Depositor Repayment – July 1894 into 1920s
Repayment of Herman Schaffner Bank Depositors – 1894 to 1923
As we will learn further along in this chronicle, A.G. Becker was an extremely able businessman who in his lifetime built a significant investment organization, pursued a range of civic and humanitarian causes, and helped to raise a fine family. But perhaps his most noble and praiseworthy achievement, and an act which most established his wide and favorable reputation, was to seek out and repay a significant number of depositors of the former Herman Schaffner bank on the basis of a deeply felt moral obligation.
No Legal Liability (1)
In a range of documents, including letters (some extracts are reported later) and public statements, it appears that A.G. Becker had no legal liability arising from the insolvency of the Schaffner Bank. It has been disappointing and quite frustrating not to be able to find a legal document or other description or news report that confirms A.G. Becker's conclusive exoneration from legal liability for the debts of Herman Schaffner & Co. In this regard, perhaps corporate and bankruptcy law at the time did not encompass today's conception of joint and several liability of general partners for the debts of the partnership. Perhaps it was determined that A.G. Becker, by reason of his junior position, had some form of limited or no liability in the defunct bank. Perhaps he was relieved of liability by a judge or judges on the basis of his testimony in court, the details of which thus far have not been discovered, nor are they likely to be. It may be so simple that, in the 1890s, each claimant had to establish, suit by suit, the legal obligation of an alleged debtor in order to legally collect a debt, and thus many depositors and other creditors of the Herman Schaffner bank were not willing or able to pursue this path.
It has been frustrating not to find the final resolution of the legal suit and grand jury indictment alleging A.G. Becker violated Illinois banking law when receiving certain deposits. Perhaps these legal challenges were defective and dismissed. Perhaps the law was deemed invalid or inapplicable. Perhaps the suits were in due course dismissed. An extensive search for information on these legal proceedings has not yet turned up any answers (1).
We must also go back to A.G. Becker's statement the day after Herman Schaffner disappeared, in which Mr. Becker was convinced that the Schaffner bank was whole and that depositors were amply covered. It would appear he had no clue to the bank's real condition. Further, the newspapers did report some of his testimony before the assignee to the effect that Herman Schaffner handled the money and banking aspects and details, and Mr. Becker was not privy to those matters. Perhaps as junior partner, he was kept in the dark, or the status of matters was purposefully kept from him. Perhaps he too much worshiped and trusted his brother-in-law. It is also interesting to note that in all the various deposit acknowledgments, deposit certificates, and other documents dealing with the banking side of Herman Schaffner & Co., the only signatory appears to be Herman Schaffner.
A.G. Becker was clearly very sick at heart with his brother-in-law's tragic death and with the emerging reality of the terribly mismanaged banking operation unfolding in July 1893. Whatever his own role, Mr. Becker, even at that time, was saying to close friends and others that he intended to repay depositors in the bank, and that it was his goal to undertake whatever sacrifice and hard work would be needed to meet this moral commitment.
As noted earlier, the Schaffner bank assignee made a report to Judge Scales in County Court on March 1, 1894, that summarized the work of the assignee since the June 18 filing.
As reported, there were 838 claims from depositors and other creditors which were approved by the assignee at that time, with a range of petitions still being reviewed. As noted in that report, a good amount of the bank's assets in miscellaneous paper in fact turned out to be worthless (essentially as predicted in June 1893). In addition, the collateral of secured creditors, upon liquidation, came up $400,000 short of the secured liabilities. A dividend of probably 10 per cent of approved claims was thus to be recommended to the court.
It was not until August 10, 1894, that the assignee filed its next report and proposed that a 10 per cent dividend be paid out on an approved liability of about $1,355,000. Of this amount, about $690,000 was due to unsecured creditors (principally depositors), and $665,000 was due to secured creditors (given the significant reduction in the value of their collateral upon disposition). This liability was about $1 million less than that initially evaluated in June 1893. A distribution of $137,555 went to creditors, and to cover some court costs, according to this report).
The final payment to the creditors of the Herman Schaffner & Co. was not made until November 27, 1898, with a distribution of $27,825. The basis for this distribution was 2 1/2 per cent of the then standing total liability. As such, this liability had apparently been further reduced by about $100,000 by court action over the period since August 1894. Even so, it would appear that some $650,000 of depositor claims were still outstanding as the court wound up the affairs of the failed Herman Schaffner bank in late 1898.
In the firm's archives are three tabulations which reflect the details of the status of depositors and other creditors of the failed bank. One tabulation appears to be an alphabetical printed listing of depositor account names, as if regularly printed in the normal course of internal weekly operations, with an amount of each deposit penciled in after the depositor's name. The printed list is augmented with the names of other depositors, inserted generally alphabetically, with the balance in their accounts, as if an audit review of the overall situation was being compiled. The written entries may be in the hand of A.G. Becker. It is believed that this was possibly A.G. Becker's own first tabulation of the bank depositor situation, right after Herman Schaffner's death.
