books (Tr. 227-29, 1011;
E. 26-G - 26-H). The bank was unable to supply any information as to the
contents of the missing page and none of the witnesses connected with
the bank gave a satisfactory explanation of why the page was missing.
(30) On the ninth and tenth pages of the January 21 minutes the
following reports by Isaacs as "Acting Cashier" appear:
"The Acting Cashier then reported that he had
concluded a clearance loan with The First
National Bank of Chicago in the amount of
approximately $300,000.00, which loan represented
outstanding shares that had not yet been issued to
the public. These shares are to be held in
reserve to foster new accounts and will be
dispensed to new business accounts from time to
time until such time as they are sold. As these
shares are picked up from this date henceforth,
there will be interest charges to be added to the
$20.00 per share cost.
"The Acting Cashier also indicated that as a
result of careful handling and avoiding the even
remote possibility of having the ownership of this
bank fall into the hands of one or two
individuals, the bank is now owned by
approximately 500 stockholders, all of whom should
be of great assistance to the bank's Directors and
Officers in establishing an excellent beginning." (Ex. 26-H - 26-I)
(31) The term "clearance loan" used in the minutes of January 21,
1966 is not a term of art in the banking business (Tr. 998-991). The
nature of the loan made to Isaacs by The First National Bank of Chicago
was in reality this:
(a) Isaacs undertook to borrow, upon his own credit and
the collateral represented by share of CCB stock issued to
him (at the rate of one share of stock, as collateral, for
each $20 of the loan), a sum of $304,500. That was the
initial amount of the loan and it was to be collateralized by
15,225 shares of the stock of CCB (Tr. 247,280-81).
(b) the proceeds of the $304,500 loan to Isaacs was to
be paid into the account maintained by CCB with The First
National Bank of Chicago as payment (at the rate of $20 per
share) for 15,225 shares of CCB stock to be issued to Isaacs
(c) In order to qualify for its charter, CCB and Isaacs were both required, in law, to regard (i) the issuance of the
15,225 shares to Isaacs as an outfight sale of the shares to
Isaacs, and (ii) the proceeds of the loan, when deposited to
the credit of CCB, as an unconditional and absolute payment
of the purchase price of the shares sold to Isaacs (Tr. 356-57, 1003; Ill. Re . Stat., Ch. 16-1/2, §113).
(d) Upon receipt of a credit equivalent to the proceeds
of the loan made to Isaacs by The First National Bank of
Chicago, CCB would then have on deposit the full 2 million
dollars required as a condition to the granting of its
charter and would show as issued and outstanding the full
100,000 shares of stock sold by it.
(e) CCB was not obligated to repay the loan made to
Isaacs and there is no documentary evidence that there were
any other guarantors or indemnitor in respect of the
indebtedness of Isaacs to The First National Bank of Chicago.
The only reference in the bank's minute books to the loan
from The First National Bank of Chicago to Isaacs is the
report made by Isaacs as "Acting Cashier" at the January 21,
1966 meeting of the Board of Directors of CCB (Tr. 233-34,275-76, 1039, 1421).
(32) Almost immediately after the loan of $304,500 to Isaacs by The First National Bank of Chicago was arranged, the amount of the loan
was reduced to $257,000 by a remittance to The First National Bank of
Chicago, by CCB for the account of Isaacs, of $47,500. This $47,500
represented payments received by CCB on previously outstanding
subscriptions to its stock (Tr. 279-80; Ex. 32, 33-C).
(33) The reduction in the amount of the Isaacs loan served also to
reduce the amount of collateral pledged for the repayment of the loan.
Following the reduction of the loan on January 26, 1966, 12,850 shares
were issued in the name of Isaacs by the Civic Center Bank in the form
of two stock certificates. One stock certificate, No. 249, was for
9,999 shares; the second stock certificate, No. 250, was for 2,851
shares. Both certificates were pledged to The First National Bank of
Chicago by Isaacs (Tr. 280, 1123-24).
(34) While in legal effect and to all outward appearances Isaacs
became the owner of the 12,850 shares and became the sole obligor on
the loan made to him by The First National Bank, Isaacs testified that
he: (a) regarded himself as having undertaken the borrowing from The
First national Bank of Chicago as an accommodation to the organizing
group of CCB; (b) considered it his moral obligation to consult with
CCB or the organizing group in effecting a disposition of shares of
stock out of the 12,850 share block which had been issued in his name;
(c) believe that if he got in trouble with the loan he would be bailed
out by one or more of the members of the organizing group. There are,
however, no papers, documents or other records to indicate the basis
for this state of mind (Tr. 375-76, 471-76, 497, 532-33, 1039, 1301-08,
1417-23, 1427-29, 1435-37).
(35) The modus operandi in disposing of the 12,850 shares of stock
issued to Isaacs (in legal effect, the "resale" of the shares by
Isaacs) is not spelled out in any of the records maintained by the bank
or by Isaacs. It is, however, abundantly clear that Isaacs and a
number of other persons who were members of the organizing group or
importantly associated with the bank did, in practice, have a right to
make a disposition of shares held by Isaacs, and that it was the
general intention of the bank and the members of the organizing group,
as well as of Isaacs, that the 12,850 shares would be resold to persons
who would be in a position to help the bank or who, for other reasons,
might be favored by Isaacs and the other persons who, de facto,
controlled the disposition of this block of 12,850 shares (Tr. 219-20,
224-25, 277, 291-92, 467, 509, 533, 1016, 1153-55, 1165,1437-38,1467).
