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People v. Kotlarz

October 13, 2000


The opinion of the court was delivered by: Chief Justice Harrison

Agenda 13-May 2000.

Defendant, Joseph S. Kotlarz, appeals his conviction for theft by deception of an amount exceeding $100,000 (720 ILCS 5/16-1 (West 1992)), for which he was sentenced to serve four years' probation, 180 days in the Du Page County jail, 400 hours of community service, and to pay restitution of $190,000. Defendant's main contention is that the appellate court erred in affirming his conviction (No. 2-97-l194 (unpublished order under Supreme Court Rule 23)), because the State failed to prove all the essential elements of the crime beyond a reasonable doubt. We allowed defendant's petition for leave to appeal. 177 Ill. 2d R. 315.

At the joint Du Page County bench trial involving defendant and co-defendant, Robert Hickman (Hickman), Malcolm Erickson testified that, from 1982 to 1992, he had served as chief counsel for the Illinois Toll Highway Authority (Tollway). The Tollway owned a piece of property on the north side of Interstate 88 and west of Meyers Road in Du Page County which had originally been purchased for an oasis. The property became excess because the Tollway had decided not to build an oasis on that site and the Tollway chose to sell the property.

Erickson further testified that, in 1989 and 1990, he started negotiating with Roger Berres and Gregory Constantino of Waste Management, Inc. (Waste Management), for the sale of the Meyers Road property. He stated that, during those negotiations, neither side used the services of a broker. The negotiations proved unsuccessful and the Tollway retained ownership of the property. Erickson testified that, although he was contacted by Berres in April 1991 about reopening negotiations, he directed Berres to another attorney for the Tollway and was not involved in those negotiations due to an extended illness. Erickson stated that he would not have expected a broker to participate in the sale of the property because a broker is normally used to find potential buyers and, here, the buyer was already identified. Erickson testified that in July and August of 1991, Hickman was the executive director of the Tollway. Erickson did not know defendant.

Michael Blonstein testified that he had been employed by Eagle Real Estate Services (Eagle) for 11 years, up until approximately one year before the trial in this matter. Blonstein testified in exchange for immunity from prosecution and stated that Eagle had, pursuant to an agreement with the State, returned its portion of the commission from the sale of the property to the Tollway rather than risk indictment. Blonstein stated that Eagle primarily represented shopping center developers or retailers and that, in 1990, defendant assisted Eagle in a Tinley Park real estate transaction. Defendant received over $25,000 for his assistance in the transaction.

Blonstein testified that he and defendant were friends and that, in the spring or summer of 1991, defendant asked Blonstein to pick him up at Midway Airport, explaining that he had a "dream" deal for Blonstein. When they met, defendant told Blonstein that he was going to put Eagle in a deal in order to repay Blonstein for the way he had handled the Tinley Park transaction relative to defendant. Blonstein stated that defendant explained the deal involved Waste Management purchasing property from the Tollway and that Eagle would receive $50,000. Blonstein asked what Eagle was expected to do in the deal and defendant replied that Eagle would have nothing to do and that this was his way of repaying Eagle. Blonstein testified that he asked defendant whether the deal was legitimate and defendant assured him that it was.

Blonstein further testified that he never learned many details concerning the sale of the property. When he would question defendant about the deal, defendant would put him off, telling him that when the problems were worked out, the deal would close. Blonstein learned that the total commission on the deal was to be $240,000, with $50,000 to Eagle and the balance to defendant, and that Eagle was listed in the contract as the broker of record. When the deal was scheduled to close, Eagle was directed to send an invoice indicating that it had been Waste Management's broker. Until receiving a letter dated July 23, 1991, it was not clear to Blonstein that Eagle was representing Waste Management rather than the Tollway. The letter, on defendant's letterhead stationary and addressed to Hickman, was given to Blonstein by defendant to provide him with some of the particulars of the deal. The letter reflected the purchase price of the property as $3.8 million and the brokerage fee to Eagle of $240,000. The State admitted into evidence copies of Eagle's check to defendant for $190,000 and the 1099 tax form reflecting payment of the commission.

Blonstein stated that he never discussed the sale of the property with anyone from either the Tollway or Waste Management. Indeed, before attending a dinner with defendant and Hickman, defendant instructed him not to mention the deal. Blonstein testified that he had never before been brought into a transaction where he had then paid a large portion of the commission back to the purchaser's lawyer.

George Erwood testified that he helped to form Eagle and has been its owner since 1986. Erwood stated that he first met defendant on July 1, 1991, when he handed defendant a check for his services in the Tinley Park transaction. Blonstein informed Erwood about the deal involving the Tollway and Waste Management, and he believed Eagle was to provide comparable listings. Erwood stated that no oral or written agreement existed between Eagle and either the Tollway or Waste Management. Erwood had no contact with either the Tollway or Waste Management regarding the deal, nor did he provide services to either party.

