DOCKET No. 87 Board Docket No. 62
James E. Beasley, Philadelphia, for respondent.
Abraham J. Brem Levy, Philadelphia, for Board.
Eagen, C. J., and O'Brien, Roberts, Pomeroy, Nix, Manderino and Larsen, JJ. O'Brien, J., and Pomeroy, former J., did not participate in the consideration or decision of this case. Nix, J., concurs in the result. Eagen, C. J., and Roberts, J., filed dissenting opinions.
The matter before us for review is the determination of the Judicial Inquiry and Review Board recommending that respondent, Arthur D. Dalessandro, Judge of the Court of Common Pleas of Luzerne County be publicly censured for conduct alleged to violate the Code of Judicial Conduct and Article 5, Section 18(d) of the Constitution of the Commonwealth of Pennsylvania. That recommendation was contained in a report filed by a majority of the Board. Three members of the Board filed dissents recommending removal from office.
Article 5, Section 18(h) of the Pennsylvania Constitution requires us to "review the record of the Board's proceedings on the law and facts." Pursuant to that duty we have reviewed the entire record on the facts and the law. That section also permits this Court to allow the introduction of additional evidence before it. Neither party has requested that additional evidence be received and our exhaustive review of the record (consisting of over one thousand pages
and numerous exhibits) indicates no need for additional evidence. We therefore proceed to the required constitutional review.
Article 5, Section 18(h) of the Pennsylvania Constitution instructs us to enter an "order which is just and proper." We may "wholly reject the recommendation" of the Board; we may accept its recommendation for public censure, or we may impose more serious penalties. Our review of the record in this matter compels us to reject the recommendation of the Board. In some areas, the Board's conclusions are completely without support in the record. In other areas, the evidence is woefully short of the clear and convincing evidence required before concluding that any discipline is just and proper. In still other areas, the Board's conclusions are based on nothing more than private notions of what constitutes censurable conduct without any support in the law of the Commonwealth.
We note initially that nowhere in the record, and nowhere in the Board's conclusions, is there any indication that respondent was derelict in the performance of his judicial duties. On the contrary, lay witnesses, lawyers, and respondent's fellow judges testified unequivocally that respondent is a well-respected, hardworking judge. The record reveals that respondent's work habits are excellent; he spends long hours at his judicial labors, frequently beginning very early in the morning and continuing long after normal working hours.
We begin with the allegation that respondent when he was a candidate for judge in 1973, solicited and received a $35,000 campaign contribution from Lispi Chevrolet, Inc. The receipt of campaign funds from certain corporations is in violation of the Act of June 3, 1937, P.L. 1333, Art. XVI, Section 1605; Act of June 3, 1943, P.L. 851, Section 1, 25 P.S. 3225 (1963). The record, however, is totally lacking in evidence that the $35,000 received by respondent from Lispi Chevrolet, Inc., in 1973 was a campaign contribution. On the contrary, the evidence establishes that the $35,000 was the repayment of a loan which respondent had made to the corporation in May of 1972.
The record establishes the following facts. In 1971, respondent, a practicing attorney at the time, and his cousin, Eugene Lispi, who was experienced in the automotive field, decided to go into business together as a franchised Chevrolet automobile agency. In June of 1971, respondent borrowed $125,000 from the United Penn Bank. This loan, secured by appropriate collateral, was obtained for the purpose of acquiring land and constructing a building to be leased to the contemplated Chevrolet agency. According to their agreement, Eugene Lispi, although he was to be a part owner of the Chevrolet agency, was to have no ownership interest in the building. Eventually a mortgage was obtained on the building and respondent's $125,000 loan was paid. On May 23, 1972, at the same time that the June, 1971 note in the amount of $125,000 was paid, respondent secured a second personal loan, also in the amount of $125,000. The money from this second loan was deposited in the account of Lispi Chevrolet, Inc., a corporation organized by the respondent and his cousin, Eugene Lispi, for the purpose of operating the Chevrolet franchise which had been obtained. Respondent and Eugene Lispi each received 50% of the stock in Lispi Chevrolet, Inc., at a total cost of $50,000. The stock of each of the shareholders (at a total cost of $50,000) was paid for out of respondent's second bank loan. The remaining $75,000 was deposited in the corporation's account as a loan to the corporation, one-half from respondent and one-half from Eugene Lispi. In 1973, in order to meet certain expenses involving his candidacy for judge, respondent requested the corporation to repay his loan. Repayment was made by two checks, one in the amount of $10,000 and one in the amount of $25,000.
The above facts are uncontradicted in the record. No testimony of any witness nor any documentary evidence of any kind was presented even remotely suggesting that the previously described transactions did not occur as outlined.