(36) The 12,850 shares held as collateral by The First National
Bank were the shares referred to in Isaacs' January 21 report to the
Board of Directors as shares to be held "in reserve to foster new
accounts" and to be sold at $20 per share plus interest from January
21. These 12,850 shares were all that remained of the 100,000 share
original issue (Tr. 280-81; Ex.32).
(37) The original issue of stock of the bank was heavily
oversubscribed (Tr. 549, 557-59, 1521).
(38) As shares from the 12,850 share block held by Isaacs were
resold to other.persons, the payments for the shares were applied to
reduce the balance of The First National Bank loan. The purchasers
typically made their payments to CCB and the bank deposited these
payments to the credit of its own account with The First National Bank
of Chicago (Tr. 373, 382, 399-400, 1128-29; Ex. 35).
(39) By July 20, 1966 the unpaid balance of The First National Bank loan had been reduced to approximately $19,000. On July 20, 1966
Isaacs borrowed $19,309.13 from CCB and this amount was applied on the
same day to the repayment of the remaining balance of The First
National Bank loan. After July 20, 1966 the proceeds from the resale
of the remaining shares in the 12,850 share block were applied in
payment of the loan made to Isaacs by CCB (Tr. 374; Ex.36).
(a) On six different occasions from March to October, 1966,
certificates were issued by CCB to purchasers out of the
12,850 share block (Tr.550).
(b) Certificates 249 and 250 held at The First National were
replaced by other certificates for smaller quantities of
shares as sales of shares occurred (Tr. 379-80, 543-44, 551-52; Ex. 34).
(40) As the 12,850 shares were sold, a handwritten list was
maintained by Mrs. Jane M. Kegley, "Pro-Cashier" of CCB during almost
all of 1966. This list showed the name and address of the shareholder,
the number of shares issued to that person, and the amount paid for the
shares and for interest, and the remaining unsold balance of the 12,850
shares (Tr. 292-97, 465-69; Ex. 25-A-25-D).
(a) The list also indicated whether the payment was by cash or check, and if by check, the date of the check (Tr. 305).
(b) Mrs. Kegley drew up the actual certificates issued to these purchasers, and Harry Mertz, Cashier at that time, and Harold H. Stout, President, signed them (Tr. 380-81).
(41) It was an established policy of the "organizing group" of CCB that no director of the bank should be permitted to acquire, directly or indirectly, more than 1,500 shares of the stock and that no other person should be permitted to acquire, directly or indirectly, more than 1,000 shares of the stock. These limitations applied to both the original subscribers and the persons who purchased out of the 12,850 share block held by Isaacs (Tr. 508-09, 1089, 1411).
(42) The 12,850 shares were not sold or issued on the basis of any subscribers list or other formal procedure by which shares had been reserved (Tr. 219-20, 224-25, 277, 291-92, 467, 1016, 1165, 1437-38, 1467).
(a) A number of organizers and officers of the bank
undertook to make contacts with persons who might become customers
of the bank with the added incentive of being allowed to buy stock
(Tr. 509, 533, 1016, 1153-55).
(b) With minor exceptions, all of the sales out of the
12,850 shares can be traced to the solicitation efforts of one of
the following individuals:
(i) Theodore J. Isaacs
(ii) David X. Meyers
(iii) Leo A. Distenfield
(iv) Bailey K. Howard
(v) Hugh M. Driscoll
(vi) Harold H. Stout (Tr. 497, 532-35)
(c) These shares were to be sold to persons who it was hoped
would become customers of the bank or would otherwise be able to
assist it (Tr. 1006, 1042, 1134-35).
(d) Isaacs had an apparent legal right to direct the
issuance of shares to selected purchasers without the approval of
consent of any other official or organizer of the bank. No other
person had any authority evidenced by written documents with
respect to the disposition of these shares (Tr. 1018, 1422-33)
(e) Isaacs directed the issuance of shares out of the 12,850
to certain purchasers without the approval or consent of any other
official or organizer of the bank (Tr. 471-76, 497, 532-33, 1301-08, 1435-37, 1422-23, 1427-29).
(f) Isaacs' signature was necessary for any transfer of
shares (Tr. 1017, 1057, 1068, 1426, 1502).
(g) There is no evidence that the persons who bought out of
the 12,850 shares had in any way previously committed themselves
to do so (Tr. 467).
(43) Approximately 100 persons acquired shares out of the block of
12,850 shares. Eighty-four of these persons purchased 100 shares or
less. Only the following five people purchased more than 500 shares:
Harold Stout (1,400); Edward Meyers (1,500); Bernard Ernstein (1,000);
Justice Solfisburg (700); and Howard Hansen (600). Stout was the
President of the bank, Meyers was an organizer of the bank, and
Ernstein was an associate of Meyers. Both Hansen and Justice
Solfisburg received his shares in the name of a revocable trust set up
by him for this purpose, and Hansen was a nominee for either Joseph E.
Knight or Knight's mother (ex. 25-A-25-D; Tr. 482,492-494, 502-504,506).
(44) During 1966 an active market in CCB stock raised its price as
high as $27 per share (Tr. 521-23, 554-55, 1012).
(a) On April 21, 1966 the Board of Directors
was advised that Langill & Co. quoted the
stock at $27 as of March 31, 1966 (Tr. 459;
(b) Numerous individuals who purchased
the stock on the original subscription
or from the 12,850 shares were not
allowed to purchase as much as they
originally requested (Tr. 549, 557-59,
(c) Some individuals and brokers were
informed as early as February, 1966
that no more stock was available for
sale (Tr. 548, 1003, 1042).
