Political scandal is not new to Illinois,nor is it the exclusive property of one political party. In 1956 a top Republican official, Orville Hodge, was convicted of looting the statetreasury of $1,450,000; last year it was discovered that the late secretary of state, Paul Powell, a Democrat, had stashed away $800,000 in shoeboxes. Less than a year before the 1972 election, another scandal has surfaced that could severely damage the Democratic machine of Chicago Mayor Richard J. Daley.
For more than two months, draft indictments naming U.S. Court of Appeals Judge Otto Kerner and several of his former top aides have been waiting approval by U.S. Attorney General John Mitchell for submission to a grand jury. Until recently, Kerner had an impeccable reputation. He was Democratic Governor of Illinois from 1961 to 1968 and won national prominence as chairman of a presidential commission investigating urban rioting. Now, if Mitchell decides to prosecute him and a grand jury concurs, Kerner could be indicted for bribery, extortion and income tax fraud. The charges stem from sizable profits he reaped from race-track stocks while he was Governor.
Letter of Intent. In 1968 a routine audit of Kerner's tax return revealed that he had listed income from the sale of stock in a firm he called the "Chicago Company." Further investigation showed the firm was in fact Chicago Thoroughbred Enterprises, Inc. (C.T.E.), whose principal shareholder at the time was Mrs. Marjorie Everett, once known as the "queen of horse racing" in Illinois. C.T.E. owned Washington Park and Arlington Park, two race tracks near Chicago. Their suspicions aroused, Internal Revenue men checked the return of Theodore Isaacs, a Kerner crony and Illinois revenue director, who also had listed income from sale of Chicago Company stock.
After weeks of work, IRS agents put together pieces of the stock deal. In 1966, when Kerner and Isaacs were in office in Springfield, they were allowed to buy 50 shares of C.T.E. stock. Each put up $25,000. At that time the 50 shares were worth a total of $300,000, but they paid only about what the stock had been worth in 1962. In an effort to disguise the bargain, Mrs. Everett signed a "letter of intent" to sell the stock that carried a fake date of 1962.
Six months later, Kerner and Isaacs traded their C.T.E. holdings for 5,000 shares each in the Balmoral Jockey Club, another racing venture of Mrs. Everett's. In 1967 they sold the Balmoral stock for $30 a share, collecting a profit of $125,000 each on their original $25,000 investment. Government investigators also learned that Kerner and Isaacs turned a profit of $22,400 apiece within a ten-month period on stock in other Everett interests.