Maybe former New Jersey car dealer Denis Kelliher can license his name to an investment firm once he is released from federal prison next year.
Kelliher, like E.F. Hutton & Co., is a confessed check kiter.
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The Bordentown, N.J. man would write checks from bank accounts that did not have sufficient funds. Then he'd deposit the worthless checks in other accounts. Then he'd repeat the process, always trying to stay ahead of the paper as it flew.
Kelliher, 42, who owned Cartec Motors, admitted to a scheme that prosecutors said resulted in $7.4 million in bank overdraft fees on about $117 million worth of kited checks.
"He left a wide swath of financial disruption," said Chief Judge Garrett E. Brown Jr., who sentenced Kelliher in September 2010 to 33 months for bank fraud, wire fraud and money laundering.
E.F. Hutton left an even wider swath. In the 1980s, the firm admitted to 2,000 mail and wire fraud counts involving about 400 mostly small and rural banks. Overdrafts sometimes exceeded $250 million in a single day. It was exactly what Kelliher did, but on the far grander scale of a major Wall Street investment firm at the peak of the market.
"The object of the defendant's scheme .. was to obtain interest-free funds by means of intentional over-drafting," prosecutors said at the time.
E.F. Hutton blamed its illegal practices on middle managers and the kind of poor cash management controls you'd never expect from a firm that advertised legendary investment advice.
The firm agreed to pay a $2 million fine, reimburse the Justice Department $750,000 for its legal costs, and give money back to the banks it targeted. The scandal eventually led to the resignation of Chairman Robert Fomon, but not one person was ever charged with a crime.
Kelliher, a first-time offender who said he was just trying to keep his business afloat amid a nasty economic downturn, had no such luck. "For him to walk out with a probationary sentence would simply send the wrong message," Assistant U.S. Attorney Eric M. Schweiker argued, as quoted in a report by news website NJ.com.
We sure wouldn't want to send the wrong message.
Check-kiting is the proverbial robbing of a bank with a pen instead of a gun. In a May 1985 piece, the late New York Times columnist and former Nixon speechwriter William Safire compared E.F. Hutton to the infamous bank robber Willie Sutton.
"No personal disgrace for the perpetrators; no jail terms; not a slap on one individual wrist," Safire complained. "Putting on his most severe look, Atty. Gen. Edwin Meese had the chutzpah to announce, "This makes it clear to the business world that white-collar crime will not be tolerated.'"
At least there's karma in capitalism. The scandal left E.F. Hutton in a weakened state as the 1987 stock market crash approached. The firm agreed to be acquired by Shearson Lehman Brothers Holdings for $1 billion, and it eventually became lost and forgotten in that too-big-to-fail bundle of mergers and acquisitions known as Citigroup Inc (NYSE:C).
Now, however, some former E.F. Hutton guys, led by former E.F. Hutton and Smith Barney executive Frank Campanale, are planning to revive the name, sticking it on a new boutique investment advisory firm, The Wall Street Journal reported Monday.
They hope people will forget the amateurish check-kiting scheme and remember the famous commercials where entire rooms would fall silent at the sudden drop of E.F. Hutton's name: "When E.F. Hutton speaks, people listen."
These hopes are well-founded. By now, just about every major bank and investment firm has settled some kind of fraud allegation. And people are happy to do business with them, anyway.
Maybe they'll be even happier doing business with Kelliher. At least he's serving his time.
(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at email@example.com or tellittoal.com)