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(2) That he did use the confidences and information obtained from these former employers to his subsequent advantage to such an extent that he sought to force through court action enforcement of agreements concerning property that he caused to be obtained through his former position to his personal advantage.
(3) His responsibility as an officer of the court was to conserve and protect the assets involved in the liquidation of the Baltimore Trust Co. wherein many depositors and clients suffered heavy losses. Instead, under a judicia! masquerade, through a series of legal manipulations, he obtained control for a subsequent client of one of the most valuable assets, namely, the 34-story office building now known as the Mathieson Building, in total disregard of the agreement of transfer by the receiver, John D. Hospelhorn, in July 1941, and approved by the court.
Based on the past record of Simon E. Sobeloff as an officer of the court and as an attorney, my conclusions for objecting to his confirmation is that he is completely unqualified for the high judicial office of judge of the United States Circuit Court of Appeals.
(Documents attached to Senator Johnston's statement are as follows:)
The following three persons are necessary witnesses and should be subpenaed: 1. John D. Hospelhorn (receiver, Baltimore Trust Co.), 307 North Eutah Street, Baltimore, Md.
2. Raymond J. Funkhouser, % R. J. Funkhouser & Co., 138 West Washington Street, Hagerstown, Md.
3. William L. Rigger, 920 West University Parkway, Baltimore, Md.
The following persons have knowledge concerning the affairs of the Baltimore Trust Co. but may not be necessary as witnesses:
1. Herbert Myerberg (Sobeloff's assistant 1935-36), Baltimore, Md.
2. Howard Bruce, Elkridge, Howard County, Md.
3. Stewart S. Jackson, treasurer, Maryland Dry Dock Co., Key Highway, Baltimore, Md.
Jackson is described as being Mr. Bruce's No. 1 assistant, familiar with the negotiations of the Sobeloff settlement.
4. Grover L. Michael, President, McConway Torley Corp., 109 48th Street, Pittsburgh, Pa.
Representative of receiver. Familiar with the details as to whether Sobeloff represented any clients of the trust company.
5. J. Purdon Wright (cosolicitor of receiver), room 1134 Mathieson Building, 10 Light Street, Baltimore, Md.
In 1936 the court records list Alexander Armstrong, former attorney general of Maryland, resident of Hagerstown, Md. (now deceased); J. Purdon Wright, and Simon E. Sobeloff as solicitors for the receiver, John D. Hospelhorn.
6. Alexander Gordon, vice president and trust officer, Maryland Trust Co., Calvert and Redwood Streets, Baltimore, Md.
A young lawyer familiar with the affairs of the receiver's counsel who did much of the work.
7. Charles Shankroff, P. O. Box 1003, Baltimore, Md.
A man 74 years of age, now retired, who has spent the last 2 years copying and reviewing the entire records of the Baltimore Trust Co. liquidation; has made a chronological list of all important papers concerning the numerous transactions. Mr. Shankroff advised that he did not own any stock or have any deposits or have any interest of a financial nature in the affairs of the trust company and is not a lawyer.
CANONS OF PROFESSIONAL AND JUDICIAL ETHICS OF THE AMERICAN BAR ASSOCIATION
(Canons No. 33-45 were adopted on July 26, 1928.)
CANON 36. RETIREMENT FROM JUDICIAL OR PUBLIC EMPLOYMENT
A lawyer should not accept employment as an advocate in any matter upon the merits of which he has previously acted in a judicial capacity.
A lawyer, having once held public office or having been in the public employment, should not after his retirement accept employment in connection with any matter which he has investigated or passed upon while in such office or employment.
Opinion 39. A prosecutor may not accept private employment in connection with any matter which he investigated in an official capacity.
Opinion 135. A prosecuting attorney should not represent private litigants in any action based on substantially the same facts which he had investigated in an official capacity.
