CHICAGO -- Few people anticipated this summer's collapse of Stotler Group Inc., one of Chicago's more venerable commodities firms. Fewer still expected Stotler Chairman Karsten "Cash" Mahlmann to resign.

But no one, it seems, foresaw Mahlmann's resignation last month as chairman of the Chicago Board of Trade (CBOT), too.

It was a tough summer for Mahlmann, 53, who was riding high in June and was shot down in August. People were surprised when Mahlmann told the exchange's board on Aug. 1 that he was through. He had quit in disgrace from both Stotler and the Board of Trade.

Mahlmann's precipitate fall was big news in Chicago, where the world's largest futures exchange casts a long shadow. Founded in 1848, the CBOT's 3,500 members today trade 11 agricultural contracts in wheat, corn, oats and soybeans.

But they also trade 14 contracts in financial futures, such as Treasury bonds or 10-year Treasury notes. In terms of contract sales, financial futures and options account for more than 70 percent of the exchange's totals.

The agricultural traders, though, remain a force of solidity on Chicago's LaSalle Street. For the last few years, no one better personified their fraternal, grain-based authority than the former chairman.

Mahlmann, the son of a German grain importer, boarded a grain freighter in 1957 and landed at Port Arthur, Tex. The 20-year-old immediately headed north to Chicago, where he worked as a runner for Daniel Rice & Co.

Among his early back-office positions was a job in the cash grain department at Shearson Hayden. It was from this job that he got his nickname. He joined the CBOT in 1963, and 20 years later became at member of its board of directors.

The end came quickly for the Stotler Group, which started as a grain-trading partnership in 1962. Although there were shaky earnings reports and indications of capital shortages as early as 1987, investors seemed not to find the problems critical.

This spring, examiners for the Securities and Exchange Commission found $13 million in assets and liabilities identified on the books of the parent group that should have been on the brokerage subsidiary's books. The brokerage fell below minimum capital requirements and had to transfer customer accounts to other brokers.

Newspaper reports of more trouble appeared in mid-July. On July 25 the company failed to meet a $750,000 debt payment, and efforts to garner financial support faltered.

At the end of July the Commodity Futures Trading Commission charged Stotler with misusing $5.5 million of funds invested in its pools. Two weeks later, Stotler Group and its two chief subsidiaries -- Stotler & Co. and Stotler Financial Corp. -- were forced by investors in two commodity funds to file for liquidation under Chapter 7 of the Federal Bankruptcy Act.

Stotler grew too quickly. Its customer-segregated commodity funds increased from $965,000 in 1968 to almost $300 million in 1990, making it the third-largest clearing firm at the Chicago Board of Trade.

But growth brought with it the need for more capital. According to exchange and federal regulations, a company's net capital had to exceed 4 percent of the funds required to be segregated. Stotler went public in August 1988, making it the first publicly traded commodities clearing firm. The offering raised $4.4 million.

Earnings, though, fell 61 percent last year, to $221,000. The company had to assume more debt. The use of short-term commercial paper hurt its liquidity, making it difficult to fund subsidiary operations. Stotler arrived at its present state owing more than $32 million to its unsecured creditors.

As chairman of Stotler, Mahlmann, assumed responsibility for its failure. But responsibility is a detachable burden easily shifted.

Mahlmann wasn't fiddling while Stotler burned. During his four terms as CBOT's chairman, his attention was dedicated to Board affairs. In a July 31 letter to CBOT members, he wrote: "I have had no day-to-day management responsibilities {at Stotler} since early 1988, and my position at Stotler was constantly eroded."

According to reports, it was Thomas Egan, 48, Stotler chief executive, who was doing the eroding. Egan, a former director of research at Stotler, usurped control from the absent Mahlmann over two years.

Egan embarked Stotler on its latest expansion binge, signing up almost 300 independent brokers to solicit business.

"Everyone who has worked with him is absolutely convinced Cash Mahlmann personally had nothing to do with the failure of the Stotler Group," said a president of a major futures brokerage company. Mahlmann, who started Stotler's futures department in 1963, hadn't even drawn a salary from Stotler since mid-1989.