The report submitted to this Court by the Board states the following regarding these two checks totaling $35,000:
"Respondent defended that this $35,000.00 was return of a loan owed him by Lispi Chevrolet. Raymond P. McGlynn, accountant, testified that Respondent took out a $125,000.00 loan in May 1972 and deposited it with the corporation according to corporate records, although he never saw a note; that the corporate books show that $50,000.00 of this sum went into capital stock (half being credited to Gene Lispi and half to Respondent); and that the balance of $75,000.00 went to Notes Payable Officers (half to Lispi and half to Respondent). This witness testified that he had inserted in the books in pencil 'Judge's loan 125,000'. He further testified that the $35,000.00 was debited from the $37,500.00 credited to Respondent's account under 'Notes Payable Officers.'
"Respondent identified copy of a loan statement of United Penn Bank showing loan to him of $125,000.00 (Ex. R-30) and canceled check in that sum (Ex. R-31), both dated June 24, 1971. Respondent admitted that there was no note recording the transaction but testified '[t]hat money was to be used and was used to lend and invest in the company.' On the questioning by a member of the Board, Respondent admitted that in fact this money was borrowed for the purchase of a tract of land as shown on the check's endorsement, and that this land is under lease to Lispi Chevrolet. When this loan was made, June 24, 1971, there was no Lispi Chevrolet Company, nor was the Letter of Intent issued.
"Respondent requested and was given further opportunity the following day, November 2, 1977, to explain the foregoing and to produce evidence of his loan of $125,000.00 to the corporation. At the hearing, counsel for Respondent assumed responsibility for picking up the wrong note and claimed that Respondent was actually testifying to a note of May 23, 1972. He then produced a document (Ex. R-40) which Respondent identified as the note to which his testimony applied. Exhibit R-40 is a Capital Stock-Loans-Corporate Net Income Tax Report of Lispi Chevrolet dated March 15, 1973, to the Commonwealth of Pennsylvania.
"The Board finds that the alleged $125,000.00 loan was in fact a paper transaction, that Respondent's testimony was knowingly misleading and incorrect, and that in fact the $35,000.00 was not a return of a loan to Respondent."
The last paragraph quoted above from the Board's report refers to the $125,000 loan of May 23, 1972 as a "paper transaction" and says further that the respondent's testimony was "knowingly misleading and incorrect" in that "the $35,000.00 was not a return of a loan to Respondent." We are completely at a loss to understand how the Board could have arrived at that conclusion. In addition to the testimony of respondent, his accountants, and the bookkeeper for Lispi, Chevrolet, Inc., none of which was contradicted by any witness, the record is replete with uncontradicted documentary evidence that Lispi Chevrolet, Inc., was indebted to the respondent for the $35,000. Federal income tax returns and Pennsylvania corporate net income tax returns were introduced into evidence. They regularly and consistently stated that Lispi Chevrolet had capital of $50,000 and indebtedness to the respondent and Eugene Lispi for the original loans which each made of $37,500 to the corporation. The tax returns also clearly show the reduction of indebtedness to the respondent as a result of the $35,000 repayment.
The first contact of any kind between the Board and the respondent took place sometime in the early part of 1975. The tax returns referred to above were filed long before that time. Indeed, the first tax returns filed by the corporation indicating the indebtedness to respondent were filed before respondent received any repayment of the loan. Lispi Chevrolet, Inc., began doing business in the latter part of May, 1972. Both its federal and its state tax returns, filed in early 1973, state that the corporation had $50,000 of capital stock, and was indebted to respondent and to Eugene Lispi as previously outlined.
Following repayment of the $35,000 in 1973, the corporation's federal and state tax returns clearly reflect a $35,000 reduction in the corporation's indebtedness to respondent. These returns were filed with the proper authorities long
before any question was raised about the matter by the Board. The record further reveals that although contact was made by the Board with respondent in early 1975, no question was raised concerning the $35,000 until sometime in 1976. Thus, the first tax returns corroborated the oral testimony at the Board's hearing. The first of these returns were filed approximately three years before any question was raised about the purpose of the $35,000 paid to respondent during his campaign. The first tax returns reflecting the reduction of the corporate indebtedness were filed approximately two years before any question was raised concerning the $35,000.
The Board has pointed to the fact that both respondent and the corporation's accountant testified that no note was executed by the corporation to the respondent or to Lispi as a result of the indebtedness. We fail to find anything unusual about this in a closely held corporation in which the two and only stockholders are cousins. The fact that no notes were executed can not be considered in a vacuum ignoring the completely uncontradicted oral testimony and documentary evidence proving the indebtedness.
The Board's report quoted above also indicates (in the third paragraph) confusion concerning other documentary evidence involving the previously outlined financial transactions. In the brief presented by respondent to the Board prior to its final determination, respondent referred to Exhibit R-40 as the bank note in the amount of $125,000 executed by respondent when the second loan was obtained. In the next to the last paragraph of that portion of the report previously quoted, the Board suggests that Exhibit R-40 was not the note of May 23, 1972, but rather was "a Capital Stock-Loans-Corporate Net Income Tax Report of Lispi Chevrolet dated May 15, 1973, to the Commonwealth of Pennsylvania."