Erwood further testified that he understood defendant was representing Waste Management. At defendant's request, Erwood drafted the broker's invoice and sent it to the title company. A day or two later, Erwood picked up the commission check for $240,000 from the title company and deposited it. Erwood then drafted the $190,000 check to defendant, dated October 20, 1992. Erwood testified that he had never been involved in a deal in which a portion of the brokerage fee was given to the purchaser's attorney. While Erwood admitted that he had once described Eagle as a "conduit" with respect to the deal, he regretted that choice of words but agreed that the deal was "processed" through Eagle. Erwood stated that he never believed that Eagle did anything illegal in connection with this matter, and paid back the $50,000 because he was being threatened with prosecution and felt it was the prudent course of action. Eagle made the check payable to the Tollway at the direction of the State's Attorney's office.

Peter Huizenga testified that he has been a member of Waste Management's board of directors since it was formed in 1968. Huizenga had known defendant for 12 to 15 years, and Hickman for 8 to 10 years. Huizenga stated that Waste Management had been seeking the Meyers Road property for two or three years before it was actually purchased. He was aware of the personal friendship between defendant and Hickman, and introduced defendant to Waste Management because defendant indicated that he might be able to assist the company in acquiring the property. Defendant told Huizenga that he had a personal relationship with Hickman, which might be a "good fresh approach." Huizenga testified that he was not involved in the real estate transaction and was not aware that Eagle was involved. While Huizenga did not know how defendant was going to be paid by Waste Management, he assumed that it was being handled by Roger Berres. To Huizenga's knowledge, no one at Waste Management approved of an arrangement by defendant to receive $190,000 of sale proceeds provided to a broker.

Gregory Constantino testified that he is an attorney for Waste Management, and that in 1991 and 1992, he worked as senior attorney in real estate transactions. As part of his duties, Constantino drafted, reviewed and formulated real estate contracts and offers. In 1988 and 1989, Waste Management was attempting to obtain an easement or right of way over the Meyers Road property owned by the Tollway in order to construct a frontage road to link two of the company's buildings. Waste Management did not use a broker during these negotiations.

In June 1991, negotiations between the Tollway and Waste Management renewed. Constantino met defendant when he was asked to go with Berres and defendant for a drive by the property, after which they all joined Hickman for lunch. Constantino had no further involvement in the negotiations and testified that Berres handled them. Constantino did, however, participate in drafting the sales contract and reviewed a draft agreement prepared by defendant. Defendant's draft contained an offer of $3.8 million for the property and a provision for payment of $240,000 to Eagle as real estate broker. Constantino protested the provision to Berres, stating that he was unaware that a broker had been involved, did not know why Waste Management was paying a fee, and had not heard of Eagle. Constantino testified that Berres told him "this was the way the Tollway wanted the transaction." Constantino then prepared a new version of the agreement and included a provision in which the Tollway warranted that there were no other brokers and that the commission would not exceed $240,000.

Constantino further testified that he had no knowledge of any real estate broker working on behalf of Waste Management for this property; he believed that Eagle was the Tollway's broker. Constantino informed Berres that because Eagle was not their broker, some of the contract language should be changed. Constantino objected to three sentences which were ultimately deleted, one of which stated: "Purchaser agrees to be solely responsible for the commission due Eagle Real Estate." Constantino explained: "We had agreed out of proceeds to pay it, out of the total that we were paying for the property, the $4,040,000. But we were not going to be solely responsible for this commission." For this same reason, Constantino stated, he believed it was the Tollway's responsibility to deposit the commission statement into escrow. Constantino affirmed on redirect that Waste Management's out-of-pocket expenditure to obtain the property was $4,040,000 plus closing costs.

Ben Swislow testified that he had been employed in the Tollway's real estate department since March 1991. He was informed about the potential sale of the Meyers Road property to Waste Management, and contacted Berres about the property, but was not involved in the negotiations regarding the sale. Swislow stated that Hickman was the executive director of the Tollway at this time, and he occasionally spoke with Hickman about the sale of the property and was told the deal was not closed. Hickman told Swislow that the Tollway would receive $3.8 million for the property.

In the winter of 1991, Hickman directed Swislow to take the contracts to Berres at Waste Management. While waiting in the reception area at Waste Management's offices, Swislow met defendant. When Berres came down, the three men went to Berres' office and Swislow gave him the contracts. Swislow testified that he found the broker's commission odd because, to his knowledge, there was no broker involved in the deal and the Tollway had no broker's agreement with respect to the property. Swislow stated that an appraisal of the property contained a variety of values, but he did recall the amount $2,265,000. He believed that the price of $3.8 million was "a fabulous price."

