People v. Stevens

• Decision Date: 13 December 1934
• Docket Number: No. 22523.,22523.
• Parties: PEOPLE v. STEVENS.
• Court: Illinois Supreme Court

358 Ill. 391

193 N.E. 154

PEOPLE

v.STEVENS.

No. 22523.

Supreme Court of Illinois.

Oct. 22, 1934.

Rehearing Denied Dec. 13, 1934.

Error to Criminal Court, Cook County; Michael Feinberg, Judge.

Ernest J. Stevens was convicted of embezzlement, and he brings error.

Reversed.Sims, Stransky & Brewer, of Chicago, (Franklin J. Stransky, Timothy I. McKnight, and Frank S. Sims, all of Chicago, of counsel), for plaintiff in error.

Otto Kerner, Atty. Gen., Thomas J. Courtney, State's Atty., of Chicago, and J. J. Neiger, of Springfield (Edward E. Wilson, J. Albert Woll, Henry E. Seyfarth, John E. O'Hora, and Earle C. Hurley, all of Chicago, of counsel), for the People.

STONE, Justice.

Plaintiff in error, Ernest J. Stevens, was indicted in the criminal court of Cook county, with his father, James W. Stevens, and his brother, Raymond W. Stevens, charged with embezzlement under section 75 of the Criminal Code. (Smith-Hurd Ann. St. c. 38, § 208.) This section provides as follows: ‘If any officer, agent, clerk, or servant of any incorporated company, * * * embezzles or fraudulently converts to his own use, or takes and secretes with intent so to do, without the consent of his company, employer or master, any property of such company, employer, master, or another, which has come to his possession, or is under his care by virtue of such office or employment, he shall be deemed guilty of larceny.’

The indictment consisted of four counts. The first charged the crime of larceny as bailee, the second and third counts charged embezzlement, and the fourth count larceny. The first and fourth counts were dismissed and the cause proceeded on the second and third counts, charging embezzlement. Subsequent to the return of the indictment Raymond W. Stevens died. A severance was obtained by James W. Stevens on account of illness and the trial proceeded as to plaintiff in error alone. The second count of the indictment charged that James W. Stevens, being chairman of the board of directors, Raymond W. Stevens, being the president, and plaintiff in error the vice president of the Illinois Life Insurance Company, unlawfully and feloniously, without the consent of the Illinois Life Insurance Company, did embezzle and fraudulently convert to their own use certain moneys which were deliveredand came into the possession and under the care of the defendants by reason of their employment. The third count differs from the second only in that it charges the embezzlement of property, personal goods, and money.

Plaintiff in error filed a motion to quash the indictment, which was overruled. He then sought an order for bill of particulars, which was allowed, and a bill of particulars was filed, in which it is charged that on May 15, 1931, the defendants embezzled $300,000 of the property of the Illinois Life Insurance Company; that on June 29, 1931, they embezzled $400,000 of the property of the Illinois Life Insurance Company; that on July 1, 1931, they embezzled $150,000 belonging to the Illinois Life Insurance Company, and on January 4, 1932, they embezzled the sum of $700,000, property of the Illinois Life Insurance Company; that this money was converted to their own use by fraudulently transferring and causing it to be transferred from the Illinois Life Insurance Company to the Stevens Hotel Company. The bill of particulars specifies, also, that on December 3, 1931, defendants did embezzle and fraudulently convert to their own use sixty United States Liberty bonds, of the sum and value of $10,000 each, the goods and property of the Illinois Life Insurance Company, by causing the bonds to be transferred and delivered to the Stevens Hotel Company.

The facts concerning these transactions are not in dispute. As to conclusions of law and inferences of fact to be drawn from the facts, there is, however, very serious dispute. The record shows that James W. Stevens was the founder of the Illinois Life Insurance Company. At the time of the transactions involved here he was chairman of the board of directors and its active directing head. Raymond W. Stevens, now deceased, brother of plaintiff in error, was president and devoted his entire time in assisting his father in the management of the insurance company and performing his duties as president. Plaintiff in error was vice president of the insurance company and took no active part in the operation or management of it, but was a member of the board of directors and finance committee. He had no desk in the offices of the company. The by-laws of the insurance company provided that the vice president could act only in the case of the death, absence, or inability of the president to act. Such contingency did not arise and plaintiff in error was never called upon to perform any act in his capacity as vice president. The Illinois Life Insurance Company was authorized to write life insurance and had power to loan its available funds.

