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In Re Callas

OPINION FILED SEPTEMBER 29, 1980.

IN RE PERRY G. CALLAS, ATTORNEY, RESPONDENT.


Disciplinary proceeding.

MR. JUSTICE WARD DELIVERED THE OPINION OF THE COURT:

Perry Callas was admitted to the bar of Illinois in 1951 and engaged in the private practice of law from 1952 until 1962, when he became associated with the American National Bank of Chicago (the Bank) as a trust officer. He resigned from the Bank's service in 1978, at which time he was a senior vice-president and deputy head of the trust department. He is now engaged in private practice.

In January 1978 Callas pleaded guilty in the United States District Court for the Northern District of Illinois to a criminal information charging embezzlement and conversion of funds entrusted to the Bank. He was fined $1,000 and placed on probation for one year. A hearing panel of the Attorney Registration and Disciplinary Commission found that his conduct brought the legal profession into disrepute and recommended that he be suspended from the practice of law for a period of 18 months and until further order of this court. The Review Board of the Commission affirmed the recommendation.

In January 1969 the circuit court of Cook County appointed the Bank as trustee to hold and to disburse certain sales tax funds which had been paid under protest pursuant to a statute which was later held to be unconstitutional. The Bank designated the respondent to handle this account, which developed into a fund of some $34 million. Because of the magnitude and complexity of the funding procedure it was determined that an independent computer service was required. On the recommendation of the respondent, the Bank in April 1969, retained the Mid-America Computer Corporation (MAC). In 1970 the respondent was named as head of the corporate trust department of the Bank and a Mr. Guthrie was placed in immediate charge of the refunding program. Guthrie would act under the general supervisory authority of Callas.

The respondent became interested in MAC as an investment and in April 1971 purchased a one-third stock interest in the company for approximately $26,700. He never served as an officer, director or employee and did not receive any compensation, fees or other remuneration from MAC.

Callas had agreed earlier to serve as a guarantor or surety on a $30,000 loan obtained from another bank by his brother. When the brother defaulted in 1974 the respondent borrowed $25,000 from MAC and used the proceeds of the loan, together with $5,000 of his personal funds, to satisfy his obligation on the brother's loan. The loan by MAC was made on June 27, 1974, and the respondent gave a demand note to MAC calling for interest at 14 1/4%. At the hearing before the Commission he testified that he intended to repay the loan from his share of the proceeds of an expected sale of MAC to Shick-Reedy, a company which had made an offer of $1 million for MAC. The sale was not completed in 1974, as contemplated, because of litigation instituted by a stockholder of Shick-Reedy. Eight days after making the loan to the respondent, MAC, by its president, Pros, on July 5, 1974, requested Callas to arrange a $25,000 advance from the Bank, which Pros said was made necessary by the expense of handling the large number of claims filed in April and May. The advance was to be repaid by debiting future billings of the Bank by MAC for its services. This procedure had been followed on three previous occasions when MAC received advances from the tax accounts in the Bank. The largest of the earlier advances had been for about $16,000, and it had been repaid in six months from subsequent billings. Guthrie was out of town the day the respondent received the request from Pros for the advance, and the respondent testified that after making certain that the Bank had more than $25,000 in uninvested cash in the tax accounts he authorized the advance of $25,000. The respondent told Guthrie what he had done the day after the advance and asked, "Do you have any problem with this?" Guthrie replied that he did not as long as the advance would be credited against future billings. The respondent ordered three trust-department checks to be prepared on three tax-refund accounts being administered by the Bank, the service-occupation-tax account, the tobacco-tax account, and the cigarette-tax account. Guthrie normally signed checks drawn on these accounts, but the respondent told Guthrie he would sign the checks "so that there would never be a question of who authorized the advance."

