Chesterton Tribune

Historical Society finds Samuel Insull not guilty of securities fraud

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By JEFF SCHULTZ

The jury that found magnate Samuel Insull not guilty of 25 charges of mail fraud and antitrust actions in 1934 took just five minutes. For the Duneland Historical Society, the same verdict was delivered by about 80 “jurors” in a matter of seconds.

But the mock trial on Thursday night also did not last six weeks like the real one.

All but one society member, Herb Read, raised their hands in near-unanimous approval to keep Insull from going to the clink. Maybe because the performances of Chesterton attorney Chuck Lukmann, as Insull, and law partner attorney Bob Welsh, as Insull’s defense attorney Floyd Thompson, were so convincing.

But the citizens of Chesterton can rest assured their town attorney doesn’t plan to leave his job for a spot on Broadway soon.

“It was a lot of work but fun,” Lukmann said about rehearsing the 45- minute drama.

Welsh convinced his other law buddy Mike Harris to play the U.S. prosecutor Leo Salter. Playing witnesses were Tom Roberts as an FBI agent and Sylvia Rhine as the widowed Margaret Harris, one of thousands of Insull company shareholders who lost their every penny in the stock collapse.

Welsh later revealed Rhine’s character was actually the real-life great-grandmother of co-star Mike Harris.

Presiding over the case was retired Porter County Judge Thomas Webber, who had to break character for a moment to make a very important announcement.

“This is 1934 so may I ask the jury to turn off their cell phones,” the judge said.

Through Welsh’s narration and drama, the life story and swindles of Insull materialized. An English immigrant, Insull grew a monopolistic empire of electric power companies in the Chicago area after working as Thomas Edison’s personal secretary. Yes, the Thomas Edison.

Insull became president of Commonwealth Edison (ComED) and, little by little, purchased holdings in other companies that we know today as Integrys Energy Group (formerly Peoples Gas Light and Coke Company) and the Northern Indiana Public Service Company (NIPSCO). He formed the Middle West Utilities Company in 1912 which acquired many power companies in Chicago. The company and its 46 subsidiaries at one time were worth over $1 billion in assets but tanked in 1932, resulting in over $700 million in losses for shareholders.

The U.S. Prosecutor’s office had reason to believe that Insull sold worthless stocks for personal gain while convincing the public investing in the company was a good decision. When his companies collapsed, he went to borrow money from Chicago bankers and when they said “no” he went to the New York Stock Exchange where the traders were not fond of Insull and put the companies into receivership.

Roberts’ character in the trial was reported to have been investigating Insull for two years and said “he planned on raising $80 million through solicitations.” The government argued Insull was reporting false figures in order to lure more people to purchase phony stock and said he engaged in a “simple conspiracy to swindle, cheat and defraud the public” with highly inflated stock prices.

Suspiciously, Insull fled to Greece in 1933. The country had no extradition treaties with the United States but the government fought hard and with criminal indictments forced him to return.

Insull stood trial in 1934 where he contended he was broke, although admitting he did still receive a comfortable pension of $50,000 annually from his companies. He said his wife Gladys Wallis had to sell her property in attempts to save his business.

A “planted” character in the audience was not moved by Insull’s pathetic testimony.

“Insull, you’re a lying cheat! I’ve lost everything because of you. I hope you go to jail!” shouted the character played by society member Angel Goins. Escorting the unruly woman from the court was a bailiff played by Lynn Welsh, Bob’s wife.

After the performance, Welsh told an amusing story about the real jury. It took jurors a matter of minutes to form a verdict but they felt it would be best if they stalled for a while before presenting their findings to the judge, so they ordered out for cake and ice cream when they learned it was one of the jurors’ birthday.

Answering questions from the floor, Welsh said he researched the archives at Loyola University in Chicago where Insull’s records are kept. The script did not follow the trial’s transcripts verbatim as he had to cram the six-week trial into an abbreviated version.

“Obviously this is not going to be an exercise in detail but we’ve attempted to be as accurate as we can,” he said.

Insull lived in Europe after two more trials, one in Illinois and the other in U.S. Bankruptcy Court being found not guilty in both, and fell dead of a heart attack in Paris at age 78.

Welsh told the Tribune Insull’s practices would likely be considered illegal today but the proper laws were not in place at that time. He said the passage of the Federal Securities Act was a direct result of Insull’s activities.

Welsh said he is not an Insull enthusiast but had offered the idea of a mock trial when the historical society was deciding programs for their meetings.

Society member Carl Reed, who handles the group’s publicity, said Insull has a local connection to Duneland because he is responsible for saving the South Shore Line. He also was a national power, literally, generating more than ten percent of the nation’s electricity.

Other accomplishments include the Chicago Civic Opera House which he had built for his wife, who Reed said was “an aspiring actress and terrible.” She was inspiration for Charles Foster Kane’s second wife in the 1941 film Citizen Kane.

Reed said Insull had a son who worked as an insurance executive in the suburbs of Chicago and died in 1983 at age 82.

The historical society will break for the summer and reconvene in September. Possible programs on the horizon include the 100th anniversary of the Girl Scouts of America and the 60th anniversary of the Save the Dunes Foundation.

 

Posted 5/22/2012