(45) CCB opened for business on June 28, 1966 (Tr. 511, 522).
(46) The shares of CCB stock which were acquired by Justice
Solfisburg and Justice Klingbiel came from the 12,850 share block held
by Isaacs for resale to selected purchasers (Ex. 25).
Section D. Acquisition and Sales of 700 Shares of CCB Stock
by Justice Solfisburg
(47) On June 16, 1966, 700 shares of the stock of CCB were issued,
and subsequently delivered, to the Old Second National Bank of Aurora
as Trustee under its Trust No. 931. The 700 shares were represented by
seven certificates each for 100 shares, numbered 696 to 702 inclusive.
These shares were purchased, and were beneficially owned, by Justice
Solfisburg, who was the settlor of Trust 931 (Tr. 300-10, 610; Ex. 20-A-20-GG, 25-C).
(48) Justice Solfisburg paid $14,000 for the 700 shares of stock
thus acquired by him, at the rate of $20 per share, and in addition
thereto made a payment of $350 to CCB as "interest" on the $14,000 for
the period from January 21, 1966 to the date of payment (Ex. 25-C, 39-A-39-AA, 40-A-40-AA).
(49) The payment of the purchase price for the 700 shares by
Justice Solfisburg was made in the form of a check for $14,000 drawn by
him on May 27, 1966 on his account at the St. Charles National Bank and
made payable to the order of CCB. Payment of the $350 "interest" was
made by Justice Solfisburg by a check for $350 drawn by him on May 27,
1966 on his account at the Old Second National Bank of Aurora and made
payable to CCB. The two checks were delivered to CCB some time after
May 27, 1966 but were not deposited by CCB to the credit of its account
with The First National Bank of Chicago until June 13, 1966 (Ex. 25-C,
(50) Justice Solfisburg, in his testimony before the Commission,
described the circumstances of his purchase of the 700 shares of CCB
stock substantially as follows:
(a) Some time in the September term or the November term of the
Supreme Court in 1965 Justice Solfisburg had a conversation with
Perbohner and Dolph in Dolph's apartment in Springfield, Illinois.
On that occasion Perbohner and Dolph informed Justice Solfisburg
that they could afford him an opportunity to purchase shares of
stock of a new bank which was being organized (the Civic Center
Bank and Trust Co.) at the subscription price of $20 per share.
Justice Sofisburg told Perbohner/Dolph that he desired to acquire
700 shares of the stock. Perbohner/Dolph then told Justice
Solfisburg that they would "protect" him on the purchase of the
shares -- that in other words he, Justice Solfisburg, would be
"counted in" (Tr. 610-612, 625, 708-10, 712).
(b) Justice Solfisburg did not at any time sign or send to
the Bank a subscription agreement for the 700 shares (Tr. 612).
(c) At the time of the conversation with Perbohner/Dolph in
which Justice Solfisburg said that he desired to purchase the 700
shares, he knew that he would have to borrow the purchase price
but his state of mind was that when he was called on for the
money, he would then "figure out where [he] was going to borrow
it." (Tr. 612-13).
(d) Justice Solfisburg on the occasion of that conversation
with Perbohner/Dolph made no inquiry as to who was associated with
the bank or who it was that Perbohner/Dolph would rely upon in
"protecting" Justice Solfisburg on his acquisition of the shares.
He never thereafter, at least until subsequent to his actual
acquisition of the shares, made any inquiry as to the location of
the bank in Chicago, the prospects of the bank, the persons who
were the organizers of the bank, the persons who would be the
directors or other shareholders of the bank. His testimony is
that he made no inquiry of any kind to ascertain whether the
investment of $14,000 in the stock of CCB was a good one. His
explanation of this lack of inquiry was that he had a conviction
that the original issue of a bank stock never goes down; that he
has "only seen them go up" (in value) (Tr. 612, 614-17, 699-700).
(e) Specifically, Justice Solfisburg said that he had no
knowledge of any kind that Theodore J. Isaacs had any connection
with CCB, and having made no inquiry about the bank, the
association of Isaacs did not come to his attention (Tr.616-17,700).
(f) Some time in May of 1966, shortly before May 27, 1966,
Justice Solfisburg was informed by Perbohner/Dolph that he should
get his money in for the purchase of the 700 shares of CCB stock.
On or about May 27, 1966 Justice Solfisburg went to the St.
Charles National Bank and arranged to borrow $14,000. The
proceeds of the loan were credited to Justice Solfisburg's account
at the St. Charles National Bank and he then wrote his check to
the order of CCB (Tr. 614, 617-620).
(g) Justice Solfisburg testified that the $14,000 check,
together with the $350 check, was enclosed with a letter
instructing CCB to issue the 700 shares in the form of seven
certificates for 100 shares each in the name of Justice
Solfisburg, and to deliver the certificates to his home (Tr. 625-26; Ex. 86).
(h) Some time after May 27, 1966 or the date on which
Justice Solfisburg transmitted his payment for the shares to CCB,
he changed his mind as to the form in which he desired the stock
certificates to be issued. On or about June 15, 1966 Justice
Solfisburg, as settlor, created a wholly revocable trust with the
Old Second National Bank of Aurora designated as Trust No. 931.
The trust, being wholly revocable, had no gift or income tax
consequences and it provided that both the principal and income of
the trust might be withdrawn at any time by Justice Solfisburg
(Tr. 628-30; Ex.94).