A second tabulation, a ledger labeled "Estate Accounts," consists of four alphabetical groupings and appears to be the assignee's record of depositor names, balances, and claims. This ledger contains the names of 838 numbered entries, which was the number of claims announced by the assignee in March 1894. This tabulation/ledger thus appears to have been initiated sometime before, or in connection with, the March 1894 announcement. The ledger in some cases shows a reduction in the "filed" claims vs. the "allowed" claims. Also, the ledger shows the dividends paid, including the final 2 1/2 per cent dividend. Thus, this ledger appears to be the assignee's record of all allowed claims as of March 1894, and their payment of dividends through late 1898. In addition, someone has penciled in the addresses of all the depositor and creditor entries, and has added some names and balances at the end of some of the alphabet groupings.
Starting apparently in late 1893, A.G. Becker, through A.G. Becker & Co., or directly, or in some cases through his sister, Rachel Schaffner, or his nephew, Robert Schaffner, began to "repay" some depositors, receiving receipts for full or often partial payments. A bit later, the repayment began to take the form of an assignment of the depositor's claim against the Schaffner estate, presumably with the settlement of the deposit balance, or, perhaps in some cases, a lesser amount. In some cases A.G. Becker apparently paid some cash and gave a note for the balance. This pattern of steady although occasional repayment of depositor claims went forward particularly in 1894 and perhaps 1895. Then it appeared generally to fall off. Examples of these repayments are shown in the following links.
Repayments by Rachel Schaffner
Repayments by Robert Schaffner
Repayment by A.G. Becker, cash and note
Repayments by A.G. Becker, early form
The final third tabulation is a ledger which essentially copies the 838 entries made in the second tabulation above, but lists addresses in ink, in a separate column, and incorporates more detail in other columns. It is believed that this ledger was developed by A.G. Becker in mid-1899 as a way to enter all settlements of claims he had made to date and for which he had retained separate documents, but apparently no master listing, and then as a guide to a more organized and systematic depositor repayment program in the future. This ledger is printed and organized for such a purpose and on one of the facing pages, near the spine, is printed "Jul 15 1899." Thus it is believed that this ledger was organized and printed by Mr. Becker in mid-1899 for the purpose of summarizing, updating, planning, and the future recording of his overall depositor repayment program.
It is fascinating to closely examine this repayment ledger. All the depositor names and other data are entered by hand in ink, the entries being made by a very good script writer, perhaps not A.G. Becker, but more likely his secretary. The column headings, across the top of the left and right hand page, are Name, Address, Account, Certificate, Claim, Offset, Dividend No. 1, Dividend No. 2, Settlement, and Remarks. As noted, the pages and column headings of the ledger appear to have been custom designed and printed to record and support the repayment program. There are generally 20 depositor/credit or claims listed usually - but not always - alphabetically, numbering from 1 to 838. On a few pages there are claims entered in ink that have no number, and unnumbered claims are inked or penciled in at the end of each alphabetical section. The total number of depositors and claims thus exceeds 900. This suggests that A.G. Becker acknowledged and added a number of claims on his own, and apparently did list some claims which had been settled "out of court” by entries in various columns which are not footed, or totaled. This suggests that Mr. Becker was approaching the repayment plan on a claim-by-claim, person-by-person basis, utilizing some selection process, known only to him, to allocate the funds in his voluntary repayment plan.
Generally, many relatively larger claims - by what appear to be businesses - were not repaid, whereas many small deposits of individuals were paid, as if that selection were more "just." (Mr. Becker said in 1901: "From the moment of the failure I set to work to pay every just account."). Since most claims had received 12 1/2 per cent of their approved amounts, the amount in the "settlement" column reflected the remaining unpaid 87 1/2 per cent. In some cases, however, the amount in the settlement column was less than 87 1/2 per cent of an approved claim, the amount presumably being lower, suggesting a discussion and agreement with a depositor. In some cases, a claim is noted to be offset by a liability to the estate or to Mr. Becker. In a number of cases, the unpaid claim or settlement was shown paid on an installment basis, but in most cases, it was "Paid in full in cash," with a date shown.
The paper and entries in this ledger are in excellent condition, and the ledger itself protectively rebound in handsome red leather, probably in the early 1980s, after Paribas became the principal shareholder of the former A.G. Becker & Co.
