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Let me digress here for a moment. The papers in receivership are not destroyed, as the receiver testified they were. I am told they are microfilmed. If so, they, too are available in that form. Certainly the court records are not destroyed. The records in case No. 20,433–A are intact and on file in circuit court No. 2 in Baltimore, Md. Two men from my office have seen them.
The charges grew out of Mr. Sobeloff's conduct in a relationship to the Baltimore Trust Co. case known as case No. 20,433-A, docket 44-A, commenced in 1935 and still pending in circuit court No. 2 of Baltimore, Md.
The Baltimore Trust Co. was one of the largest financial institutions in the South. It failed in 1935 with tremendous losses to its depositors and very heavy losses to its general creditors.
Senator WATKINS. Does the Senator know in that particular case that probably the recovery was well above the average throughout the country in the case of closed banks? I think it was around 70 percent, if I remember the testimony, to the depositors.
Senator JOHNSTON. The record will show that. I will be glad for the record to be produced.
Senator WATKINS. I am just trusting my memory, but as I recall, it would be better than 70 percent.
Senator JOHNSTON. If the record will disclose
The CHAIRMAN. Would the issue be there not what the average of the country was, but what could have been recovered?
Senator WATKINS. The court was in charge of this whole matter, Mr. Chairman, and the court approved the activity that took place. There is no question about that, and we went into it very carefully; Senator O'Mahoney, who is a very distinguished lawyer, examined every phase of it that seemed to be necessary in this particular case. I regret very much that the Senator from South Carolina was not present at those hearings and did not appear at that time.
We had this gentleman, Mr. Shankroff, appear, and we found out he had no special qualifications whatsoever to pass judgment on the court proceedings.
The evidence is in the record as to just what his activities were. I do not care to cast any reflections upon him, but the committee has that before it. The whole record is before the committee.
The CHAIRMAN. Did he testify?
Senator WATKINS. He testified, but he was attempting to characterize the entire proceedings with his judgment, and I think the chairman of the subcommittee ruled properly that he was not qualified to pass on those court records and render judgment.
The CHAIRMAN. He is not a lawyer? You say he is not a lawyer?. Is he a lawyer?
Senator WATKINS. No; he is not a lawyer.
Senator JOHNSTON. He is not a lawyer, but he spent most of his life-' time with records, as I understand, over there in Baltimore. He hangs around the court.
Senator BUTLER. Mr. Chairman, may I make a statement for the record?
The evidence before the subcommittee clearly shows that the nominee had no control whatever over the litigation. He could only settle it at the direction of the court; and the court, when he directed the settlement, made some remarks in connection with the settlement that
completely exculpated the Solicitor General and the nominee in this
He had no control. He could not press a suit that the court told him not to press. He could not appeal it because he had to have the direction of the court to appeal it. He did exactly what the court told him to do.
Senator WATKINS. As I remember, the evidence also shows that one of the settlements which was made was made contrary to his recommendation.
Senator BUTLER. Not only that, Mr. Chairman, but remember, in this type of case-and I know this to be a fact because I am a Baltimore lawyer-the stock of the Baltimore Trust Co. was hawked around the streets, so to speak, just weeks before this horrible failure came about, and the court took into consideration the fact that it would be so unjust to endorse a full liability against persons who were innocently brought into the company when it was almost in a failing condition, if it was not in a failing condition, so they arrived at this settlement.
So they arrived at this settlement, and Mr. Sobeloff was forced to take it by the court; and the court, as I have said, made a complete statement in connection with it, which completely exonerated the nominee.
Senator JOHNSTON. I am going to have to leave in a minute, but I would like to call to your attention that the transcript of the record does not show what compensation Mr. Sobeloff got from the stockholder clients in resisting the efforts of the receiver to enforce the statutory liability. He represented them in trying to keep them from enforcing the statutory liability.
And then you will find that later the records show that he got $30,000 for three reports; a review of press accounts of the motions, such as a large allowance, caused in Baltimore, would make interesting reading. It required a very long opinion by Judge O'Dunne to justify it.
The you will find out later he is coming in and representing the other side. Don't tell me that is not a conflict of interest.
Senator BUTLER. I do not think the record will show it.
Senator JOHNSTON. Well, I have here exactly the way, also, that he represented the two opposing sides. But I have got to go.
Senator BUTLER. Mr. Chairman, may I inquire before the Senator from South Carolina leaves, when we may expect to resume the hearing on the nomination of Mr. Sobeloff?
The CHAIRMAN. I would like to resume later in the week if we can get a quorum. I tried to resume on Thursday and Friday, and we could not get a quorum.
Senator WATKINS. Mr. Chairman, why did we have to have a quorum?
The CHAIRMAN. Because he has requested us to make a record. Senator JOHNSTON. I would like for the subcommittee more than anything else to go over to Baltimore, and you will find that he was representing both sides, if you will only get the record.
Senator BUTLER. Will the Senator pinpoint that a little, because I would like to know wherein he has done it. I have listened to testimony
Senator JOHNSTON. I will be glad to give to the subcommittee wherein I say that he has represented both sides.
Senator BUTLER. I think it would be well to do that.
