1
How to Steal a Bank
July 1976
Heading out to dinner on a summer Saturday night, Byron and Emma Haines-Prescott (not their real names) couldn’t have expected much. Byron, a British banker, was meeting two Americans who had arrived at his door two days earlier to discuss acquiring his small twelve-year-old bank, Seven Oak Finance, Ltd.
Haines-Prescott had put his bank (which was more of a depository, really) up for sale more than a year before, attracting a parade of big shots who had rolled into London ready to cut a sweetheart deal. But he wasn’t about to give it away. Haines-Prescott was only thirty-six, so maybe the sharks expected to take advantage of his youth, or perhaps word had gotten out that he was flailing financially. Regardless, his latest suitor, Phillip Kitzer, could easily have been just one more in the parade of empty suits with hollow offers.
But Kitzer’s arrival at Seven Oak had made an impression. At forty-three, he was wiry but dashing in his tailored suit, light blazing behind the eyes, brown hair parted on the left and swept back. Although his head looked slightly too large for his body, he had a narrow, creased face, a smile that revealed deep dimples, and the prominent chin of an early Hollywood star; he emanated a kind of effortless charisma unique to successful people. He’d arrived with a business partner, Paul Chovanec, who looked a decade younger. Chovanec had dark hair and black horn-rimmed glasses and was taller and heavier, but he was clearly second-in-command. Kitzer had talked up his background, then invited Byron and Emma for a follow-up meal at a swank London restaurant.
As they settled in at their table, Kitzer was funny and charming with Emma. He described a stratospherically successful career. He had already owned an assortment of banks and insurance companies, and had traveled the world brokering loans for the United Nations. He had global contacts across the uppermost strata of finance. All of that endeared him to the couple--but what happened after dessert made even more of an impression. Chovanec pulled Haines-Prescott aside and handed him an envelope.
“Here, this is for your time,” Chovanec said. “We want to talk. We’re serious.”
Haines-Prescott opened it. Inside was $5,000 in cash.
The negotiations for Seven Oak began the following week. Kitzer and Chovanec showed up at the bank daily, riding the Tube thirty-five minutes to the suburbs from London’s Brittanica Hotel. Sitting in the office with Byron and Emma, they pored over financial statements and lists of depositors.
As he grew more comfortable with the Americans, Haines-Prescott revealed the details of his situation. The rumors of his struggles were true: The bank was a smoking crater. Just a couple of months earlier, Seven Oak had promised readers of the Illustrated London News a return of 14 percent on deposits. “If you have a minimum of £500 that you wish to invest safely and profitably, then send off the coupon below.” But Haines-Prescott had siphoned out £175,000--about $300,000--in deposits to fund a business called Cidco. He’d used his accounting background to conceal this shortfall by preparing a false first-quarter report. He’d then sent the document to an accountant whom he’d paid to certify the fabricated figures before he submitted them to the U.K.’s Board of Trade. Exactly how long Haines-Prescott could shield this financial sand castle from the oncoming tides of government oversight was unclear. Beyond the £175,000, Seven Oak was £7,000 in the red to two banks with which it had relationships.
Haines-Prescott was relieved to find that Kitzer wasn’t put off by this. Kitzer assured him that none of that was any problem--in fact, he could help the Brit put his house back in order.
As the summer wound down, they reached the crux of the negotiation: how much Kitzer and Chovanec would pay. Haines-Prescott wanted, at the bare minimum, £175,000--so he could erase his debt, file a truthful statement with the Board of Trade, and walk away clear. But Kitzer took a tough stance.
“If you think that anybody is going to buy this bank and put a hundred and seventy-five thousand pounds into it [in] cash, you are badly mistaken,” he said. “That will never, never happen. That’s one of the reasons you haven’t sold the bank. You’d better come up with a better idea.”
“Phil, we can work it out,” Haines-Prescott replied. “It doesn’t have to be cash. We can come up with something.” By then he’d invested about six weeks in the Americans, and he felt pressured to file his late second-quarter paperwork with the government.
Kitzer then furnished a better idea. He and Chovanec would provide a letter indicating that Sterling and Company, Chovanec’s Milwaukee-based corporation, would transfer about £175,000 to cover the bank’s debts--Haines-Prescott would never touch the money, but he would walk away assured he was in the clear. As a bonus, the Americans would pay him £50,000 in cash.
Haines-Prescott agreed to that offer. When he wrote up a preliminary agreement on September 14, he asked whom to put down as the purchaser.
“Make it 219 Dearborn Corp.,” Kitzer said.
Chovanec looked over and lifted his eyebrows inquisitively: Who? Kitzer smiled and said he would explain later.
Naturally, Haines-Prescott wanted assurances that Kitzer and Chovanec would honor the deal, and in the next few days he spelled out his demands. First, he wanted a notarized letter from Sterling and Company confirming that it was holding $300,000 on behalf of Seven Oak. Haines-Prescott also required further references--banks that could assure him that Sterling had sufficient assets or that would back the company up with their own funds. And he wanted a notarized letter providing assurance that Chovanec could authorize such transactions for Sterling.