The following exhibits are offered in support of the foregoing statements:
A. Court authorization for Simon E. Sobeloff to make an investigation of the affairs of the Baltimore Trust Co.
B. Excerpts from Sobeloff's report re Baltimore Trust Building.
C. Letter of July 8, 1941, to receiver, John D. Hospelhorn, from William L. Rigger, offering $5,000 cash for 50 shares of the capital stock of Baltimore Realty Trust, Inc., and the petition of the receiver for an order authorizing him to enter into an agreement of sale with William L. Rigger.
D. Petition of the receiver for an order authorizing him to execute an agreement between the Baltimore Realty Trust, Inc., and the Metropolitan Life Insurance Co., holder of the mortgage.
E. Copy of letter of April 14, 1943, from Arthur W. Machen to Simon E. Sobeloff in re claim for rent for space in the O'Sullivan Building.
F. Petition to the court by Simon E. Sobeloff, solicitor for the petitioner, O'Sullivan Building, Inc., for an order requiring the receiver to vacate the rentfree office space in the O'Sullivan Building.
G. The answer of the receiver to the O'Sullivan Building, formerly Baltimore Realty Trust, Inc., praying said petition be dismissed; and letters in re claims for rent against receiver.
STATE OF MARYLAND V. THE BALTIMORE TRUST COMPANY, A BODY CORPORATE In the Circuit Court No. 2 of Baltimore City
Supplementing oral opinion and reasons stated therein, directed to be written up and filed in these proceedings, it is this day of September 1935, by Circuit Court No. 2 of Baltimore City,
ORDERED that Simon E. Sobeloff, Esquire, be and he is hereby authorized and directed to make such investigations as will enable him to ascertain whether there is any probable cause for holding the officers and/or directors of The Baltimore Trust Company, or any of them, liable (and if so, the nature and extent of such liability) as a result of their conduct of the affairs of The Baltimore Trust Company, with particular reference to the acquisition and administration of the assets of said institution in connection with which serious losses were suffered.
BALTIMORE TRUST COMPANY
Excerpt No. 1
Simon E. Sobeloff, report filed February 24, 1936.
File No. 400.
Re Baltimore Trust Building.
Completed (construction) November 1929.
1, 422, 040. 11 5,546, 970. 45
6, 969, 010. 56
Total value__ (P. 50.) The entire premises owned by the Baltimore Realty Trust, Inc., were leased to the Baltimore Trust Company with the understanding that the lessor operate the building and collect all the rents, but with the guarantee on the part of the Baltimore Trust Company that the earnings would be sufficient to pay interest on the mortgage of $3,500,000, sinking fund, insurance, depreciation, taxes, and operating expenses.
The Baltimore Trust Company for its banking operations, occupied the part of the basements used as vaults and appurtenances, the main banking floor the second, third, and fourth floors, on which a rental schedule was fixed at $300,000 annually. The original rental schedule fixed for the building exclusive of the corner at Baltimore and Light Streets, occupied as a ticket office, and inclusive of the corner of Light and Redwood Streets, occupied as an investment bank, was $725,814.00, to which should be added the $300,000, for the bank, making the total schedule for the building, $1,025,814.00. The rate for the above bank floors was approximately $3 per square foot and competed favorably with other office buildings in the downtown section of the city.
(P. 51.) The cost of operation of the building for the year ending December 31, 1934 was:
(P. 52.) It will be noted that the sublease from the Baltimore National Bank netted only $29,749.96 as against original scheduled rental of $300,000, referred to above, but the Baltimore National Bank has given up space previously occupied by the Baltimore Trust Company on the third and fourth floors, having a scheduled value of $26,000.00. The Baltimore Trust Corporation is paying no rent for the space occupied by it, but as it is vacated, it will be taken over by the Baltimore National Bank. The minimum rental of Baltimore National Bank at this time is $36,000.00 per annum.
The large reserve for bad debts is accounted for by the fact that the rent of the Chesapeake Club, amounting to $31,500.00 per year, is being accrued and a reserve of like amount set up against it. If this is deducted, the reserve is very small.
In these figures for operations interest is being accrued at 4 percent.