Senator JOHNSTON. I have got it now, and I will give it to you in writing.
The CHAIRMAN. We will recess at this time, subject to the call of the chair.
(Whereupon, at 11: 55 a. m., the committee recessed, subject to call.)
NOMINATION OF SIMON E. SOBELOFF
MONDAY, JUNE 25, 1956
UNITED STATES SENATE, COMMITTEE ON THE JUDICIARY, Washington, D. C.
The committee met, pursuant to call, at 11 a. m., in room 424, Senate Office Building, Senator James O. Eastland (chairman), presiding. Present: Senators Eastland, Johnston, Kefauver, Daniel, O'Mahoney, Langer, Watkins, Dirksen, and Butler.
Also present: Joseph A. Davis, chief clerk.
The CHAIRMAN. Senator Johnston, you may proceed.
Senator JOHNSTON. At the close of the last meeting on this matter, the question came up as to whether or not Mr. Sobeloff had been acting as attorney with conflicting interests. I thought it would be well to draw this to your attention and just work it down before I went into that detail so you could clearly understand just what the position was. Here is what Mr. Sobeloff did, and how he did act, to my way of thinking representing conflicting interests.
It may be well that I give a brief summary of Mr. Sobeloff's acts, which I believe will show he represented conflicting interests in the Baltimore Trust Co. case, No. 20,433-A, still pending.
First, he opposed the interests of the receiver when he represented stockholders who, by suit, resisted the additional statutory stockholders liability. I have here a newspaper article showing it appeared in the paper he represented. He appealed and lost this case in the Maryland Court of Appeals. This litigation was in opposition to the interests of the depositors and general creditors.
He later, by court appointment, made reports of discovery and possible liability against the officers and directors for their alleged negligence in the transaction of the business of the trust company. This professional engagement was on behalf of the depositors and creditors, hence adverse to his first action in the case. Now it may be urged that he took this onerous duty because the court had appointed him. Is that a fair answer to the charge that he represented conflicting interests? My answer is that it is not. No court has a right and no court can rightfully compel an attorney to assume, in the same case, contrary, legal, or ethical positions. It must therefore be assumed that notwithstanding this patent conflict, Mr. Sobeloff was perfectly willing to be placed in a compromising position.
The transcript of the record naturally does not show what compensation Mr. Sobeloff received from his stockholder clients in resisting the efforts of the receiver to enforce the statutory liability in the first suit.
The record does show that he got $30,000 for his three reports. A review of press accounts of the commotion such a large allowance caused in Baltimore would make interesting reading. It required a very long opinion by the court, Judge O'Dunne, to justify it.
Where did this conflict leave Mr. Sobeloff? It left him in the position to permit the judge—and that was precisely done to settle the fixed statutory liability for amounts less than that originally determined by the court of appeals in the first suit brought by Mr. Sobeloff. He may say he had nothing to do with those settlements and that they were approved by the court. At that period of time, he was in the case on the side of the receiver. The committee ought to ascertain from the record in the case what Mr. Sobeloff's duty was in this matter. The committee ought to ascertain why, after being the attorney for the receiver, Mr. Sobeloff stood by without dissent or appeal, and permitted settlements of liability to be made which were detrimental to the receiver and ultimately to the depositors and general creditors.
Mr. Sobeloff then filed as one of the attorneys of record, 15 suits on behalf of the receiver against the stockholders and directors. Having first sued the receiver to prevent additional stock assessments, and later suing for the receiver to enforce liability against the officers and directors, certainly shows, at least to me, that in the same case he represented the plaintiffs in one phase of the suit, and the same defendant as a plaintiff in another.
Senator LANGER. Was that on double liability?
Senator JOHNSTON. Coming back on the double liability. For these latter suits, he received a fee of $7,500 in addition to the above $30,000. Another illustration of conflict is the fact that he later on in the same suit sued the receiver again. He filed a petition seeking the cancellation of a rent-free agreement held by the receiver for the Occupancy of part of the Baltimore Trust Building. That is the biggest building they have over in Baltimore. He filed this suit knowing in advance of the rent-free agreement. Does this latter action not place Mr. Sobeloff in a legal or ethical position that is contradictory to the interests of the receiver whom he had represented as a client in the prior 15 suits? To me the answer is obvious. How can it be said that there is no conflict when an attorney sues an officer of the court, then prosecutes for him and thereafter in the same case, at a later time, again sues him? The foregoing are representations of fact which have been made to me. I submit it is the grave responsibility of the committee to determine whether they are true. If they are true, the committee should steadfastly refuse to report out this nomination.
I suggested to the subcommittee my communication, which I reduced from Mr. Shankroff's complaint to writing, that it would be appropriate for the subcommittee to subpena the court records in this case and to subpena certain witnesses. I understand one of the witnesses responded, but a Mr. Funkhouser did not respond to the subpena and did not testify. I do not understand that the subcommittee subpenaed the records and I do not understand that any of the records in the case have either been studied by the committee or considered by them. I suggest that any report to the full committee without a prior careful consideration of the records in this case to which such serious charges as Mr. Shankroff urges would be immaterial. It