A top Justice Department official said yesterday that the president of E. F. Hutton & Co. "didn't know what he was talking about" in saying that the brokerage firm would have agreed to plead guilty to an illegal check-kiting scheme even if officials or employes were to be indicted.
Assistant Attorney General Stephen S. Trott, chief of the Criminal Division, made the statement in an interview in which he vigorously defended his decision to prosecute the company but not individuals.
Trott and Hutton President Scott Pierce were guests on the MacNeil-Lehrer News Hour on May 9, a week after Hutton implemented the comprehensive settlement by pleading guilty to 2,000 felony counts, consenting to pay fines and legal costs of $2.7 million, creating an $8 million reserve to make full restitution to victimized banks, and pledging to end money-management abuses.
The public television program's Jim Lehrer asked:
"Mr. Pierce, would E. F. Hutton agree to this deal of restitution if the Justice Department had gone after individuals as well?"
And Pierce responded:
"I think that we were most anxious to get this period behind us, and that if it was necessary that there was a criminal indictment, of course we would have agreed to it."
Trott, asked about this yesterday, said: "With all due respect, he was wrong. . . . The settlement was available if individuals were not in it. Hutton was willing to put this to bed, but not if you had in it those . . . low-level individuals. Hutton was making it [the nonprosecution of individuals] sort of a quid pro quo."
A Hutton spokesman said Pierce understood Lehrer's question as well as Pierce's answer to refer to the restitution of banks. Pierce did not respond to a request for further comment.
Attorney General Edwin Meese III responded yesterday to sharp criticisms of the Justice Department for not having charged Hutton executives, telling a news conference that "there was no basis" for having prosecuted them.
Trott has said all along that there were "indictable" individuals, while stressing that pursuing them would, as he put it yesterday, have "derailed" and "taken away from us this marvelously successful and beneficial settlement."
A Los Angeles Times story published in yesterday's Washington Post said that Trott "at one point authorized the criminal prosecution" of three Hutton officials. The story rested on a March 17 memo said to have been written by Thomas F. Curnin, a partner in Cahill, Gordon & Reindel, a law firm representing Hutton. Curnin did not return reporters' phone calls.
Trott, asked if he had "authorized" prosecution of individuals, hinted that the possibility of such prosecutions had been a bargaining chip, pointing to a paragraph in the story saying that "government prosecutors often take a hard line in discussions with attorneys for a potential defendant in hopes of obtaining concessions from the defendant."
Trott also said that career prosecutors on the case had worked out the settlement, and that he had approved it. He added that he had never seen the Curnin memo, which was based on "meetings I was never at."