Repository: UIHistories Project: Board of Trustees Minutes - 1914 [PAGE 269]

EXTRACTED TEXT FROM PAGE:

1913]

PROCEEDINGS OF THE BOARD OF TRUSTEES.

267 T H E UNIVER-

REPORT OF S U I T OF C H A R L E S W . S P A L D I N G A G A I N S T SITY OF ILLINOIS, ET A L .

(10) A report from Dean O. A. Harker, Legal Counsel, of the suit brought by Mr. Charles W. Spalding, formerly treasurer of the University, against the University of Illinois et al.

This report was received to be printed in the minutes:

June 18, 1913. President E. J. James, University of Illinois. DEAR SIR: Some time ago you requested me to make a thorough investigation of all the facts and matters involved in the case brought by Charles W. Spalding against the University of Illinois et al, and report the same to you. My time has been so occupied with other matters since receiving your request as to preclude a thorough investigation and report before this time. I am now in possession of the data which will enable me to give you the following : REPORT. Some time during the year 1896 it was ascertained that Spalding was default to the University of Illinois in the sum of $549,006.42, as follows: In endowment bonds $418,110 In endowment fund uninvested 38,602 In general fund 92,293 in 00 91 51

Making a total of $549,006 42 In addition to being Treasurer of the University he was manager of the Globe Savings Bank of Chicago. At the time his defalcation to the University was ascertained to the Globe Savings Bank was greatly involved, and as Spalding had hypothecated some of the University's securities to secure obligations of the bank some serious and vexatious litigation followed. The Chicago Title and Trust Company, as receiver appointed in the case entitled The People of the State of Illinois ex rel. J. S. McCullough, Auditor, v. The Globe Savings Bank et al., laid claim to a large amount of the securities. An adjudication resulted in favor of the University. In the litigation it was necessary for the University to employ counsel in all the cases in which title to the securities was involved. To avoid the expense to the University, and also to provide that the income of the fund derived from the Federal Government be appropriated to the use of the University, an arrangement was made at Springfield whereby the office of the Attorney General took care of the litigation, and an Act was passed protecting the interests of the State in connection with the management of those funds. That Act was passed June 11, 1897, at which time it was determined that the embezzlement of Spalding was as follows: From the fund for operating expenses From the fund for building purposes From the federal endowment fund and interest thereon $ 48,116 13 44,803 25 456,712 91

Making a total of $549,632 29 Before then (14th of April, 1897), Spalding executed a deed of trust to the University to the following described personal property: 16 bonds, town of Buckley (Washington), each $ 500 00 17 bonds, Marshalltown Light, Power & Railway Co., each 1,000 00 50 bonds, Pocatello Power and Irrigation Co., each 1,000 00 60 Idaho Canal Co. bonds (new issue) numbered, each 1,000 00 Two notes made by J. W. Lanehart, payable on demand 5,000 00 (Guaranteed by John P. Altgeld) 6,500 00 Seven notes of N. W. and G. W. Graham, being for $1,000, $500, $1,500, $2,000, $2,000, $2,000 and $4,000, respectively, all secured by a trust deed to Adello D. Avril, conveying electric light plant at Carbondale, 111.; all said notes payable on demand; also secured by stock of said Electric Light Company, par value, $25,000. Five hundred shares of stock in the Pocatello Power and Irrigation Co., par value $100 per share. Two thousand three hundred ninety shares of stock in the Idaho Canal Co., par value $100 per share. In the deed of trust he authorized the University, its trustees, or attorneys, to demand and receive all the said property from any person in whose hands the same might be found, to compromise and discharge any of the obligations mentioned in such way as in its discretion it might see fit, and to take any steps or proceedings to realize from the property at such prices as its trustees or attorneys might elect; the proceeds of the same to be applied to the discharge of the indebtedness to the University. The deed of trust further provided that if there should be any surplus it should be paid over to Spalding. Spalding also executed a deed of trust or mortgage to Francis M. McKay, the President of the Board of Trustees, to certain lands situated in the state of Idaho and to some encumbered real estate situated in Cook County, Illinois. On the passage of the Act of June 11, 1897, for the reimbursement of the University for Spalding's defalcation, and in consideration thereof, the securities which had been turned over by Spalding and the deed of trust were transferred to a State commission, composed of the Governor, the State Treasurer and the State Auditor. After that the University regarded itself as relieved of any