3.

F.

What admissions does the company

make?

6. Your

also include a

review of the submissions should Summary / Conclusions section specifying the strengths, weaknesses, failures and onussions of company's position

the

H. Lastly, you should include a recommendatio concerning any additional Grand Jury subpoendes for either testimony

A.

or records.

The following well be the assignments for the completion of the submission reviews. ARTUR YOUNG STAUFFER, MUNLEY, MURRAY

B. CEA / CHEMICAL BANK - KENERSON, LANGFORD
C. FACILITATING TRANSACTIONS - KENERSON, LANGFORD
D. BANK COMPLAINTS CONROY, HOLLAND

E. BRANCH-TO- BRANCH CONRLY, HOLLAND, MUNLEY

4. The aforementioned should be accomplished, during the week of Jan 7 to Jan 11, 1985 with a dictated report or hund draft to me by Jan. 11, 1985.

Just

P.J.

3002

During the expcoming weeks; the availability
ctrical support at DHQ well be
limited due to the absence of Doris Grubb
Please limit as much as possible any
requests for clerical assistance. Requests
for typing relating to this case should be
forwarded to me. I will determine where
the typing should be done. We should
remember that Ann & Carolyn are required
to support the Inspector in Charge and
twelve other Suspectors in addition to us.

We can utilize the Scranton and Reading
domiciles as well as the Region to
supplement our staff in Harrishing. be
addition, Al Murray has indicated that
his office can router assistance on occassion
Required typing will still get done-it
may just take a little longer.

John Holland

Rule X, cl. 1, paragraph (m) of the Rules of the House of
Representatives provides that the Committee on the Judiciary
has federal legislative jurisdiction over "judicial proceedings,
civil and criminal generally." Clause 2 of Rule X provides
authority for standing committees to exercise oversight over
the laws within the subject matter jurisdiction of the committee,
and the organization and operation of the Federal agencies
having responsibility for those laws.

Pursuant to this authority, The Subcommittee on Crime, as
a part of a broader investigation of corporate crime and the
disposition of such matters within the federal criminal justice
system, is conducting an in depth analysis of the facts surround-
ing the recent conviction, pursuant to plea agreement, of the
E.F. Hutton Co., Inc. for mail and wire fraud growing out of
Hutton's cash management practices from 1980 until the present
time. One element of that plea agreement that has drawn some
public criticism is the decision of the Department to agree not
to proceed against individuals responsible for the fraudulent
activities, in exchange for a guilty plea by the company and
its agreement to injunctive relief and restitution.

We are mindful of the fact that the Department strongly defends
the propriety of the plea agreement on the grounds, inter alia,
that (1) many of these practices were still being carried out
by Hutton up until the time of the plea agreement; (2) the
practices were resulting in substantial losses to victim banks
and could pose a threat to the banking system if they continued
and became even more widespread throughout the banking and
cash management communities; (3) it was necessary to get the
practices stopped and send a message to both those who might

Honorable Edwin Meese III

Page Two

June 4, 1985

participate in such schemes and those who might be victimized by them that these practices are not to be tolerated; a contested trial in the Hutton case would take from several months to several years, during which time the practices would likely continue; and (4) only relatively low level corporate officials were responsible for and involved in mail and wire fraud activities, and any public policy needs to pursue prosecution of these individuals were outweighed by other factors, set forth above.

I might note that, as we undertake our assessment of all these considerations, the defendant Hutton corporation seems to be presenting a substantially different version of the facts and of the circumstances surrounding the settlement discussions and agreement. Hutton asserts that "[t]he practices to which the Company pleaded guilty ended in early 1982" and "the practices in question were stopped as soon as senior management became aware of them and in the subsequent three years have not recurred." Hutton is also asserting that the Department's decision not to prosecute individuals was based on a conclusion by Justice that it would be too difficult to establish criminal intent; Hutton makes no mention of the considerations the Justice Department cited in support of its decision not to prosecute individuals.

We provide this rather lengthy introduction to our request for your continued cooperation in making information available to the Subcommittee so you will understand the need of the Subcommittee to develop a comprehensive picture and understanding of the case. We need to determine how, when, where, for how long, and by whom the practices in question were developed and carried out by Hutton, and the dollar volume of such practices. The Department's proffer at the plea agreement hearing in District Court presents us with some information that is useful for our purposes. However, it is incomplete for our needs, for we seek to develop a more comprehensive record of these practices. For example, information relating to some transactions in some of the individual bank accounts in some of the incidents of "chaining" or successive transfer of funds from bank to bank, to extend the "float" was a part of the proffer. We do not have complete information, showing the entire chain, for any one these various chains.

Accordingly, we request that you furnish the Subcommittee the following documents and information in your possession:

--Transcripts of the three in camera conferences held in the case. At the May 2, 1985 hearing at which the plea agreement was entered, the Court ordered that the transcripts of these conferences be made a part of the record.

Honorable Edwin Mease III
Page Three
June 4, 1985

--All correspondence with and reports received from other agencies and organizations concerning the case. We understand these reports include reports of investigation by the Federal Deposit Insurance Corporation, the United States Postal Service, the Federal Reserve, and the New York State Banking Commission. --All documents of Hutton that bear on this matter.

--All documents obtained by the government or developed by it showing activity in bank accounts maintained by Hutton during 1980-1985, and all analyses, work-ups, charts, graphs, of such information.

--All documents, including those developed by the government, relating to cash managment practices of Hutton, including analyses of responsibility within the company for the development and execution of the practices inquestion, and all analyses of issues of corporation and individual criminal responsibility and of the question of filing criminal charges against individuals.

We have tailored this request so that providing the documents necessary for the proper Congressional hearings will be entirely consistent with Rule 6(e) of the Federal Rules of Criminal Procedure. As you know, production of documents in response to a quite similar Congressional request was approved In re Grand Jury Impanelled October 2, 1978, 510 F. Supp. 112 (D.D.C. 1981). We are not seeking to learn what proceedings occurred before the grand jury, nor whether (or if so, which) documents were presented to the grand jury, nor are we seeking the release of any grand jury testimony. Our interest is solely in the documents. The courts have repeatedly reiterated regarding Rule 6(e) that the grand jury has no "Midas touch" of secrecy by which the possible presentation of documents to it would preclude the production of documents elsewhere.

As you know, we are conducting public hearings on this matter this month. Accordingly, a prompt response to this request would be most appreciated.