The respondent testified that he heard that MAC had made loans to certain of its employees at interest rates ranging from 4% to 6% in contrast to his loan at 14 1/4% and that he complained to Pros. The loan to him had been made on June 27, 1974, and at Pros' request the respondent, on July 8, did send a check to MAC in the amount of $69.27, representing one week's interest. The respondent said that because of a dispute which developed concerning the interest rate no other payments of interest were made by him. When the principal indebtedness to MAC was repaid in January 1977, as will be described later in this opinion, the respondent said he received a receipt for repayment of the $25,000 but did not get back the promissory note. This was, he said, because of the unresolved question of how much interest he owed.

For a period of about three months from July 5, 1974, the date of the advance, to October 16, 1974, no fees were paid by the Bank to MAC for its services. Guthrie was holding up payments on the invoices MAC submitted pursuant to the arrangement to repay the advance of $25,000. Pros, however, then spoke to the respondent and asked if the Bank would pay the June to October 1974 invoices, as MAC was having a serious cash-flow problem. The respondent told Guthrie that MAC would like to extend the advance for a little while, and he asked Guthrie if the Bank could pay the invoices submitted from June to October. As a result the Bank did pay MAC in October 1974 for its outstanding invoices.

In a statement the respondent filed with the Commission prior to the hearing he stated that Guthrie thereafter, on three or four occasions, asked him to question Pros about repayment of the advance. He talked each time to Pros, who asked him to defer holding up payment because of MAC's cash position. Callas said he felt, and he so advised Guthrie, that at the time the tax accounts were to be closed there would be much work remaining to be performed by MAC, and that the advance could be credited against the closing billings by MAC if the advance had not been satisfied by that time. He said that Guthrie did not object when the respondent explained this to him and said that prepayment of the advance would not be in jeopardy. He said he told Guthrie that he was the account administrator and should do as he wished. The Bank did not hold up MAC's billings, and the $25,000 advance was carried by the Bank until it was repaid in 1977.

Callas testified that when he had discussions of the matter with Guthrie the $25,000 was carried on the books of the Bank as an advance to MAC. He testified he was unaware that MAC showed on its books that its loan of $25,000 to Callas had been repaid. He testified that on January 7, 1977, he satisfied his loan from MAC using $25,000 that had been loaned to him by Mr. Shick of Shick-Reedy. The books of MAC were changed at that time to reflect that the loan was satisfied as of January 7, 1977, and MAC's books were changed to reflect also that the payment to it of the $25,000 in July 1974 was an advance payment by the Bank against MAC's future billings and not a repayment to MAC of the loan MAC made to Callas. The advance by the Bank to MAC was also repaid at this time. The loan of MAC to the respondent and the advance by the Bank were repaid at the same time at the insistence of Shick.

A Federal grand jury investigation was begun in March 1978, and Callas resigned his position at the Bank on April 12. When the investigation began, the Bank placed the respondent on a paid-leave-of-absence status, but he testified that he voluntarily resigned because it had become apparent the "somewhere down the line I would have to resign from the bank." The Bank was not aware, until the commencement of the investigation, of MAC's loan to Callas and that Callas had acquired an interest in MAC.

In December 1978 the United States Attorney at Chicago filed a criminal information charging that on or about July 5, 1974, Callas, with intent to defraud, had embezzled and misapplied, in an amount less than $100, moneys entrusted to the Bank from its tax accounts and did convert the money to his own use and benefit.

Callas and his attorney had conferred with the prosecutors, and his attorney told him that the prosecutors were prepared to file a one-count information charging a misdemeanor. His attorney advised him that in the event he was not prepared to plead guilty to the criminal information the likelihood was that an indictment would be returned with at least three felony counts, representing the three checks the respondent had drawn in making the $25,000 advance to MAC. The respondent entered into a plea agreement with the United States Attorney's office and on his plea of guilty in the United States District Court in January 1979 was sentenced to pay a fine of $1,000 and placed on probation for a period of one year. He testified before the Hearing Board that despite his having pleaded guilty he did not feel that he had knowingly misapplied the funds.

At the hearing before the panel Callas testified that MAC was sold to Shick-Reedy for $1.6 million, of which Callas will receive approximately $490,000. He had ...


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