Senators Angry Over Hutton Case

Senators of both parties skeptically questioned the Justice Department’s No. 2 official Wednesday about the government’s decision not to prosecute E. F. Hutton employees for a check-kiting scheme that defrauded banks of an estimated $8 million in interest.

“Somebody should be in jail for a long time” for the Hutton scheme, Sen. Joseph R. Biden Jr. (D-Del.) thundered at a confirmation hearing for D. Lowell Jensen as deputy attorney general.

Hutton officials, Biden declared, “should be excoriated. They should be pilloried for what they did.”

But Jensen testified that there are “misperceptions”--although he did not say what they are--about the controversial case, in which Hutton pleaded guilty to 2,000 felony counts of wire and mail fraud and was fined a record $2 million.

In addition, Hutton was required to pay investigative costs of $750,000 and agreed to a restitution plan for which it has set aside $8 million.

At the hearing, which had been expected to be uneventful, Jensen disclosed that the Justice Department is taking unusual steps to try to counter what officials privately concede was unanticipated intense criticism in the Hutton case. These steps, he said, include briefing senators’ staffs on the department’s reasons for not prosecuting individuals.

But Sen. Charles McC. Mathias Jr. (R-Md.) brushed aside Jensen’s argument that the guilty plea by the company led to an “immediacy of result” that could not have been obtained through lengthy prosecution of individuals.

Critical Questioning

“The two concepts are not mutually exclusive,” Mathias said. He asked Jensen to provide data on the number of check-kiting convictions that the department has obtained over the last five years and what has happened to those convicted.

Meanwhile, Sen. Paul Simon (D-Ill.) said: “I don’t think we can have a dual standard of justice. If you rob a service station of $25, you’re put in prison. But if you are a big broker and rob millions, nothing happens.”

Despite the critical questioning about the Hutton case, all the senators at the hearing expressed admiration for Jensen, whose approval by the committee and confirmation by the Senate seem certain.

But Mathias asked Jensen whether there was a “mastermind” at Hutton behind the scheme, a comment he attributed to Stephen S. Trott, assistant attorney general in charge of the department’s criminal division.

“I’m not sure there was any (such) assessment,” Jensen replied.

Trott, in an interview after the hearing, said the Justice Department investigation had traced the scheme to “the doorstep of the person responsible.” But he said it would be “a misconception” to describe this individual as “a bigwig at Hutton who is living on some yacht.”

The person, whom Trott would not identify, was in the “internal treasury” side of Hutton’s business and was “not a hotshot.”

“I grilled the hell out of them (prosecutors in the case) on why we weren’t getting any individuals,” Trott said.

However, he said the prosecutors convinced him that the large fine, combined with the other penalties, outweighed the uncertain prospect of prosecuting individuals.