(51) Justice Solfisburg was unable to supply any evidence as to
how the information that the 700 shares of stock should be issued in
the name of Trust No. 931 instead of his own name was communicated to
CCB. Mrs. Kegley, however, received her instructions to issue the 700
shares to Trust 931 from Isaacs or Isaacs office. On June 16, 1966,
CCB issued the 700 shares in the name of Trust No. 931. with no indication on the stock certificate as to the person who was the beneficial owner or the person who was the settlor under the Trust (Tr.
481-82, 492-96, 502-04).
(52) Trust No. 931 was the only revocable trust ever created by
Justice Solfisburg as settlor. No assets other than the 700 shares of
CCB stock (or the proceeds of the sale of such shares) were ever
conveyed or transferred to the Trust. As the 700 shares of stock were
sold by Justice Solfisburg in the name of the Trust, the proceeds of
each sale were withdrawn from the Trust by Justice Solfisburg promptly
after each sale was completed, except as to a balance of $100 which he
permitted to remain in the Trust (Tr. 629-30, 651, 664-66, 723; Ex. 94,
(53) When Justice Solfisburg borrowed $14,000 from the St. Charles National Bank for the purpose of making payment of the purchase price
of the 700 shares of stock he thereby increased his outstanding loan
balance from $11,000 to $25,000. On or about June 4, 1966, Justice
Solfisburg applied for the maximum available loans on four life
insurance policies with Northwestern Mutual Life Insurance Company
owned by him and the proceeds of these loans were applied by him to
reduce his loan balance at the St. Charles National Bank. These loans
on Justice Solfisburg's insurance policies were the first loans which
he had ever made against the policies. It is Justice Solfisburg's
testimony that at the time of making the loans on his insurance
policies he had still not made an inquiry or investigation to determine
whether the stock of CCB was a desirable investment. (Tr. 620-24, 678,
720, 742-43; Ex. 88-93).
(54) On the same day that the 700 shares of CCB stock were issued
in the name of the Old Second National Bank of Aurora under Trust No.
931, 100 shares of CCB stock, represented by certificate No. 703, were
issued to Old Second National Bank of Aurora under its Trust No. 932.
These shares had been purchased, and were beneficially owned, by Robert
Dolph. Notwithstanding that the certificate for the shares purchased
by Dolph was issued in the name of Trust No. 932, no such trust was
ever created by Dolph (Ex. 21, 105-A-105-Q)
(55) On or about the same day that CCB shares were issued to Trust
No. 931 and Trust No. 932, certificates for 200 shares were issued to
M. R. Davison, the president and a director of the St. Charles National
Bank from which Justice Solfisburg had borrowed the $14,000 and of
which Justice Solfisburg was also a director (Tr. 594; Ex. 22-A-22-DD).
(56) The only function served by Trust No. 931 and the issuance of
the 700 shares in the name of the Trust was to conceal Justice
Solfisburg's acquisition and ownership of said shares.
(57) The use of purported Trust No. 932 as the registered owner of
Dolph's stock served no purpose other than to conceal the ownership of
(58) Isaacs is a partner in the law firm of Burton, Isaacs, Bockelman & Miller and was a partner (or associate) of its predecessor
firm (or association), Burton, Isaacs, Dixon & Winn (Tr. 840). Said
law firm performed legal services for Financial Security Life Insurance
Company from early 1963 to the latter part of 1967 (Tr. 840, 1269).
Said services included preparation of agreements to enable permits to
be procured from the Department of Insurance for the issuance of stock
to be issued pursuant to stock option agreements, discussions and
negotiations concerning a proposed merger with another insurance
company, and research and other work concerning possible qualification
of the stock of the company for sale to the public (Tr. 841, 842).
(59) Justice Solfisburg was one of the incorporators of Financial
Security Life Insurance Company, served as Chairman of the Board of
Directors prior to 1962, as a Director until 1964, and continued to be
a large shareholder of the company until late in 1967 (Tr. 598). In
1965 and 1966 he attended meetings of the Board of Directors and the
Executive Committee, and sometimes presided at such meetings. He also
participated in management decisions in 1965 and 1966 (Tr. 967-970;
(60) Justice Solfisburg knew that the Isaacs firm performed legal services for Financial Security Life Insurance Company (Tr. 566, 601-02, 634, 844, 849; Ex.108).
(61) Justice Solfisburg and Lawrence J. Flynn were close friends,
neighbors and business associates. Justice Solfisburg and Flynn
frequently discussed investments and participated jointly in
investments; including Financial Security Life Insurance Company.
Flynn has an office in Aurora in the same building as Justice
Solfisburg and an office in Chicago in the same building as Isaacs.
Justice Solfisburg offered Flynn a fifty percent participation in
Justice Solfisburg's proposed purchase of shares of CCB stock, shortly
after Justice Solfisburg's conversation about the stock with
Perbohner/Dolph. Flynn declined this offer (Tr. 567-573, 843-846, 849,
(62) Flynn knew of Isaacs' association with the bank as it was
being formed (Tr. 569-570). In view of the size of Justice
Solfisburg's investment in CCB stock, his close relationship with
Flynn, his discussion with Flynn of the anticipated purchase of stock,
and the fact that Isaacs' association with CCB was known to Flynn,
Justice Solfisburg had ample opportunity to learn of Isaacs'
association with the bank at the time he acquired the shares (Tr.569-570).
(63) Justice Solfisburg did not become a customer of the bank or
assist it in any way prior to or subsequent to his purchase of stock in
June, 1966 (Tr. 656-657, 1016-1016, 1018, 1456). Neither Isaacs,
Justice Solfisburg, nor any representative of CCB has offered any
satisfactory explanation for the allocation of 700 shares out of the
12,850 reserved shares to Justice Solfisburg or why he should have been
accorded this preferential treatment.