Haines-Prescott wrote out what he wanted, then stood there while Kitzer dictated it to Chovanec, who had flown back to Milwaukee.
Dear Sirs,
We hereby confirm that we are holding the sum of U.S. $300,000 on behalf of Seven Oak Finance, Ltd. of Priory Buildings, Churchill, Orpington, Kent, England. The authorized signatory being Phillip K. Kitzer.
Yours faithfully, for and on behalf of Sterling and Company, N/A,
P. Chovanec, President
Kitzer had suggested using his name because he’d stayed in England and could therefore sign in person. The letter came back bearing a stamp: “Signature guaranteed by Midland National Bank, Milwaukee, Wisconsin.”
Chovanec provided a list of references on Sterling letterhead. A letter from William Kelly at North Ridge Bank highlighted his bank’s solid relationship with Sterling and explained that Sterling had maintained $300,000 in deposits at various times during the previous year. A second bank reported that Sterling had authorized six-figure transactions in recent months.
Just before five in the afternoon London time, Haines-Prescott dialed one of Chovanec’s references. Roger Lewis, the executive vice president of St. Francis Savings and Loan Association, in Wisconsin, confirmed that he knew Chovanec and that Sterling maintained an account holding hundreds of thousands of dollars.
Haines-Prescott jotted, “Yes, six figures. We have had a good relationship with them.” Then he hung up.
“Okay, now the second one,” Kitzer said.
“No, that’s it,” Haines-Prescott said. “I don’t have to go any further. I got it from one, I imagine I will get it from them all.”
Kitzer pressed, but Haines-Prescott waved him off.
“Phil, this is fine, this is exactly what I need,” he said. “Let’s close the deal.”
On September 30, Haines-Prescott made out a deposit slip for £175,000, and Kitzer handed him two bills of exchange--the British version of a personal check--to cover the bonus. They were postdated because, Kitzer had explained, he needed to spread out the payments.
Kitzer signed various pages of paperwork, and Haines-Prescott assigned him and Chovanec his stock in Seven Oak--all one hundred thousand shares. They shook hands, and having spent a productive couple of months in England, Kitzer headed home.
Haines-Prescott hoped to move quickly to clean up his accounting mess. There was one problem: The transfer of the £175,000 didn’t happen. A few days passed, then a week, and the Americans assured Haines-Prescott that the transaction was imminent.
But after ten days, the Brit received notice that the bank responsible for wiring the funds had declined payment for insufficient funds. Squelching his rising panic, Haines-Prescott tried to call Kitzer and couldn’t reach him. But he contacted Chovanec, who said that the declined payment was a mix-up that he would soon straighten out.
When he still hadn’t received the money by October 17--two and a half weeks after the deal closed--Haines-Prescott must have suspected that he’d been scammed. He figured he’d strike back while he still had some leverage: He wired Kitzer a message saying he planned to notify Seven Oak depositors that their money was in jeopardy. He would trigger a run on the bank.
But Haines-Prescott had initiated a chess match, and his first move was a stumble: October 17 was a Sunday. The bank was closed. This gave Kitzer time to send notice back to England that he had fired Haines-Prescott; his wife, Emma; and the entire board of directors, effective immediately--thereby eliminating their ability to communicate with the bank’s customers. Seven Oak’s four employees would receive this directive when they arrived at work on Monday.
Haines-Prescott studied the deal he’d signed, turning to the guarantee he had received from Midland National Bank. He would soon find that the stamp didn’t match Midland’s corporate seal--that, in fact, it was a counterfeit created by a stamp maker Chovanec had hired.
Then there was the document’s wording: “Signature guaranteed by Midland National Bank, Milwaukee, Wisconsin.” A careful reading revealed a hidden catch. The letter didn’t mean that Midland guaranteed the $300,000. All it said was that the bank guaranteed Kitzer’s signature.
Haines-Prescott might have taken comfort from the $50,000 Kitzer had given him. The bills of exchange were each for $25,000 and were postdated for three and six months after the sale date--but in light of events, Haines-Prescott decided to try cashing them. Kitzer had built in a trapdoor there, too. After acquiring Seven Oak, Kitzer had sent a telex instructing the staff to place a stop payment on any checks or bills of exchange from any past bank officers or directors “until a determination can be made if in fact they were issued for the personal benefit of past officers and directors.”
Haines-Prescott realized, to his horror, that he had even inadvertently helped Kitzer cover his tracks. He had written the terms of the deal. If he dragged Kitzer and Chovanec into court, they could simply show Haines-Prescott’s notes: See? We gave him exactly what he asked for. Except, of course, for the money--and in that setting, Kitzer could simply draw attention to Haines-Prescott’s accounting improprieties.
Haines-Prescott ultimately figured that was worth the risk, because on October 18 he played his final move. He met with Kenneth Guilbert, a detective inspector in the fraud department of Scotland Yard, handed over the sale documents, and explained how two Americans had stolen his bank.