Stotler's fall was a personal dishonor for Mahlmann. His resignation from the Board of Trade was unanticipated and voluntary, preceded by only an hour's notice. Since he quit, he hasn't appeared at the Board of Trade in any formal capacity, and has not responded to requests for interviews.

Mahlmann paid dearly for his inattention. As the largest shareholder of Stotler Group, his 220,000 shares of common were worth almost $3 million a year ago. Before trading halted on the American Stock Exchange in July, Stotler sold at $2.50 a share. Now, they are essentially worthless. While chairman of the Board of Trade, Mahlmann oversaw some significant achievements. But there were also a few indications of mortality. After three years of solid growth, the exchange's trading volume dropped in 1989 by 3.3 percent. Volume growth in its bellwether Treasury bond futures contract slowed. Its world market share, challenged by Asian and European markets, deteriorated to less than 30 percent last year from 36 percent of futures in 1987.

Then there was the Ferruzzi Finanziaria affair in July 1989. Nine days before the July soybean contract expired, the CBOT ordered the Italian conglomerate to liquidate most of its soybean positions on the grounds that Ferruzzi's holdings threatened the market. The order drove down the price of soybeans to $6.86 a bushel from $7.25 a bushel. The resolution didn't go over well in Europe, where it was called a "scandalous initiative" and perceived as "an intolerable attack against European operators."

The big blow, though, came from the FBI investigations of trading abuses. News of the undercover operation broke in January 1989, and in August 1989 22 CBOT traders were indicted.

Mahlmann was disturbed by the intense reaction to the Ferruzzi affair, and eventually seemed humbled by the extent of the trading abuses alleged by the FBI. "I was very surprised by the number {of indictments}," he told reporters when the federal grand jury indictments were announced, "but one was too many."

As a public figure, Mahlmann perhaps compared unfavorably to Leo Melamed, the dynamic executive committee chairman of the Chicago Mercantile Exchange. Mahlmann's aloof and occasionally imperious custom left him open to sniping.

Faced with mounting international concern that Chicago's auction markets were an insider's game, and an unfair one at that, Mahlmann conferred with the CBOT's president, Thomas Donovan, rather than turning outside for advice.

His close-to-the-vest style might have worked better when Chicago's markets were still regional and predominantly agricultural. But some observers thought that, with the CBOT now competing for capital against Tokyo and London, such a sequestered position was difficult to justify.

Critics wanted Mahlmann to regain some of the initiative the Board of Trade ceded over the last half decade to the mercurial Chicago Mercantile Exchange. The CBOT is trying to innovate: It plans to start trading a Topix stock-index futures contract on Sept. 27. But, with a traditionalist grain-trading faction dominating the exchange's politics, any change comes slowly.

Mahlmann wasn't the most popular chairman the CBOT ever had, winning his last election by a 634-to-528 margin. Some thought him too protective of floor traders, to the detriment of upstairs concerns. Others resented his $240,000 salary as chairman. So Mahlmann's departure won't be all sad.

"It lets a good deal of pressure off the accumulated tensions, and enables a new administration to work in a different manner," said one old-line Board of Trade member.

Another prominent futures broker said of Mahlmann's resignation: "Although unfortunate, it should have absolutely no impact whatsoever on the futures business. There are equally competent people prepared and able to step in."

For the Chicago Board of Trade, the coming months won't be easy. More federal trials begin in Chicago later this month. Last week, James Nowak, a CBOT soybean trader, pleaded guilty to racketeering conspiracy and tax fraud, agreeing to testify against other traders.

Former vice chairman William O'Connor will serve the remainder of the chairman's term, which ends next January. It is still unclear how involved O'Connor intends to be in exchange business. Already there are two rumored challengers positioning for the chairmanship: Les Rosenthal and Pat Arbor. Both men are members of CBOT. Rosenthal is general partner of Rosenthal Collins Group, a futures clearing firm, and Arbor is a head of LIT America Inc., the board of trade's largest clearing firm.

So it's business as usual at the CBOT without Mahlmann. Sen. Alan Dixon (D.-Ill.), who worked with Mahlmann over the years, feels compassion for the man. "He's lost all his business, and lost all his money," Dixon said. "Cash was fairly much of an innocent, and he paid the price. It's a true tragedy."