(64) On December 19, 1966 Justice Solfisburg received from the Old
Second National Bank as Trustee under Trust 931, a notice of annual
meeting of CCB stockholders signed by Theodore J. Isaacs as Secretary.
Upon receipt of the notice, Justice Solfisburg authorized the bank to
sign a proxy authorizing five persons, including two associates in the
Isaacs law firm (whose names were incorporated in the notice), to act
as its proxy at the annual stockholders' meeting. One of these
associates was Bockelman, who, with Justice Solfisburg's knowledge, had
done work for Financial Security Life Insurance Company (Tr. 634-7,
844, 849, 1500; Ex. 95-95-A).
(65) On May 25, 1967, Justice Solfisburg personally obtained the
following documents from the Old Second National Bank of Aurora:
(a) CCB Certificates 696, 697 and 698, each of which had been endorsed in blank by the Old Second National Bank of Aurora
on May 23, 1967 (Ex. 20-A-20-CC; Tr. 639).
(b) Original of a letter dated May 23, 1967 from Old Second National Bank of Aurora to the Civic Center Bank authorizing the
sale of Certificates 696, 697 and 698 at their market value (Ex.
(c) Copies of corporate resolutions of the Old Second National Bank of Aurora of May 23, 1967 (Ex. 19-I).
(66) On May 25, 1967, in Justice Solfisburg's office in Aurora,
Illinois, Justice Solfisburg asked Flynn to deliver an envelope
containing the above described documents to Chicago, Illinois (Tr.
(67) At about 8:45 A.M. on May 26, 1967, Flynn delivered the
envelope containing the certificates and other instruments to Isaacs'
office at 111 West Washington Street, Chicago, Illinois (Tr. 579-80).
(68) Between the time when Justice Solfisburg handed him the
envelope and the time of its delivery to Isaacs' office, Flynn did not
examine the contents of the envelope (Tr. 588-89).
(69) At the time he delivered the envelope to Isaacs' office
Flynn received a receipt signed on behalf of Isaacs by his secretary,
Blanche Zenger, which reads as follows:
"Received of OLD SECOND NATIONAL BANK of Aurora, Illinois, Trustee
under Trust #931, three hundred (300) shares of common stock of
CIVIC CENTER BANK AND TRUST CO. as described in letter of said
Bank dated May 23, 1967, for sale purposes.
By /sgd/ Blanche Zenger"
(70) That receipt was not prepared in Isaacs' office. It was
prepared on a typewriter which was unlike any machine used in Isaacs'
office and it was the regular practice of Isaacs' secretary to use his
middle initial "J" on all instruments prepared for signature by or on
behalf of Isaacs (Tr. 1329-1330).
(71) Flynn testified that Justice Solfisburg requested him to
deliver the envelope to the Civic Center Bank and give it to Mr. Stout,
President (Tr. 584). The Commission does not credit this testimony.
The following circumstances suggest that Justice Solfisburg requested
Flynn to deliver the envelope to Isaacs' office:
(a) The envelope contained a stock certificates endorsed in blank which had a value of at least $7,200. It is improbable that
an attorney who had been asked to deliver an envelope containing
such certificates to a specific individual at the Civic Center
Bank would, on his own initiative, deliver them elsewhere.
(b) Justice Solfisburg knew that Isaacs and Flynn had offices in the same building (Tr. 583-585, 677). He also knew
that the Civic Center Bank was located approximately two blocks
away from Flynn's office (Tr. 627). Flynn was not compensated by
Justice Solfisburg for making this delivery. It is more probable
that Justice Solfisburg would request a senior practicing attorney
to deliver an envelope to another office in his own building than
to request him to walk four blocks to make such a delivery.
(c) The receipt which was signed on behalf of Isaacs at 8:45 A.M., on May 26, 1967, was prepared prior to that time.
(d) Flynn obtained the signed receipt from Isaacs' office in
order to be in a position to answer a possible inquiry by Justice
Solfisburg to Flynn which Flynn described in the following words:
"What if he told me he never got it and he says I never brought it up to Isaacs?" (Tr. 582).
(e) Flynn testified that he did not advise Justice Solfisburg of the delivery of the certificates to Isaacs' office. His explanation of the reason for not giving such advice to Justice Solfisburg indicates that his original instructions contemplated that his delivery would be to Isaacs' office. Flynn testified:
"Question: Did you report back to Justice Solfisburg after
you had performed this function for him?
"Answer: He never asked me and I don't think I ever told him. He just took it for granted that if he asked me to do it, and being in the same building, I would do it." (Emphasis supplied.) (Tr. 585)
(f) The fact that Justice Solfisburg intended the delivery of the certificates for 300 shares of Civic Center Bank stock to
be made by way of Isaacs' office provides a reasonable explanation
for his use of the services of a personal courier rather than the
U.S. mails the day after the mandate issued in the case of People
(g) Justice Solfisburg's demeanor on the witness stand during questioning about his use of a personal courier to effect
the delivery of the certificates is consistent with this
interpretation of the facts (Tr. 687-94, 698-99).
(72) The purchasers of the 300 shares were C. E. McKittrick,
James J. Pelts and Ronald A. Landsman, each of whom bought 100 shares
under certificates 1023, 1024 and 1025, respectively, issued June 7,
1967 (Tr. 331, 340).
(73) Prior to May 26, 1967 Isaacs had communicated with Pelts and
offered the stock at a price of $24 per share. Pelts wrote a letter to
Stout on May 26, with a check for $2,400 enclosed for the stock "per my
conversation with Ted Isaacs" (Tr. 343, Ex. 23-C).
