3: Paragraph 58 Hutton was fined $2 million and agreed to pay up to $8 million in restitution to the banks, but Abbes and the other Hutton higher-ups I dealt with laughed that off as "chump change" compared to the amount Hutton had gained from it. They were, however, concerned that VP Bush was pissed off at the political flak he was taking for protecting Hutton, so they decided to hire a prominent Democrat to repair the political fences; they ended up paying former AG Griffin Bell about $2.5 million to handle the damage control. I can't help wondering if all the members of Congress who were shouting so loud then for someone at Hutton to go to jail would feel the same way now that their own check-kiting at the House bank has come to light. And if Carper hadn't known all along that what Hutton was doing was pretty shady, he has to have known it by the summer of 1985, but he kept trying to help Hutton get more favorable treatment under the federal banking laws.
3: Paragraph 59 Do you remember in "My Fair Lady" when Professor Higgins said, "The French don't care what they do, as long as they pronounce it correctly"? That's Hutton all over — they didn't care that they broke the law, but they got all bent out of shape that the media reported they did. Here's Shapiro's October 1991 testimony about the check-kiting and related scandals: "Hutton had had a very bad press because of some federal charges, and they were very sensitive about adverse publicity." "Hutton had had a series of bad newspaper notices and was very sensitive to criticism in the press." Apparently the only lesson Hutton learned was that federal felony charges are bad publicity. Other than that, Mrs. Lincoln, how did you like the play?
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CHAPTER IV. A crock of malarkey
4: Paragraph 1 Meanwhile, back at the ranch, the plot was thickening: Hutton Trust was getting into trouble of its own.
4: Paragraph 2 The day I reported to work at Hutton Trust I was assigned to handle the transfer of assets for the Vietnamese Orphans' Trust: In April 1975 a number of children were being flown out of Vietnam to be adopted in North America and Europe when a hatch blew off the C-5A, so it crashed near Saigon, injuring many of the children permanently. In settlement of the litigation on behalf of the 45 survivors who were adopted in the U.S., Lockheed Aircraft Corporation had paid $13.5 million into a trust to provide compensation and the costs of medical treatment to the children for the rest of their lives.
4: Paragraph 3 The case had been in federal court in D.C., and a lawyer in the D.C. law firm McDermott, Will & Emery was appointed "co-trustee" to oversee the trust. The complicated trust document called for regular meetings of and reports to the children's parents, and the structure was rather like that of a corporation, with the co-trustee as the board of directors and the beneficiaries as stockholders.
4: Paragraph 4 The lawyer who acted as co-trustee was Charles R. Work, and the trustee had been American Security Bank in D.C., the one that advertised it was on the back of a currency bill. When I was doing my thesis on taxation of trusts and estates for my 1983 Master of Laws in Taxation at Georgetown University Law Center, my thesis advisor had been a senior trust officer from American Security, and he taught me just about everything I knew about the practicalities of banks' administering trusts before I came to Hutton.
4: Paragraph 5 An AE from Hutton's C18 brokerage office in D.C., Tom Clark, had persuaded Work to move the trust, which was down to about $2 million because most of the principal had already been paid to the beneficiaries, from American Security to Hutton Trust. Later on I found in the file the misrepresentations Hutton Trust made to the federal judge to get his approval, saying we were qualified to do business in D.C. when we were not qualified to do business anywhere but in Delaware, but all I knew the first day was that Butler told me to make arrangements to receive and invest the assets.
4: Paragraph 6 We were going to put the assets in three accounts and invest each separately to provide diversity of the investment portfolio and because part of the principal was earmarked for the trust's day-to-day operating expenses, but part was for long-term investment to cover pay-outs in the distant future, which would diminish continuously. American Security transferred stock to us, and we sold it and invested the proceeds in other securities; it was when that stock started coming in that I found out our SEI system was not programmed to accept data on market and book values of assets.