Former Appellate Justice Gordon Maag
Former Appellate Justice Philip Rarick
U.S. appellate judges have affirmed the convictions of James Gibson for a monstrous fraud that Southern Illinois judges made sure he could commit.
On July 30 the U.S. Court of Appeals in Chicago denied Gibson's appeal of seven convictions that carry a 40-year sentence.
Gibson stole from widows and orphans, and he couldn't have done it if St. Clair County judges and Fifth District appellate judges had not let him do it.
They allowed Gibson to transfer funds of accident victims from Magna Bank to Flag Finance, a shell corporation that his daughter owned.
None of the judges trusted Magna Bank. All of them trusted Gibson.
By the time the Fifth District blessed the transfer, Gibson had already been exploiting the widows and the orphans for at least two years.
A few weeks before the Fifth District ruled in his favor he bought a home on Signal Point Road in Belleville with $72,000 that he stole.
A few weeks after the Fifth District ruled in his favor he bought a 1989 Bentley automobile with $42,000 that he stole.
When federal grand jurors indicted Gibson in 2001, they included the Fifth District decision in their description of the crime.
They found that the Fifth District failed to consider misrepresentations Gibson made in letters, brochures and payment schedules.
They found that Gibson told people the Fifth District decision meant he could do whatever he wanted.
They found that when directors of First National Bank of Carbondale balked at financing Gibson, he threatened to sue and they gave in.
The indictment measured the fraud at almost $160 million. At last count, Gibson still owed more than $20 million.
Magna Bank attorney Thomas Hennessy prophesied it, 12 years ago.
Arguing at a hearing that accident victims needed notice of the transfer, he said the money might wind up in the Last National Bank of Jamaica.
In reality, some of the money wound up in a bank in Belize.
Gibson took up the business of structuring settlements in 1985, under an agreement with a bank that Magna Bank soon acquired.
Attorneys who settled personal injury suits would offer clients a choice between lump sum payments and regular payments lasting for decades.
If a client chose long term payment, the attorney would accept a check from a defendant and convey the proceeds to Gibson's company, SBU.
Gibson assured investors that he would invest in government bonds.
In 1993 Gibson told Magna Bank he would terminate the agreement and take the money elsewhere.
Magna Bank refused to turn the money loose, so Gibson sued the bank.
St. Clair County Circuit Judge Robert Hillebrand ruled that the agreement allowed termination. He granted summary judgment to SBU.
Magna Bank moved for reconsideration. Hillebrand stepped back and Circuit Judge Ellen Dauber heard the motion.
At a hearing in 1994 Dauber said Hillebrand did not want the case and she understood why.
SBU attorney Thomas Ducey said, "This is a simple matter of a hundred million dollars in government funds sitting in the trust company, and the trust company doesn't want to lose the revenue from it."
Dauber said, "I assumed that was what this was all about."
At a hearing in 1995 Ducey told Dauber that SBU did not have to set up a trust for each investor.
He said, "Whether SBU was required to set up a trust or not is not relevant when the issue is, who is the trustor and the sole beneficiaries."
He said, "There is not, in any of those documents, any language that SBU is required – there will be set up – there has to be set up. There is nothing."
Dauber denied reconsideration. She defined the investors as "merely creditors," rather than beneficiaries of trusts.
Magna Bank appealed to the Fifth District in Mount Vernon, arguing that investors should have been made parties to the proceedings.
The bank sent out letters advising SBU investors of the change.
SBU then added to its suit a claim that the letters damaged it.
The bank asked Hillebrand to stay the new claim pending the appeal.
At a hearing in 1995 Hennessy said, "We do not want to rely on the hope that SBU will discharge its contractual responsibility to the plaintiffs."
He said the bank wanted to send notice so that, "…when these folks find out that the Last National Bank of Jamaica is now administering their trust assets, they can't come back at us."
Hillebrand said, "SBU can take care of the persons with whom it has contracted, and I find nothing improper and no reason to be interested in the relationship between SBU and these persons."
He signed an order declaring, "This Court does not find said individuals to be beneficiaries of said trusts."
On July 29, 1997, Fifth District Justices Gordon Maag, Philip Rarick and Terrence Hopkins affirmed Hillebrand and Dauber.
"Magna claims that because the injured parties bargained for and were promised that a trust would be set up with Magna as trustee, they are necessary parties to this appeal," they wrote. "We disagree.
"Magna fails to appreciate that the settlement agreement is between the personal injury plaintiff and the tortfeasor defendant.
"…it is clear from the language of the settlement agreement that the plaintiffs have no rights other than those specifically set forth in the settlement agreement.
"…we conclude that the trust agreement is merely an ancillary agreement between SBU and Magna.
"…the personal injury plaintiffs are merely creditors.
"The trusts in the instant case were established for the benefit of SBU, not for the benefit of the plaintiffs."
St. Clair County Circuit Judge Annette Eckert then signed an order confirming Flag Finance as successor corporate trustee.
Gibson enthusiastically carried out the Fifth District's decision that the trusts were established for his benefit.
He spent the money on himself and stopped sending payments to investors.
In 2001, grand jurors in East St. Louis indicted him on seven counts.
Federal agents captured him in Belize and brought him to East St. Louis.
He agreed in 2002 to plead guilty to a single count. The government dropped the other charges.
U.S. District Judge Patrick Murphy sentenced him to 22 years in prison.
Gibson appealed, arguing that the sentence exceeded federal guidelines.
The U.S. Court of Appeals in Chicago granted his appeal in 2004 and sent the case back to Murphy.
Prosecutors reinstated the charges they had dropped in 2002.
Murphy recused himself, writing that Gibson in prison offered someone $500,000 to kill him.
The court randomly assigned District Judge Michael Reagan. He recused himself.
The court randomly assigned District Judge David Herndon. He recused himself.
The court randomly assigned District Judge William Stiehl. He recused himself.
Finally the court sent the case to District Judge Phil Gilbert at the U.S. courthouse in Benton.
Gibson's trial lasted almost a month. Among others, Judge Reagan testified for the prosecution.
Gilbert sealed some of Reagan's testimony for his safety.
Jurors convicted Gibson on seven counts.
Gilbert imposed a 40-year sentence.
As it turned out, Gibson's apparently successful appeal of his first sentence wound up adding 18 years to his time.
Gibson appealed the jury verdict, arguing that when the government reinstated the charges, the statute of limitations had run out.
The appellate judges denied Gibson's appeal July 30, 10 years and a day after the Fifth District handed him the blank check that brought him to ruin.