We have examined the record thoroughly and find that the Board erred in this conclusion. The confusion was apparently caused by the fact that the official transcript shows that two exhibits were marked "R-40." On page
A of the record the transcript lists "Exhibit R-40" as "Note 5-23-72." On page 818 of the record the transcript also lists the corporate net income tax return dated March 15, 1973 as "R-40." In its report to us the Board refers to the tax return as R-40, implying without stating that the record contains no Exhibit R-40 corroborating the oral testimony. The transcript clearly indicates, however, that respondent's attorney introduced financial records concerning the two bank loans and their repayment, and requested that these be marked as "R-40." Although numbering two exhibits with the same number can understandably cause confusion, the confusion disappears when one examines the record (pages 774 to 812). Respondent's accountant testified regarding the financial transactions previously outlined. During that testimony respondent's attorney said:
"I have got a photostat copy of the entire transaction and I have available the accountant. I am going to mark this as Exhibit R-40.
(Note marked Respondent's Exhibit No. 40, for identification.)"
R-40 was an exhibit containing copies of the June, 1971 note, along with the bank payment record showing that that loan was repaid on May 23, 1972. The note is also stamped on the front "Paid May 23, 1972." That exhibit also contains a copy of a second note dated May 23, 1972. This note evidencing the second $125,000 loan was not a corporate note but one personally executed by respondent and secured by his personal assets. Respondent did not repay the loan to the bank until several years after his election campaign. There is no evidence in the record contradicting these facts.
Again, Exhibit R-40 corroborates the oral testimony and the other documentary evidence concerning the financial transactions that occurred.
The Board's report also states that the accountant "testified that he had inserted in the books in pencil 'judge's loan $125,000.'" The Board's report says nothing further about this fact or what conclusions are to be drawn from it. Any suggestion however that the penciled notation indicated
something improper about the books is totally belied by the evidence. Entries in the daily journal and general ledger of the corporation were in ink and accurately reflected the financial transactions previously outlined. The accountant testified that the penciled notation was made several days before the hearing in order to assist his superior who was originally scheduled to testify and who was not as familiar with the transactions as the accountant. There was no evidence to the contrary, and the explanation was quite reasonable. In any event, the penciled notation did not alter any of the ink entries and was written in above the ink entry simply to indicate that the source of the ink entry found at that point in the books represented the judge's loan.
One of the dissents states that the "records of the Chevrolet Agency were altered with no credible explanation as to the person making the changes or the reasons or justifications therefor." The dissenting report does not further explain this statement, and cites no facts to support its conclusion. To the extent that it implies any impropriety we must utterly reject that conclusion. Our examination has revealed no evidence in the record sustaining any conclusion that there were such improper alterations. In addition to the penciled notation referred to above, there was testimony concerning an opening balance entry for the year 1974. This entry was in ink, and reflected an opening balance of $50,000. When the accountant was asked if he could explain why that entry appeared to have been written after a prior erasure, he stated that he did not know because the actual entries are made by a bookkeeper. Subsequently, the bookkeeper was called to testify, and pointed out that at various times when making ink entries, if she made a mistake, she would erase the ink entry and make the proper entry. She pointed out several places in the books where this had occurred in areas having nothing to do with the financial transactions being inquired about. Moreover, her examination of the entry made several years earlier indicated that she had originally entered the figure "$5,000"
which was in error and was corrected to "$50,000." Significantly, the testimony further reveals that there was no erasure of the ink entry for the same item in the closing entry for the year 1973. This ink entry was $50,000, and corresponded to the corrected entry for the opening balance for the year 1974. The $50,000 entry was totally consistent with all prior entries and with all tax returns including those that had been filed early in 1973, almost one year before the corrected mistake was made. There is simply no other conclusion to be drawn except that the bookkeeper's explanation was reasonable; moreover, that explanation is corroborated by all the other documentary evidence previously discussed.
Because of the lack of evidence in the record that the $35,000 received by the respondent from the corporation was a campaign contribution, and because of the overwhelming amount of testimony and documentary evidence establishing that the $35,000 was a repayment of a loan, we reject the Board's conclusion that there was any violation of the election code.
The next allegation against respondent concerns his participation in the business of Lispi Chevrolet, Inc. Aside from the respondent's previously discussed investment in the agency, he has also received a yearly consultant's salary and use of a car. The salary was $8,000 when the business began, and was later increased, as the business grew, to approximately $10,000 per year.
The Code of Judicial Conduct allows a judge to "hold and manage investments" and to "engage in other remunerative activity including the operation of a family business." Code of Judicial Conduct Canon 5C(2). Since the Canons permit a judge to hold and manage investments and engage in remunerative activity involving a family business, respondent's investment, and his receipt of remuneration as a consultant, does not violate the Canons. With this the Board agrees. The Board stipulated that the automobile agency was a family business, and in its report stated "[t]he Board does not allege that [respondent's] financial involvement was in violation of the Canon."
Canon 5C(2), however, is qualified by Canon 5C(1), which reads,
"A judge should refrain from financial and business dealings that tend to reflect adversely on his impartiality, interfere with the proper performance of his judicial duties, exploit his judicial position, or involve him in frequent transactions with ...