There are governmental agencies in the building paying substantially less than the rent schedule, but until the space is needed for other tenant, it has been felt that it was wise to rent this to the governmental agents at the best rate which could be obtained. The Federal Land Bank pays a total annual rent of $65,506.44 which is only at the rate of $1.25 per square foot. The Works Progress Administration rent amounts to $29,517.12 annually, and is at the rate of $1.50 per square foot. At the present time the square foot area of the building is 90.6 percent rented. (P. 53.) A large percentage of the cost of the building was in the banking floor equipment and vaults. The rent obtained from the sublease to the Baltimore Natitonal Bank, is of course, greatly out of proportion to the rent for the part of the building used for office space. When the Baltimore National Bank subrented the space from the Baltimore Trust Company, there was of course and
is now, no other available tenant. The rent was made on the basis of the amount of deposits of the Baltimore National Bank as its head office, with a guaranteed minimum, which minimum, however, has always been exceeded. The rent was arrived at purely on the ability of the bank to pay without regard to the value of the space occupied. It is certain that the office space in the building is more rentable and the rented space more valuable with the bank occupancy than otherwise, and as long as the liquidating corporation has no other prospective tenant this consideration is not important. With an increase in business, and an increase in the ability of banks to earn money there should be a substantial increase in rent for the space available for bank occupancy.
(Pp. 54-55.) Section 24A, Federal Reserve Act, added to United States Statutes by the Banking Act of 1933 :
"Hereafter no national bank, without the approval of the Comptroller of the Currency and no State member bank, without the approval of the Board of Governors of the Federal Reserve System, shall (1) invest in bank premises, or in the stock, bonds, debentures, or other such obligations of any corporation holding the premises of such bank or (2) make loans to or upon the security of the stock of any such corporation, if the aggregate of all such investments and loans will exceed the amount of the capital stock of such bank."
DEAR MR. HOSPELHORN: I hereby offer to pay you Five Thousand Dollars, in cash, for fifty shares of the capital stock of Baltimore Realty Trust, Incorporated, the sale to be subject to the following conditions:
(1) You agree to extend to March 1, 1946, the maturity of the promissory note of Baltimore Realty Trust, Inc., dated February 27, 1931, in the original amount of $5,170,815.64, upon payment to you of Twenty-five Dollars on account of principal.
(2) I agree that there shall be at all times two members out of the six of the Board of Directors of Baltimore Realty Trust, Inc., nominated by you.
(3) I agree, that the Baltimore Trust Building shall not be sold, or conveyed to the mortgage, without your consent prior to March 1, 1946, and I further agree that any possible sale of said building prior to that date shall be consummated if you so request.
(4) I agree that you shall be entitled rent free to March 1, 1946, to such space in the Baltimore Trust Building as may be necessary for you as Receiver. Yours very truly,
BALTIMORE TRUST COMPANY
WM. L. RIGGER.
44A, 797, 1935 No. 951 Petition and order filed July 11, 1941
Circuit Court No. 2:
State of Maryland v. Baltimore Trust Company.
The petition of John D. Hospelhorn, Receiver of The Baltimore Trust Company, respectfully represents :
1. That there has been distributed and duly assigned to your petitioner from among the assets of The Baltimore Trust Corporation, fifty (50) shares of the capital stock of the Baltimore Realty Trust, Inc., which constitutes the entire issue of the capital stock of the said Baltimore Realty Trust, Inc.
2. That the Baltimore Realty Trust, Inc., is the owner of the building and premises located at 21-31 East Baltimore Street, in the City of Baltimore, State of Maryland, known as the Baltimore Trust Building, which building is subject to a mortgage to the Metropolitan Life Insurance Company of $3,500,000, which said sum is still due and owing under said mortgage and mortgage note.
3. That under an agreement entered into immediately prior hereto in accordance with the order of this Honorable Court, the rate of interest on said mortgage has been reduced to and fixed at 31⁄2 percent until March 1, 1944, and to 4 percent from March 1, 1944, to March 1, 1946, and all unpaid interest from September 1, 1938, to March 1, 1941, has been cancelled.