(74) McKittrick paid $24 per share for his 100 shares on May 22
and Landsman authorized payment on May 24.
(a) McKittrick had earlier attended an Executive Committee meeting on May 15 at which Stout announced the availability of 200
shares at $25 per share (Tr. 345-49, 1163-64). No similar
announcement appears elsewhere in the corporate minutes.
(b) Landsman authorized a $2,400 charge on his savings account at the bank to pay for the stock.
(75) On May 26, 1967 Isaacs drew a personal check for $300 which
was used on June 1, 1967 as part of the payment of $7,500 to Justice
Solfisburg for 300 shares (Tr. 340-42).
(76) In early 1968, Justice Solfisburg initiated the first of a
series of telephone conversations regarding assistance Isaacs could
render Justice Solfisburg's son in his attempt to enter the Illinois
National Guard (Tr. 658-61, 673, 1261-66).
(77) In March 1968, Justice Solfisburg sold an additional 200
shares of Civic Center Bank stock at a price of $27 per share. As in
May, 1967, Justice Solfisburg picked up the certificates for these
shares from the Old Second National Bank of Aurora, and Flynn delivered
them to Isaacs' office (Tr. 674-675; Ex. 125). Justice Solfisburg
acknowledged that he may have talked to Isaacs about this sale (Tr.
(77)-A. On November 29, 1968, Justice Solfisburg sold his
remaining 200 shares to Harry Black, a Vice President of CCB, for $27
per share. These certificates were delivered to the bank by registered
mail (Ex. 126).
Section E. The Acquisition of 100 Shares of CCB Stock by
(78) On October 11, 1966, Isaacs in effect repurchased from
himself the last remaining 100 shares of the 12,850 share block which
he had held for resale as explained in Section B of these findings. On
that day he drew a check for $2,081.84 to the order of CCB and by this
means paid in full the balance of the loan of approximately $19,000
which he had procured from the bank (Finding 39) (Ex. 25-D, 36, 44-A).
(79) Upon Isaacs' instructions a certificate for the 100 shares
was issued by the bank in the name of Robert M. Perbohner (Tr. 1300-08). The stock certificate, No. 854, was delivered by the bank to
Isaacs (Tr. 1494-95), who delivered it to Perbohner. The same
certificate was subsequently delivered by Perbohner to Dolph and by
Dolph to Justice Klingbiel (Tr. 324-25; Ex. 28-A-28-AA). At the time
the certificate was delivered to Justice Klingbiel during the November,
1966 term of the Court, Perbohner had already endorsed the certificate
in blank, with his signature witnessed by Dolph, making the certificate
fully negotiable (Tr. 769).
(80) Isaacs' name was typed on the appropriate line of the bank's
stock ledger sheets as the recipient of the 100 shares represented by
certificate 854; however, his name was lined out by hand and
Perbohner's was written in by Mrs. Kegley (Tr. 298-99, 329-30, 511).
Mrs. Kegley does not recall the reason for this change in the stock
ledger sheets (Tr. 324).
(81) In November, 1966, shortly after his reelection to the Court
on November 5, 1966 and during the pendency before the Supreme Court of
the Isaacs case, Justice Klingbiel attended a dinner party at Dolph's
apartment in Springfield. On the occasion of this dinner party, Dolph
had a conversation with Justice Klingbiel in a bedroom of the
apartment. It is not entirely clear whether Perbohner was present
during the conversation (Tr. 763-64).
(82) During the conversation referred to in the previous finding,
Dolph handed to Justice Klingbiel certificate No. 854 for 100 shares of
the stock of CCB. Justice Klingbiel testified that Dolph gave the
stock to him as a "campaign contribution" and told him that the stock
had sold for $20 per share. Justice Klingbiel said that he replied to
Dolph, "Oh, goodness, I don't think I spent that much money on my
campaign." Prior to receiving this certificate for CCB stock from
Dolph, Justice Klingbiel had already received campaign contributions
amounting to approximately $6,500. His campaign expenditures amounted
to approximately $2,000 (Tr. 764-66).
(83) Justice Klingbiel testified that in the conversation with
Dolph on the occasion of his being handed the stock certificate No. 854
he made no inquiry of Dolph or of Perbohner as to how they had acquired
the shares; he made no inquiry as to the location in Chicago of the
Civic Center Bank or as to who was associated with the bank or as to
any other information pertaining to the bank or his shares of stock.
Justice Klingbiel testified that he never at any time thereafter made
any such inquiries (Tr. 768-69).
(84) Whether or not the transaction is characterized as a
"campaign contribution," the delivery of the negotiable stock
certificate for 100 shares of CCB stock by Dolph to Justice Klingbiel
was in fact a gift, since by Justice Klingbiel's testimony he had
already received campaign contributions far in excess of his campaign
(85) The gift of CCB stock was the only gift of stock Justice
Klingbiel has ever received (Tr. 769).
(86) When Justice Klingbiel rejoined the other guests at the
Dolph dinner party (after emerging from the bedroom conversation with
Dolph) he made no mention of the transaction which Dolph had just
concluded with him (Tr. 771-72).
(87) Justice Klingbiel did not recall that he ever mentioned the
receipt of the gift from Dolph/Perbohner to anybody (with the possible
exception of his wife) at any time prior to the events of May, 1969
which resulted in this investigation (Tr. 772).
(88) Justice Klingbiel did not report his ownership of CCB stock
on the statement of economic interest he filed with the Illinois
Supreme Court, although in the case of other securities he did report
ownership of items valued at less than $5,000 (Tr. 772).
