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Heartbreak Hotel

Only a few years after J. W. Stevens opened his grand Michigan Avenue hotel, the Depression devastated his family, inducing a series of calamities that included suicide, bankruptcy, and criminal charges. But from the debacle of the Stevens Hotel (now Chicago Hilton and Towers) emerged a young man who today, at 86, sits on the U.S. Supreme Court

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Photography: Chicago Tribune File Photos
Raymond (above, left) and Ernest Stevens: the Meadows, Raymond’s Highland Park home

Ernest Stevens stood trial alone. As his mother’s comments suggest, the public was not in a forgiving mood. Many Chicagoans had suffered financially when the Insull utility group went under, or when banks linked to the real-estate speculator John Bain had failed. They connected the Stevens case with those debacles. The policyholders of Illinois Life, many of whom had asked the company in vain for loans as the banks crashed, were not happy to learn the Stevenses had bailed out the hotel instead of them. Even Ernest’s first cousin Bert J. Stookey, the former treasurer of Illinois Life, agreed to testify for the state.

The trial opened on September 25, 1933. Under Illinois embezzlement law, the state had to prove Ernest had “fraudulently” converted company funds “to his own use.” Prosecutors argued the loans from Illinois Life to the Stevens Hotel met that standard, since, in propping up the hotel, the Stevenses were propping up their own portfolios. They knew its collateral was worthless, the state argued. Witnesses testified Ernest got a whopping $72,000 per year for managing the hotel-which he would lose if it went under. A high point of the prosecution’s case came when Bert Stookey “turned a frigid gaze on the defendant,” as one newspaper put it, and said that his cousin Ernest had overruled him when he protested the hotel bailout.

But Stookey admitted on cross-examination that he had never said the loans would be illegal, just inappropriate. And when his turn on the stand came, Ernest swore his only intention was to help both the insurance company and the hotel ride out the Depression, which he, like many others, had expected to end after three years. The 1932 bank panic blindsided him and J. W. “There was crash after crash that we had not anticipated,” he testified. “No one did.” He insisted that the hotel could still make money, especially once the repeal of Prohibition eliminated competition for dinner guests from Chicago’s 5,000 speakeasies. “They will come back to the hotels and dine properly instead of in some old barn,” he testified.

“Did you at all times have faith in the Stevens Hotel?” Ernest’s attorney, the former state judge Franklin J. Stransky, asked him.

“I certainly did,” the defendant replied. “I know it is going to be the greatest hotel in the world, although it is having temporary interference.”

Stransky called a parade of prominent character witnesses, including former governors of Illinois and leaders of the business community. The defendant was visibly moved as old friends swore to his integrity. Given the mood of the times and the class composition of the jury, however, their testimony might have backfired. Earle C. Hurley, an assistant state’s attorney, mocked Ernest’s claims of civic virtue, telling the jury that “it was not for philanthropic reasons nor for love of Chicago that money was pumped from the insurance company to the hotel, as Stevens would have you believe. It was for private greed.”

The jury believed Hurley. On October 14, 1933, after five hours of deliberation, they found Ernest guilty of embezzling $1.3 million. On November 27th, Judge Michael Feinberg sentenced him to a term of one to ten years in prison. Fidgeting with some keys in his pocket, Ernest stood before the court and declared, “A terrible injustice has been done to me.” Up to that point, Ernest and Elizabeth had “kept their cool,” Bill Stevens told me. But, he recalls, the conviction came as a “terrible shock.” They had simply not been able to imagine Ernest could be found guilty.

Ernest lost the family businesses. Illinois Life was liquidated by a federal judge; a Des Moines company stepped in to reinsure policyholders. The same Iowa company bought the LaSalle from a receiver in 1935, for just $337,000. It has long since succumbed to the wrecking ball. The Stevens Hotel actually made money in 1933, thanks to the Century of Progress Exposition, the world’s fair held along the lakefront. Then it limped along in receivership until World War II, when the U.S. government bought it for $6 million to use as military housing.

Photography: Chicago Tribune File Photos
Raymond, Ernest, and J.W. Stevens (left to right) appear at their 1933 indictment.