4. That there is in possession of your petitioner, as Receiver of the Baltimore Trust Company, a promissory note of the Baltimore Realty Trust, Inc., dated February 27, 1931, which is past due in the original amount of $5,170,815.64, which note protects your petitioner's estate in any possible equity that there may be in said building over and above the mortgage to the Metropolitan Life Insurance Company.
5. That under the Agreement, hereinbefore referred to the Baltimore Realty Trust, Inc., has agreed to pay to the Metropolitan Life Insurance Company, "all income from said property (21-31 East Baltimore Street) remaining after the payment of the ordinary operating cost of the property without any extraordinary expenditures of additions, replacements, renovations, alterations, and improvements unless first approved by" the Metropolitan Life Insurance Company, allowing, however, a deduction "from said net income of a commission of not more than 32 percent of the gross rents collected and the usual agent's commission in new leases" and the agreement further provides that the Baltimore Realty Trust, Inc., is to pay to the Metropolitan Life Insurance Company, "all of the net income from said property in lieu of semiannual principal installments due March 1, 1941, to March 1, 1946, inclusive, and from March 1, 1946, to pay semiannual installments of principal of $50,000 each to September 1, 1950, and to pay the balance due on said load together with interest thereon on March 1, 1950, and further that the net income paid (to the Metropolitan Life Insurance Company) may be applied at its sole discretion to the items due or hereafter to become due and secured by its mortgage, such as interest, principal installments, insurance premiums, taxes, water charges, assessments, advances made for taxee, etc.
6. That your petitioner is now in receipt of an offer from William L. Rigger of $5,000 for the 50 shares of the capital stock of the Baltimore Realty Trust, Inc., which sale, if consummated is to be made on the following conditions:
(1) That the Receiver is to extend to March 1, 1946, the maturity of the promissory note of the Baltimore Realty Trust, Inc., dated February 27, 1931, in the amount of $5,170,815.64, upon the payment to him of $25 on account of the principal of said note.
(2) That the Receiver is at all times to have two members nominated by him out of the six members on the Board of Directors of the Baltimore Realty Trust, Inc.
(3) That the premises 21-31 East Baltimore Street, known as the Baltimore Trust Building, shall not be sold or conveyed to the mortgagee (the Metropolitan Life Insurance Company) prior to March 1, 1946, without the consent of your petitioner, but, on the other hand, should your petitioner request or desire the sale of said premises prior to that date, he shall have the right to have any such sale which he may propose consummated.
(4) That the petitioner shall be entitled to such space in the Baltimore Trust Building as may be necessary to his use as Receiver free of rent to March 1, 1946. 7. That your petitioner believes that consummation of this agreement is in the best interests of the receivership estate for the following reasons:
(a) That Receiver will receive $5,000 for the capital stock of the Baltimore Realty Trust, Inc., which stock has no value, nor can it be said that it will ever have any value.
(b) That the note of the Baltimore Realty Trust, Inc., of $5,170,815.64 has no value unless the building should be sold for an amount in excess of $3,500,000, and any accrued interest and taxes, and, consequently, while the note is one of large amount, it merely acts as the representation of any possible equity which the Receiver may have in said building, and, therefore, your petitioner is not surrendering anything, but is, in fact, preserving the equity, such as it may be, merely extending the maturity of said note until March 1, 1946.
(c) The receivership will, through this arrangement, receive the use of such space in the Baltimore Trust Building, as may be necessary, free of all charge, until March 1, 1946.
(d) Should the Receiver believe that a sale of the building or a surrender of it to the mortgagee is desirable prior to March 1, 1946, authority is retained in the receivership to make any possible sale of said building and consummate the same if deemed advisable prior to March 1, 1946.
(e) The provision whereby the Receiver is permitted to nominate two members out of six on the Board of Directors of the Baltimore Realty Trust, Inc.,