(89) Other facts related to this transaction include the
(a) Perbohner and Justice Klingbiel had more than a casual acquaintance but had never been in any business ventures together.
(Tr. 760). Justice Klingbiel and Dolph were close friends.
(b) Perbohner and Dolph were members of the Illinois Commerce Commission which is and was a frequent litigant before the Illinois Supreme Court.
(c) When Justice Klingbiel received modest gifts from Perbohner or Dolph, he acknowledged such gifts with a letter of
gratitude (Tr. 761-762, 777-778; Ex. 99-102).
(d) If he did not in fact already know it, Justice Klingbiel could readily have learned that Isaacs was closely associated
with, and an important figure in, the Civic Center Bank upon
making even a casual inquiry about the bank.
(90) Although the stock certificate No. 854 was received by
Justice Klingbiel from Dolph in November, 1966, he made no disposition
of that certificate for a period of almost a year and a half
thereafter. Some time after November, 1966, Justice Klingbiel inserted
on the reverse side of the stock certificate, as the date of transfer
by Perbohner, "January 2, 1968" (Tr. 769-770).
(91) Justice Klingbiel testified that in the latter part of
August, 1968 he delivered certificate No. 854 to an attorney named
George Bieber for surrender to the Civic Center Bank. No letter of
direction was written to the Civic Center Bank by Justice Klingbiel.
Justice Klingbiel never received a report from Bieber as to whether he
had delivered the shares to the bank (Tr. 770, 776-777). On or about
September 5, 1968 the bank issued a new certificate to Justice
Klingbiel's grandchildren, Anne and Thomas Simpson. Certificate No.
854 was then canceled. Prior to this time Justice Klingbiel had never
made a gift to his grandchildren of a value of $1,000 or more (Tr.
(92) Justice Klingbiel testified that the idea or "notion" of
giving the 100 shares of Civic Center Bank stock to his daughter or to
his grandchildren arose in his mind some time in 1967 (Tr. 776). He
did not, however, take any action for the transfer of the shares out of
the name of Robert M. Perbohner until the latter part of August, 1968
(Tr. 776-777). Justice Klingbiel acknowledged that there was no
completed gift for legal purposes or for income tax purposes or for any
other purposes to his grandchildren prior to the date that the shares
were registered in the name of the grandchildren (Tr. 798-799). He
gave no satisfactory explanation for the rather extraordinary fact that
he retained the shares in negotiable form, registered in the name of
Robert M. Perbohner, for a period of eighteen months after acquiring
(93) In May, 1969, Justice Klingbiel made false statements to
members of the press about the nature of his acquisition of the CCB
shares. A week or two prior to the May term of the Supreme Court in
1969 Justice Klingbiel told a reporter for the New York Times that he
had purchased the 100 shares. Shortly thereafter, on or about May 20,
1969, Justice Klingbiel told Robert J. Seltzner, a reporter for the
Daily Calumet, that he had purchased the shares in question from Robert
Perbohner and said that the purchase was made about the time the bank
was organized in January, 1966. In June, 1966, while he was in
Morocco, Justice Klingbiel told Nicodemus, a reporter for the Chicago
Daily News, that he had purchased the shares from Perbohner, and in a
conversation with Nicodemus the next day he said that he had received
the shares as a campaign contribution (Tr. 793, 798, 1527).
(94) Following Justice Klingbiel's conversation with the reporter
for the New York Times, he gave Justice Kluczynski to understand that
he had acquired the 100 shares of CCB stock by purchase (Tr. 783-84,
(95) In May or June, 1969 Perbohner and Isaacs each made false
statements to the press about the nature of that transaction between
Dolph and Justice Klingbiel and the character of the gift of the 100
shares of CCB stock by Perbohner/Dolph to Justice Klingbiel (Tr. 1241-42, 1536, 1566).
(96) Robert M. Perbohner was a central figure in the transactions
pursuant to which Justices Klingbiel and Solfisburg acquired Civic
Center Bank stock while the litigation in People v. Isaacs was
pending. Perbohner, notwithstanding the recent operation on his hip,
was, in the opinion of his attending physician, competent to testify in
this investigation. He was instructed and advised by his counsel not
to answer a number of questions, truthful answers to which would
greatly have aided this investigation, and he did refuse to answer such
questions. (Tr. 912-913, 864-904).
(97) We now consider our findings of fact against the background
of legal precedent and the canons of judicial ethics which describe the
standard of conduct required of justices of our highest courts.
(98) We may conveniently take as a point of departure, the
following summary of the duty and obligation of judges which appears in
the headnote to Formal Opinion 322 of the Standing Committee on
Professional Ethics of the American Bar Association issued on May 18,
(99) The Canons of Ethics adopted by the Illinois Judicial
Conference in 1964 which have particular relevance for purposes of this
(100) The preamble to the Canons of Judicial Ethics adopted by
the Illinois Judicial Conference states that these canons alone shall
be applicable and shall refer to all judges of trial courts, courts of
review, and to all appointed magistrates. The preamble goes on to
(101) We are confident that the Court shares with us an
acceptance of the statement made in Formal Opinion 322 of the American
Bar Association that the relevant canons apply to judges at all levels
and "probably, as they relate to appearances of impropriety, apply with
greater strictness to the judges of higher courts, for the conduct of
judges of higher courts sets the tone for the whole judiciary."
