Senate Judiciary Committee members told Associate Attorney General D. Lowell Jensen yesterday that "something went awry" when the Justice Department decided not to prosecute employes of E.F. Hutton & Co. even though the brokerage firm pleaded guilty to a $1 billion check-kiting scheme earlier this month.
"With the E.F. Hutton people, someone should be in jail for a long time," Sen. Joseph R. Biden Jr. (D-Del.) told Jensen at his confirmation hearing to become deputy attorney general, the No. 2 job at the Justice Department. " . . . Respect for the law suffers immensely when the public reads that you have a billion-dollar kiting scheme going on and nobody goes to jail," Biden added.
Hutton pleaded guilty to writing billions of dollars of checks in excess of the funds it had on deposit over a 20-month period -- in effect tricking the banks into giving free loans, and depriving them of millions of dollars in interest. Hutton was fined $2 million and set aside $8 million to make restitution to the banks. Justice Department officials said that the banks were cheated out of far more than $8 million.
Others senators at yesterday's hearing -- including Charles McC. Mathias Jr. (R-Md.), Edward M. Kennedy (D-Mass.) and Paul Simon (D-Ill.) -- also criticized the department for not prosecuting Hutton employes.
Jensen responded that immunity from prosecution had been granted in some cases "to further the investigation." Other department officials have said that the trail of evidence did not lead "high enough."
Last week, 15 senators wrote Attorney General Edwin Meese III complaining of the "blatant failure to find individual liability" in the case. The disposition "does not bode well for the tone of enforcement nor for the evenhandedness of justice we can expect from your tenure . . . , " they wrote.
The senators said it was "ironic" that less than a week before Hutton pleaded guilty, the U.S. Attorney's office here "succeeded in getting a sentence of 30 days' time in the D.C. Jail for a woman caught shoplifting four sweaters for a total value of not more than $200."
They asked Meese how his department would demonstrate it is serious about prosecuting white-collar crime "when it lets E.F. Hutton . . . off the hook," while sending a shoplifter "to the slammer."
Terry Eastland, the department's director of public affairs, called the comparison "inappropriate," saying the department has a policy of "going after both individuals and corporations." He said that in the Hutton case "we needed to have a determination on the law immediately to send a signal regarding the criminality" of the firm's practices.
One of the reasons prosecutors say they did not seek to indict company employes is because they wanted to stop Hutton's practices quickly because of a belief they are widespread in industry.
In another development yesterday, the confirmation hearing of Assistant Attorney General William Bradford Reynolds, nominated as associate attorney general, was postponed for the second time in two weeks. Leaders of civil rights groups say they need more time to prepare their case against Reynolds, head of the Civil Rights Division, who they say has not vigorously enforced civil rights laws.