Frank Howard testified under a grant of immunity. He had been defendant's law partner from 1983 to 1987, doing the "hands on" work while defendant brought in the business. The parties stipulated that defendant's law office was across the hall from Future Realty, that defendant used Future Realty's fax machine, and that Hickman was never in defendant's office. Howard testified that he became the Tollway's chief legal counsel on November 1, 1991. Although he stated that he obtained the position by applying and interviewing for it, he acknowledged that defendant had said he would assist Howard in any way possible and told Howard that he had made efforts on his behalf. Shortly after he started his job at the Tollway, Howard was told to contact Roger Berres at Waste Management because there was a deal pending for Waste Management to purchase excess property. Howard learned of defendant's involvement in this transaction either shortly before or after beginning employment with the Tollway. He ultimately assigned the drafting of this transaction to staff attorney Paul Olszewski.

Howard testified that he was informed that the purchase price of the property was $3.8 million, and he was involved in negotiating the other terms of the contract. Howard denied ever talking to Hickman about the purchase price. Howard testified that People's Exhibit No. 6, a July 30, 1991, letter to Hickman, signed by defendant, outlined the terms of the deal as Howard understood them. As executive director, Hickman would have been the party responsible for negotiating the contract.

Howard further testified that, before beginning work on the project, he did not see anything in writing regarding who brought a broker into the deal. Howard was told that the commission of $240,000 was to be paid by Waste Management, and made a notation on the contract to that effect. Howard stated that, pursuant to his interpretation of the contractual language, Eagle was Waste Management's broker. According to Howard, the board of directors would be required to expressly approve a brokerage contract for the Tollway.

Howard testified that Paul Olszewski attempted to insert three sentences into the contract which would have made it very clear that the broker was Waste Management's, that Waste Management was to pay the commission, and that the commission was not part of the sale proceeds due the seller. When they got the contract back from Waste Management, that language had been deleted and Howard told Olszewski that it was something that he and Berres had argued over, and that this was the way the contract was to be presented to the board. Howard testified that he did not know that defendant was to receive $190,000 of the commission and, had he known, he would have investigated. No one ever told Howard that there was a $4,040,000 offer for the property before the $240,000 brokerage fee was written into the agreement.

Christine Benn testified that she was employed by the Tollway as an executive secretary from 1987 to 1994. She worked for Hickman in 1991 as his administrative assistant. Benn identified the signature on People's Exhibit No. 2 as Hickman's, and the parties stipulated to this fact. People's Exhibit No. 2 was a letter dated July 17, 1991, from Hickman to Berres of Waste Management which stated, in part:

"This letter is in reference to your proposal of July 10, 1991. My Board and I would react negatively to any offer below four million dollars and it would probably take a little more than that to gain our approval.

Your next proposal should include a reference to the brokerage fee. This is made payable to the Eagle Real Estate Services and will be at six percent of the purchase price."

Robert Douglas testified that he was a senior attorney employed by the Tollway in 1991. In 1992, he was appointed assistant chief counsel to Frank Howard. Douglas stated that he was familiar with the procedures for the sale of excess property in 1991. Douglas testified that he first became aware of the Meyers Road transaction in August 1993, after a discussion with Paul Olszewski. Douglas thereafter brought the information to the attention of the Tollway chairman's secretary, and then met with the chairman, John Garrow, and with the Illinois State Police. Douglas testified that he copied the contents of the file on the Meyers Road transaction and turned it over to the police. In April 1994, Douglas learned that he had been stripped of his designation as a special assistant attorney general, a title which Tollway attorneys held at that time. The form terminating his position was initialed by Howard and Hickman. Douglas testified that he reported to Howard, a department head, and that the department heads were given the freedom to operate as they saw fit. Douglas was never told of any dissatisfaction with the quality of his work.

Paul Olszewski testified that he was an assistant attorney general for the Tollway whose responsibilities included drafting contracts for real estate sales. Olszewski stated that, in 1992, Howard assigned him to review the contract for the Meyers Road property, People's Exhibit No. 12, and told him that his contact at Waste Management was Roger Berres. Olszewski testified that, before he reviewed the purchase price on the contract, he talked to Ben Swislow, who voiced some concerns. Swislow advised Olszewski that defendant was involved in the deal, that the purchase price was to have been $4 million, and that there had previously not been a broker involved in the deal.

Olszewski reviewed the price and brokerage provisions of the contract and noted that the stated purchase price, $3.8 million, was essentially $4 million less the commission. When Olszewski related this fact to Howard, Howard advised him that the purchase price was $3.8 million and that the commission was over and above that. Pursuant to this conversation with Howard, Olszewski redrafted the paragraph dealing with the brokerage fees to provide that the fees were independent of the sales price, that the purchaser was to be solely responsible for the commission, and that the purchaser would reimburse the seller for any costs involved in a commission claim. Olszewski testified that he understood that the Tollway had no brokerage agreement with anyone and drafted the brokerage provisions ...

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