Academic journal article Journal of the Illinois State Historical Society

A Sensational Criminal Trial in Central Illinois

Academic journal article Journal of the Illinois State Historical Society

A Sensational Criminal Trial in Central Illinois

Article excerpt

On a Spring day in the early Twentieth Century a terse notice was posted at a bank entrance on a small town's main street in Central Illinois:

"Pekin, Illinois, April 2, 1906. This bank is closed and in my hands As trustee for liquidation.

U. J. Albertsen, Trustee"

Thus began a series of events that would include the indictment of bank partners for criminal conduct in operating the bank, a criminal trial described by a newspaper as the most sensational in Tazewell County history, and finally, a year later, the dismissal of all charges against the bankers. The alleged criminal conduct was a nonviolent white-collar crime of which the many bank depositors in the Pekin area were the victims. The newspaper, the Peoria Star, had a page of "Pekin Items" that reported details of the criminal trial from time to time in 1906 and 1907. The facts in those articles, found by chance through a computer at the Peoria Public Library, became the main source of this essay in Illinois legal history.1

Located ten miles south of the large city of Peoria and midway between St. Louis, Missouri, and Chicago, Illinois, a distance of 300 miles, the town of Pekin at its founding in 1830 had adopted the curiously chosen name of the largest city on the town's latitude north of the equator. That happened to be Pekin, China. Certified as a city in 1849, it became the county seat of Tazewell County by action of the state legislature. In 1906 its population was less than 10,000.2 The most famous Pekin resident in history, the national Republican leader, United States Senator Everett M. Dirksen, had no connection with the bank failure or the prosecution of the bank partners, for he was then only ten years old.3 Another Pekin resident, U.J. Albertsen, the bankers' liquidation trustee in 1906, was known as Senator Albertsen because he had been a leader in the Illinois Senate as Republican whip.

The closed bank, named "Teis Smith & Company, Bankers," and popularly known as the Smith Bank, had been founded in 1866 by Teis Smith, who had migrated from Germany to Pekin in 1849 at age 22. After developing two partnership businesses for making wagons and plows in the 1850s, he became known as one of the ablest business and civic leaders in the Pekin community and Central Illinois.4 By 1870, when he died at the relatively young age of 43, the two factories had prospered, occupying three-story brick buildings extending across an entire city block, employing 200 men and producing annually large numbers of wagons, carriages, buggies, and plows.

After partner Frederick Smith, a younger brother of Teis, died in a railroad wreck in 1890, the wagon and plow companies were separately incorporated in Illinois to avoid the complications in settling a deceased partner's interest. But the bank was not incorporated, perhaps because of a feared government interference in an incorporated bank. The bank partners were thus left with their personal unlimited liability for all the bank's debts under the common law principle that "the entire property of every partner is liable to make good the debts of the partnership, irrespective of the amount of the partner's interest in the firm." 68 Corpus Juris Secundum 632. Near the mid-1890s the three enterprises were adversely affected by nationwide difficult economic conditions, including bank panics and years of business depression.' There came a time when the payrolls and other expenses of the wagon and plow companies were financed by borrowings from the Smith Bank, whose managers and partners were officers and stockholders of the two corporations. When the loans became delinquent in large amounts, the corporations issued shares of capital stock in payment of the loans.' This practice, since the stock had no market, depleted the bank's liquid assets and led to its closing on April 2, 1906.

The six bank partners in 1906 were related to each other by blood or marriage, lived near each other on North Fourth Street in Pekin, were all members of the nearby German Methodist Episcopal Church, and had close business connections:

Dietrich Conrad Smith, age 66, youngest brother of Teis, Smith Bank President, Vice-President of Pekin Plow Company, a member of the U. …

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