But Ernest Stevens did salvage his good name. In 1934, almost exactly one year after the guilty verdict came down, the Illinois Supreme Court unanimously ruled on appeal that he had been wrongly convicted. To prove embezzlement, the court explained, the state had to show that the accused had siphoned funds without his company’s knowledge. In this case, Ernest (together with his father and brother) was the company. Additionally, there was no proof that any of the three had intended to line his own pockets. The money loaned to the hotel went to its bondholders as interest.

“In this whole record, there is not a scintilla of evidence of any concealment or fraud attempted,” Justice Clyde E. Stone wrote. “It may have been an exercise of bad judgment . . . to have loaned this money and we in no wise commend these loans, but . . . it is a far cry from a mistake in investment made in good faith to a felonious, fraudulent investment made for the purpose of converting the funds of the lender to the use of the accused.” The Illinois high court’s unanimous rebuke of the prosecution supports the view that the charges against the Stevenses were, at least in part, politically motivated-an elected prosecutor’s effort to pin a city’s misery on the supposed perfidy of a privileged few. “I am very, very happy,” Ernest told the Tribune.

But he was wiped out financially. “His personal fortune was almost completely invested in the hotel,” Bill Stevens recalls. “It was worth a great deal at one time, and then went to zero.” Ernest quit the South Shore Country Club and the Quadrangle Club. He took a job managing the Sherry Hotel, near the University of Chicago-a position he would hold for many years thereafter. “There was no real money for extras,” Bill Stevens recalls. “When John and I went to law school after the war, we didn’t get a penny from our family.” They relied on the GI Bill instead.

In the meantime, Ernest was his old, easygoing self, except on the anniversary of Raymond’s suicide, when, according to his grandson William J. Stevens, 66, he would sometimes seem “morose.” Ernest J. Stevens died in 1972, at the age of 87.

His legacy included the successful careers of four sons: Ernest S. Stevens, who went on to become an expert in municipal finance and a member of the Fort Myers, Florida, city council; Richard James and Bill, both prominent lawyers; and, of course, Justice Stevens. With top grades from Northwestern University School of Law, John Paul Stevens became a Supreme Court law clerk and a specialist in antitrust law. In 1969, he led an official investigation of corruption in the Illinois Supreme Court. In 1970, President Richard M. Nixon made him a federal appeals court judge, which set the stage for his appointment to the high court by President Gerald R. Ford in 1975.

It is perhaps natural to search the history of the Stevens Hotel for the origins of Justice Stevens’s current role as a liberal stalwart on the court. Could it be that his concern for the rights of the accused comes from seeing his own father arrested and put on trial by an aggressive prosecutor? Or that his empathy for the disadvantaged comes from living through his family’s sudden loss of a fortune that had taken a generation to build?

If any of that is true, the justice has kept the evidence deep inside, revealing it not even to those of his close friends that I consulted. Instead, those who know him best emphasize the resiliency and positive attitude that he and his family displayed both during and after the crisis. Bill Stevens says they followed Ernest’s oft-repeated admonition “to always try to brighten our own little corner.” But otherwise, the justice’s brother notes in an e-mail message, “the Stevens Hotel and the family troubles during the Great Depression . . . had no significant effect whatsoever on John’s approach to life or the law; nor does John bear any stamp of the family’s experience with the hotel enterprise.”

The city, though, bears an indelible impression. Ernest Stevens’s predictions for his hotel ultimately came true. The War Department sold it to a private businessman in 1943. After the war, Conrad Hilton bought it and named it for himself. The streets outside the Conrad Hilton were the scene of a battle between Mayor Richard J. Daley’s police and antiwar demonstrators during the 1968 Democratic National Convention. Completely renovated and reconfigured in the mid-eighties, at a cost of $185 million, the hotel still features the two-story entrance hall with grand staircases on either side that so astounded visitors in the Roaring Twenties. But the High-Ho Club is long gone; strong winds made rooftop miniature golf impractical. The original 3,000 rooms have been consolidated to 1,544, so the hotel is no longer the biggest in the world. Even in the city it ranks third behind the Hyatt Regency Chicago, which has 2,019 rooms, and the Palmer House Hilton, which has 1,639. Still, for all the trouble and even tragedy that attended its early years, the landmark has endured, vindicating the dream the Stevens family envisioned so many years ago.


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