Most of the entries under "Remarks" have a date or dates along with "Repayment in full in cash," but a number of claims show that notation but no date. By comparing some of the detailed claim payment documents which exist in the archives, it can be determined that these undated payments were those which were completed before mid-July 1899. The first dated entry shows a repayment on September 6, 1899, with a relatively large number of payments made during the days which followed. Then, there was apparently a broad repayment made in November 1899. Then there appears to be a number of payments made together in November and December 1900. And then more payments were made at certain times in 1901, and at the end of 1902. Mr. Becker's final "tranche" of payments appears to have been in early 1903.
Recipients of deposit settlements from mid-1899 forward, even into the 1920s, were asked to sign a standard receipt, or form of assignment, waiving any future liability of A.G. Becker with respect to the Herman Schaffner affair.
A total of all the payments entered in the repayment ledger, including those completed before mid-1899, and then from September 1899 through early 1903, would reach $325,000, and include about 325 depositors. A.G. Becker continued to use this ledger to record occasional payments of claims after 1904 all the way forward to 1924, with the aggregate additional payments for this period being approximately $15,000, assuming the ledger shows all such payments.
Selection for Repayment
It is curious to speculate how A.G. Becker selected depositors for repayment and with what priority? Perhaps he went through his summary ledger, and earlier documents, identifying those persons and businesses he knew, or knew something about, or that he felt may have relied upon his presence in the failed bank? Maybe the selection involved depositors he knew to be widows or to be destitute? Perhaps he selected depositors he thought his brother-in-law must have known personally, and who relied on his presence in the bank carrying his name? Perhaps he selected some depositors with whom he needed to relate in connection with his new business activity? And, why did he cease his regular program of repayment after early 1903? At various times, he expressed the hope and intention to repay all depositors. Did he develop a specific lesser goal which he met, but which was short of the total? Did he feel after a time that he had done his duty, on a "just" basis, and anything further was unnecessary or inappropriate? Did he feel that after a time, he would be responsive to repayment, but not proactive about it? These are all questions the answers to which were only known to Mr. Becker.
And why did A.G. Becker decide, in mid-1899, to systematize and aggressively execute his moral commitment program? We might conjecture some reasons. Firstly, the new A.G. Becker & Co., Incorporated, started in mid-1894, was becoming quite successful and was apparently "rolling" by 1899. Excess funds were perhaps accumulating personally and in the business. (It is not clear whether the business's funds or those of A.G. Becker personally were being used in the repayment plan. It would appear that both sources might have been drawn on, personal funds presumably being earned by Mr. Becker through compensation and not through dividends, since he was not a shareholder).
Perhaps business conditions and the firm's growth gave reasonable optimism for good sailing ahead, and Mr. Becker sensed that he could now sustain a broad repayment program - something he later expressed as very important to him when he founded the business. Also, with the Schaffner Estate fully settled in late 1898, it was clear that there would be no more funds, or any promises of future funds, from the assignee. The final, accurate amount of unpaid depositor claims was now established. In addition, with the passage of time, A.G. Becker had time to determine those depositors he hoped particularly to make whole, and yet on the other hand, which persons and businesses he would not choose to repay, for various reasons, given, among other considerations, the experience of the claims and legal processes of the prior six years.
Finally, there is the conjecture that somewhere along this timeline, A.G. Becker concluded that there was no further risk, or significantly less risk, of any legal liability in the Schaffner matter, and that he was free to repay depositors in an organized, voluntary way, without establishing any legal and binding precedents. He could now be the sole master of an "open" repayment plan, using his own standards and selections. Perhaps now he could be guided by his own moral compass, and work within his financial capability.
Whatever the process Mr. Becker used, most recipients of his organized voluntary payment starting in mid-1899 apparently were very surprised to receive funds, and in almost all cases, terribly grateful. When he initiated payments in September 1999, A.G. Becker apparently wrote those depositors he had selected and included a check for the amount of their remaining claim. Their responses record their grateful surprise, and their acceptance of his moral obligation which apparently in some way he expressed in his letter. The archives unfortunately do not have any examples of the letter which A.G. Becker wrote to depositors, but the archives do contain a large number of letters from grateful recipients of his repayments. (Note to readers: stop a minute and be sure to read these quotations from the letters of grateful recipients; they tell further of the very high esteem with which A.G.Becker was held.)
Starting with his payments in 1900 and forward, Mr. Becker apparently would contact former depositors and suggest they call at his office to discuss a matter, on which visit they would learn of his intentions and receive payments in person. In some cases, he would hand a former depositor an envelope with a check and return voucher in it and ask that they open it later.
As noted earlier, in connection with his repayments, Mr. Becker would request that depositors sign a printed form, which assigned their claims to his company, and legally bound them to waive any future claims arising from the Herman Schaffner failure.
(1) A comprehensive review of the legal liability of A. G. Becker for the debts of the Herman Schaffner Bank, a general partnership of which he was a partner, has been prepared by David McCarthy. See text in Comments and Reflections and Appendix 9.