Plaintiff in error, his father and brother, owned 31,000 shares, and other members of the Stevens family owned 6,600 shares, or a total of 37,600 shares, of the 40,000 shares outstanding of the life insurance company. The record shows that the value of the combined holdings of the Stevens family in the life insurance company was $18,300,000. The board of directors of the life insurance company consisted of James W. Stevens, Raymond W. Stevens, the plaintiff in error, John H. Stevens, Stephen L. Tompkins, and Bert J. Stookey. Under the by-laws a finance committee of five members was appointed by the board of directors from their own number. This committee was charged with the duty of supervising investments and loans, and under the by-laws no loans other than policy loans could be made except they be authorized by the board of directors or by the finance committee, which was required to make a report at each regular meeting of the board of directors of investments made during the preceding quarter.

The life insurance company acquired title to land at the northwest corner of La Salle and Madison streets, in the city of Chicago, which was purchased by plaintiff in error, his father and brother. In 1907 the La Salle Hotel was erected thereon. Plaintiff in error was the managing head of that hotel from the time it opened to the time of the trial. The La Salle Hotel issued bonds, which were sold and later paid out of profits realized from the operation of the hotel, which profits for a number of years ran over $1,000,000 per year.

In 1925 James W. Stevens, Raymond W. Stevens, and plaintiff in error organized the Stevens Hotel Company, with a capital stock of 60,000 shares preferred, of the par value of $60 a share, and 140,000 shares common, of the par value of $10 per share. The common stock was owned largely by James W., Raymond W., and Ernest J. Stevens, the plaintiff in error. The total value of common stock was $5,000,000. Construction of the Stevens Hotel was begun and it was completed on May 2, 1927. The purchase price of the real estate and cost of the building and furnishings were financed by the issue of $13,000,000 first mortgage 6 per cent. twenty-year sinking fund, series A bonds, $3,000,000 first mortgage 6 1/2 per cent. twenty-year sinking fund, series B bonds, and $6,000,000 general mortgage 7 per cent. sinking fund bonds, all secured by trust deed on the Stevens Hotel properties. The series A and B bonds were prior lien to the general 7 per cent. sinking fund bonds. Series A bonds were purchased by the National City Bank of New York, and the series B bonds were purchased by the United States Realty Company of New York. The Illinois Life Insurance Company purchased $3,000,000 of the 7 per cent. bonds. In 1928 plaintiff in error purchased $250,000 at par value of the 7 per cent. sinking fund bonds and in 1931 purchased $40,000 of those bonds, paying $39,000 cash therefor. Raymond W. Stevens purchased $250,000 of the 7 per cent. bonds. Other members of the Stevens family purchased of these bonds in amounts aggregating over $350,000. The Stevens family owned about four-fifths of the common stock of the Stevens Hotel Company.

The Stevens Hotel opened for business in May, 1927. The total cost of the hotel and furnishings was $28,786,930. The hotel is the largest in the world and contains approximately 3,000 rooms. The testimony shows that, considering it was a new hotel, its business was deemed satisfactory-in fact, better than anticipated-and showed gradual increase in 1927, 1928, and 1929 until the stock market crash of October, 1929. The evidence shows that in 1931, by reason of conditions produced by the economic depression, the hotel company found it necessary to borrow money to pay the interest on its outstanding bonds in order to prevent the bonds coming in default and to prevent foreclosure and sale of the property. Between June and December, 1931, James W. Stevens loaned to the hotel company $522,000 of his individual funds. During all the time from the opening of the hotel in 1927 until May, 1932, the hotel company met its current obligations, but it was necessary to borrow from time to time during 1931 to meet payment of its accrued bonds and interest. This money was loaned by the Illinois Life Insurance Company to the hotel company and constitutes the alleged crimes with which plaintiff in error, his father and brother are charged.

It is conceded by the people that the insurance company had power under its charter to make loans to the hotel company. The manner in which the loans were made to the hotel company was as follows: On May 15, 1931, the hotel company bought from the insurance company series A bonds in the amount of $350,000 and gave its corporate note for $300,000 and $32,430.67 in cash. This loan was authorized in writing by James W. Stevens, Raymond W. Stevens and Bert J. Stookey, three members of the finance committee of the insurance company. The loan was afterwards, at a regular meeting of the board of directors of the life insurance...