(102) The canons to which we have referred are not abstract
statements of ethical considerations but are firmly grounded in the
long history of Anglo-American jurisprudence. The fundamental need to
which these canons are addressed is that the Bench, the Bar and the
public shall have absolute confidence in the impartiality, fairness and
integrity of the members of the judiciary and in the judgments and
decisions of the courts which govern the lives of our citizens.
(103) In the words of Mr. Justice Frankfurter in Public
Commission v. Pollak, 343 U.S. 451, 466 (1952), "The guiding
consideration is that the administration of justice should reasonably
appear to be disinterested as well as to be so in fact."
(104) Our courts have constantly reminded us that it is just as
important that a judge avoid the appearance of impropriety as that he
avoid actual impropriety. For what we are dealing with is the
confidence of the public, which is as easily affected by reasonable
suspicion or doubt of unfairness, partiality or lack of integrity, as
by the actual improprieties of which a judge may be guilty. Thus, the
New York courts have said that, "The State is bound to furnish to every
litigant not only an impartial judge, but one who has not, by any act
of his, justified a doubt of his impartiality." Moers v. Gilbert, 175
Misc. 733, 737, 25 N.Y.S. 2d 114, 118, aff'd. 261 App. Div. 957, 27
N.Y.S. 2d 425, 426 (1941).
"Not only is it the duty of a judge to render a righteous
judgment, but it is of transcendent importance to the litigants
and the public generally that there should not be the slightest
suspicion as to his fairness and integrity. Caesar demanded that
his wife should not only be virtuous, but beyond suspicion. The
people should not exact less from the judiciary, the most powerful
branch of our government." People ex rel. Union Bag & Paper
Corporation v. Gilbert, 143 Misc. 287, 288-289, 256 N.Y.S. 442,
444, affirmed 236 App. Div. 873, 260 N.Y.S. 939 (1932).
(105) Mr. Justice Shaw of our own Illinois Supreme Court,
speaking of the Canons of Judicial Ethics in In Re Harriss, 346 Ill.
290 at 293 (1936), said:
(106) We do not regard these canons as quaint moral precepts,
derived from an out-moded age of innocence. They are intensely
practical and necessary statements as to the conduct required of
judges. We could include in this Report many pages of quotations of
the same tenor--that the appearance of impropriety must be avoided as
completely as actual impropriety. The principle is so well
established, however, that we deem further quotations unnecessary.
(107) There is nothing which is in our judgment so fundamental to
the maintenance of a government based upon the Rule of Law, as the need
of the public to understand that the decisions of our courts, often
unpopular and seemingly contrary to prevailing public sentiment, are
impartially and fairly arrived at and that the judges responsible for
the decisions are above reproach. Adherence to the principles
expressed in the canons seems to us particularly necessary in an age
when authority is increasingly threatened and the traditional concepts
of law and order are under attack.
(108) We consider it entirely fair and proper, then, that we view
the facts in this record in the context of what we are told by the
canons of our own Illinois Judicial Conference is the duty and the
obligation of a judge.
(109) While it may be argued that the conclusions of the
Commission need be supported only by a preponderance of the evidence or
need accord only with the manifest weight of the evidence, we have
imposed upon ourselves, for purposes of this Report, the requirement
that our conclusions must be based upon clear and convincing evidence--a standard more rigorous than that which would normally prevail in a
civil case. We think that this standard is consonant with the grave
charges which have been made against Justice Solfisburg, Justice
Klingbiel, Mr. Isaacs and Mr. Perbohner. This requirement as to clear
and convincing evidence does not mean, however, that we are called upon
to ignore the significance of deliberate concealment as a badge of
guilt; not the demeanor of various witnesses; nor the credibility of
their testimony from the standpoint of normal human experience.
(110) We do not believe that any elaboration of our findings of
fact is required to demonstrate conclusively that the conduct of
Justice Solfisburg and Justice Klingbiel presents precisely the
appearance of impropriety to which Canon 4 is addressed. The
appearance of impropriety is so substantial and pervasive in the case
of both Justices that they must, without more, be held clearly to have
violated the Canons of Ethics of the Illinois Judicial Conference.
(111) We do not believe that either Justice Solfisburg or Justice
Klingbiel is an innocent victim of circumstance. The appearance of
impropriety, as is evidenced from our findings of fact, has resulted
from acts and conduct in which Justice Solfisburg and Justice Klingbiel
were knowing and willing participants. We agree with the observation
in Formal Opinion 322 of the American Bar Association that even when
the appearance of impropriety comes from beyond the judge's control,
"his obligation is greater to refrain from acts contributing to that
(113) We conclude, on the basis of our investigation, that there
is no evidence to support the following charges made in the Motion:
(114) We have also concluded, after careful examination, that
none of the other Justices of the Supreme Court had any knowledge or
any reason to believe that either Justice Solfisburg or Justice
Klingbiel was subject to any undue influence or had any disqualifying
interest in the decision in the Isaacs case.
(115) Except as affirmatively set forth in this Report, the charges made by Sherman H. Skolnick and Harriet Sherman in the papers filed by them with the Court are unsupported by any credible evidence we have been able to find in our investigation.
(117) The correctness of a judgment or its legal soundness
cannot, in the eyes of the Bar or the public, save it from taint if it
appears that a judge or judges who participated in rendering the
judgment had disqualifying interests or were themselves guilty of such
conduct as to raise a reasonable suspicion as to their impartiality,
fairness and integrity.
The Commission believes that the confidence of the public and the
Bar in the Court is a most essential foundation of our society. It has
been severely shaken by the facts disclosed in this record. The
Commission believes that such confidence can best be restored by the
prompt resignation of the two Justices.(7)