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CITY SUES TO COMPEL PAY BY DIRECTORS
COUNCIL ATTEMPTS TO SHORTAGE FROM DIRECTORS OF THE BANK WHO PERSONALLY SIGNED HIS BOND AS CITY TREASURER.
The Rockford city council last evening voted to start immediate legal action against the Manufacturers National bank of Rockford seeking to recover the $12.330 shortage in the accounts of Erhard J. Hinz, former Rockford city treasurer who was admitted to probation by Judge E. D. Shurtleff at Rockford yesterday. after Hinz had confessed the shortage in his accounts and threw himself on the mercy of the court. Suit will also rest against an insurance company which went on the Hinz bond after the bank became insolvent, although the insurance company has also gone into the hands of a receiver. Action to seek the recovery of the shortage is in harmony with the advice of the judge when he rendered his decision in court. Directors of the Manufacturers underwrote the original bonds are B. A. Wilson, H. A. Taylor, Oscar J. Milburn, A. R. Floberg. F. F. Nelson, Eric S. Ekstrom, Hugo L. Olson and K. E. Knutsson. Judge Shurtleff suge gested that the directors of the bank ought still to be held responsible. Says Bankers Should Pay The court held that restitution should be made to the city of the funds taken but he proposed that such restitution should be made by the bank directors and when that is done that a settlement between Hinz and the bondsmen be worked out. "The defendant should make restitution, Shurtleff claimed. "but the law of probation is not made for the man who does have money and can make restitution and to be denied to the man who has no money and cannot make restitution. The whole subject of restitution should start with the city treasurer's bond and those directors who signed that bond. They should make restitution to the city. The bank, said the court, was really the city treasurer, and made the profits from the fact that they had the handling of the city money. Hinz, an employe of the bank, was merely a dummy city treasurer, doing the work for the bank without a salary fo rthe city treasurership. The judge gave a lengthy survey of the whole case, saying that he thought the state's attorney had acted wisely in dismissing the charge of embezzlement, as he did not believe that embezzlement could be proved. He said: "In this case the defendant is indicted for embezzlement of substantially the sum of twelve thousand dollars. In addition to that there are three other counts in the indictment under the statutory provisions for withholding funds from the city upon which he has pleaded guilty, and the state's attorney has nolle prossed the counts in the indictment charging embezzlement. I think the state's attorney was absolutely warranted in nolle prossing, dismissing the counts charging embezzlement. There is no stealing in this case. There is no evidence of directly converting moneys to his own use that could be denominated an infamous crime, and that charge is entirely out of this case, In fact, taking all of the testimony that was in troduced in this court, don't believe the defendant could ever be convicted of embezzlement. Hinz said that after the bank failed he sought to resign his office, but was persuaded by Mayor Hallstrom not to do so, as his resignation at that time would have added to the agitation in the city regarding financial affairs.
Worked at Marengo Hinz testified that he is 34 years old, married and has two children, aged 5 and nearly 3 years. He stated that he stopped his education the first year in high school in order to help support his widowed mother. For ten years, he was employed at the Dairymen's State bank at Marengo, where he was born and lived. In 1922, he and his wife went to San Diego, Calif., where after a year he was offered the assistant managership of a branch bank. Returning to Rockford in 1923, he secured a job at $125 month. he said, with the Manufacturers bank. His salary at the time the bank closed was $250, he testified. When he was elected treasurer, Hinz said, he insisted that the bank place in his hands collateral for as much as the city had on deposit. By doing so, the bank had the opportunity of investing the city funds, about $1,070,000 being on deposit at the time the bank failed to open. Had Contract with Bank The contract he had with the bank, Hinz stated. was to the effect that he could dispose of the collateral placed in his possession if a demand for city funds had not been honored in 30 days. Hinz testified the bank invested city funds in commercial paper, individual notes, acceptance papers, certificates of deposit and Rockford improvement bonds. "The bank got $1,600 in income on the city funds from May 19 to June 15, Hinz said. "About $750,000 in the city funds was let out at 1 per cent interest on banker's acceptance notes and certificates of deposit." "What did you do on June 15, 1931, when the Manufacturers bank did not open?" Hinz was asked by his attorney. "When the bank failed to open, I got into the bank at three minutes after 9 that morning and made a demand for the city money from the bank examiner in charge,' Hinz answered. "I wrote out a check for each balance and asked for the money. The bank examiner said he could not pay. told him to write that the checks had been refused on each one. "Who told you to do this?" Hinz was asked. "No one told me so, he re:
