Unsolved Whodunit
E. F. Hutton & Co., the big brokerage house, has been caught by the Justice Department in a fraud that continued for nearly two years and succeeded in cheating hundreds of banks out of millions of dollars. The elaborate scheme involved writing checks on funds that Hutton didn’t have on deposit, allowing it to use money without paying interest charges. Hutton has now pleaded guilty to 2,000 counts of wire and mail fraud. It has also agreed to pay a $2-million fine and set aside $8 million for restitution, an amount that a Justice Department official says could fall well short of what’s needed. No individuals, however, will be prosecuted for the crimes that were committed.
The reason for this magnanimity, according to Atty. Gen. Edwin Meese III, is that the fraud was a corporate enterprise from which no Hutton employees profited individually. Somewhat contradictorily, Meese also holds that it would have been unfair to grant immunity from prosecution to as many as 50 Hutton employees who cooperated with the investigation while prosecuting others. But if those others were susceptible to prosecution, then presumably there was some evidence that they as individuals, and not simply Hutton as an inanimate corporation, had in fact broken the law.
A more conclusive contradiction came in a related Justice Department filing of court papers, which noted that compensation to Hutton’s branch managers was based in part on profits that included interest charges and credits. This arrangement “provided financial inducements and incentives to . . . branch office managers that, among other things, encouraged them to be more ‘aggressive’ and ‘creative’ in the overdrafting of their . . . depository bank accounts.” In other words the fraud did indeed involve the chance for personal as well as corporate profit.
What we are left with in the Hutton case is a guilty plea to a major and elaborately contrived crime, and a judgment call by the attorney general absolving any individuals from responsibility for that crime. This decision obviously leaves unanswered the question of who then devised and carried out the very considerable fraud that took place. That question in turn prompts another, and that is whether justice has in fact been done.
