EFHutton EF Hutton & Company Inc New York, New York 10004 Memo from Norman M. Epstein-Executive Vice President and Director 5/28/82 Tom Rae-- Tom, I would like to implement the attached draw-down procedure by the middle of June. Since I will need approximately one week to get this integrated and installed in the branch system, I would appreciate it if you would get back to me by June 7th. • On Thursday, if line 10 column B is minus, enter 2/3 of that number. If line 10 column B is plus, enter T. ** On Friday, if line 10 column B was plus on Thursday, enter 2/3 of that number. If Thursday's line 10 column B was minus, enter 0. *** Look at line 15: If Col A and B are both plus, draw down the total and enter on line 16. If the total is plus, oraw down and enter on line 16; If the total is minus, issue a BRC and enter on line 17. If Col A is minus and B is plus, issue a BRC for A and enter on line 17, and oraw down B and enter on line 16. Mr. HUGHES. We have not received that. We have not received any documents that we requested. We have requested those documents specifically which emanated from headquarters, dealing with practices involving money mobilization. Mr. MORRISON. OK, so now we've got-we now know what you did as of May 1985 and we know something from May 1982 to October 1982. What about the intervening period? Mr. MORLEY. In the interim period, between May and October, we hired Arthur Young to come in and develop and approve a drawdown worksheet that would be used by our branches. Mr. MORRISON. And what is the fundamental concept behind that drawdown worksheet? Mr. MORLEY. The drawdown worksheet is one that does take into effect immediately available funds as well as accounts for the float in the system. Mr. MORRISON. Does it drawdown below zero on your books? Mr. MORRISON. And have you supplied us with-is there a writing that embodies this policy? Mr. MORLEY. Yes, sir. Mr. MORRISON. Would you expect that the overdrafts under this new policy would be higher or lower than the overdrafts under the previous activities? Mr. MORLEY. The previous activity being Mr. MORRISON. Well, you started this in October 1982. Before October-before May 1982, we had activities which included things that have been conceded to be illegal. Then we had this period where, if I understand you correctly, you went back in the other direction, you went to a more conservative situation, you never overdrew on your own, your checkbook was always zero. Mr. MORLEY. Yes, sir. Mr. MORRISON. Now you went to a system where your checkbook was always negative under this new system. In effect, in October 1982, was your check book more or less negative than it used to be before May 1982? Mr. MORLEY. I don't have the numbers as far as would they be higher or lower in 1982. Mr. MORRISON. Well, I'm looking at some reconciliation statements from the Commonwealth National Bank of Harrisburg, PA, and during the period of the allegedly and concededly, I guess, criminal activities, we have book balances of yours that are negative in general and range from $14,000 to $84,000. And when I look at the later period starting in July 1982 and beyond, we are now seeing figures of overdrafts like $700,000 one point, $3 million, $6 million, $700,000, $496,000, $1.4 million. I'm just-the reason I know you're not looking at this particular piece of paper, and I don't expect you to explain it, but what I'm curious about is, you're telling me that you fixed it, and yet it seems to me like you're doing more overdrafting, not less, when I look at this information which suggests that maybe the fix is worse than what was fixed. Do you know anything about this account? Have you looked at Mr. MORLEY. No, sir, I haven't. Mr. MORRISON. I assume we got this information from you. Mr. Chairman, I don't know whether it's appropriate for these particular documents to be included in the record or not, to do that at this point. Mr. HUGHES. The documents will be received into the record. [The information follows:] RECONCILIATIONS COMMONWEALTH NATIONAL BANK prof3 DATE BANK BALANCE BOOK BALANCE TRANSACTIONS 6/20/82 469 674.56 9/30/82 235 557.19 <234 419.88> 7/30 C.HP D/D <225978.13> 5/2 WIRE TFR 200 000 9/30/82 425 970.97 < 721 296.64> 9/30 CHP D/D < 721 296.64> 10/4 UST CK 524900.15 10/29/821491977.73 <1 359 687.46) 10/29 CMP D/D </572 024.41> 11/30/92 2 542678.10 16 057 956.20) 11/30 CHP D/D <6 059.956.207 31/93 112/01 DEP 123932.89 5936023.31 295806.74< 704193.26X 1/31 CMP *1759 < 1 000 000.00> 5/31/83 -0 115650.54 393677.20 "DEPOSITS IN TEAUSIT 430 194.90 "DEFOOT'S IN TRANSIT" 110 526.07 397 077.47. 394 785.085 5731 COM NATZ * 1793 394 785.08> 6/30/93 611 DEP 121 122.70_ 281 662.37 531 205,171 410 400.80> 4/20 COM NATL * 2312 < 749 532.62> |