This came up on a local NE Ohio history blog. This guy owned all 15 Ponderosa Steakhouses in the area and was found guilty of floating checks to the tune of $800 million dollars. Can someone explain exactly what he was doing:
He was writing checks that would over draw his account. However, before the checks cleared his bank, he’d make a deposit into that account to cover the checks…drawn off another account that would now be overdrawn. Seems like he managed to keep it up for long enough that when they caught on he had a lot of money floating around in circles.
He had 15 accounts at the bank, probably had a good working relationship with everyone there, gave the bankers a line of bull when they called about a check that bounced here and there and just kept the whole scheme going for while.
It’s like a ponzi scheme except it’s all your money. Think of it like writing a check for $150 when you only have $100. So you run to the ATM and make a $50 deposit, but drop an empty envelope into the machine. The idea being that you can hopefully come up with the missing $50 before the bank notices your ‘mistake’. If/when you can’t, you have to find a way to keep it going.
I used to kite in the olden days. I didn’t know it was even still a thing.
A company my dad used to work for in Redding, California was owned by a man who got busted for the same type of scheme described in the OP. The man spent several years in jail and his company went out of business (after my dad fortuitously accepted a new job elsewhere). I think the check kiter passed away a few years after being released. He had a family he was raising too. His son is my age, and the whole thing was kind of sad.
Found a news article describing it:
https://www.bizjournals.com/sacramento/stories/2001/04/09/daily45.html
It still amazes me that cheques are even a thing in the US. Pretty much no private individual in Australia has used cheques to pay for things in many years and even most businesses went digital a long time ago.
The story was from 13 years ago. I think businesses might still use checks more than individuals, but even then there’s a lot of wiring and just using credit.
But yeah, even in the US, I remember like 20 years ago people would get pretty impatient grocery shopping in line behind the one elderly person in the country who still used checks. I pretty much stopped using cash back then, too.
Your baby boomers must be a lot more capable of keeping up with the times than our boomers are. I’ve lost track of how many times I’ve been cashiering at work and the line has ground to a halt because someone old enough to remember a time before television needs to write a check to pay for their $26 purchase.
Jokes about boomers aside, Australia and New Zealand embraced electronic payment technology early and with gusto - EFTPOS (Electronic Funds Transfer at Point of Sale) machines first appeared in the early 1990s and were widely adopted very quickly.
The last time I remember anyone I know writing a cheque was the mid-late 1990s and most people born in the 1980s or later have never had a cheqebook and I doubt there’s any more than a handful of people under 30 who would even know how to write a cheque.
Australia and NZ also have much smaller populations than the US, which makes some of these changes easier to implement because there’s fewer people to be cranky old farts about it; if 1% of the population of the US wants to keep pretending it’s 1974 and refuse to stop using cheques, that’s still more than 3 million people - enough to make keeping the method around as an option for some businesses.
We’ve had those for about as long, though we fell behind the pack when it came to adopting chip-and-pin cards (and there’s still some people out there who are still using swipe cards.) Our population just seems to be less willing to accept change.
Personally, I write a check once a month to pay my rent and that’s it. I’ve had the same checking account for nearly 20 years and I’ve only had to order more checks once.
Australia was never a cheque country the way the USA was. My parents paid for stuff with cheques in the 1960’s: when they came to Melbourne, that stopped.
And it wasn’t because you could pay for large purchases with large currency. The largest bill was $20. When you wanted to buy a car, you took a large stack of twenties. It did give a very satisfying heft to your weekly pay packet.
They also have many fewer banks per capita. The regulations tended to work the opposite way in the USA, to promote the creation of many small banks rather than a few national banks. There are small American towns with more locally-headquartered banks than the entirety of New Zealand, so any new change requires a huge number of cats to line up and walk in a parade.
And one of the things that kept checks alive in the USA is they were reformed around the turn of the century to allow them to turn into electronic transfers at the recipient’s convenience. If I get a check, I can take a picture with my phone and deposit it electronically. It’s basically a universal single-use debit card. If checks still had to be shuttled between rural airports by plane every night, they’d be dead by now.
It’s interesting you mention that, because when I worked in retail in the early-mid 2000s, there was a machine we could feed a cheque through that would instantly ping the bank and confirm if the payer was good for it or not.
Since EFTPOS was pretty much the same thing and a lot less fucking around (by the time I left the company I was working at, there were only four or five of us in the entire region who knew how to work the cheque machine, everyone knew how to work EFTPOS machines) we were taken to simply telling people “We’re not taking a cheque, just use EFTPOS or a credit card like a normal person” even though the company policy was actually to accept cheques.
my mom was very good at this with the grocery stores eventually they learned that if she came in after the 20th of the month the check was rubber so what did they do? they’d hold the check until the first when they knew she could pay for it
But one reason check kiting is obsolete is banks will gladly pay for your purchase and sock you with various fees for the privilege of doing so …
And ys the one store that still takes checks will run it through a scanner and sends it to the bank and if you have the money it prints something on the check to void it out and they hand it back to you
But not 100%. My small business, between payroll, vendors and other expenses writes, maybe, 2000ish checks a year. Plus, the majority of our B2B customers pay by check with only a few using credit cards or ACH.
As a vendor, we actually like getting paid by check. Our business takes in a lot of cash so we’re at the bank every day anyway and checks just have a flat fee associated with them. Something like 10 or 15 cents for each one we deposit. If someone owes me $1000, I’d rather pay 15 cents than 3-4 percent on that deposit if they use a credit card.
We stopped taking checks (from in-store customers) a while back, but we’ll still do that for some of our customers. I’m talking about customers that we’ve had for, literally, decades. If they are short on cash and ask me if they can write a check and hold it for a week or two it’s fine. Even if they asked if could stop back in in a week or two and pay, we’d be fine. But, again, these are people that we’ve gotten to know so well, just from shopping in the store, that we know where they live, we have each other’s cell phone numbers, we keep up with each other when they move out of the area. Hell, one husband/wife customer I invited to my wedding.
We certainly wouldn’t do it for someone we didn’t know well, at least not these days (maybe back in the 80’s/90’s when we took in more checks than credit cards).
The Telecheck machine. If you bounce a check at a store that uses telecheck, you best make good on it. Once you’re in trouble with telecheck, you’re not writing a check at any other location that uses it. We eventually got rid of it because it was really expensive. With so few people writing checks these days, they were charging us their minimum fee so, on average we were paying like dollars per check instead of cents. We decided to ditch the service and take the risk. Once we got hit by two bad checks, two days in a row, for large amounts (and it was a mother one day and her son the other day), we stopped taking checks, other than from the previously mentioned customers that we’ve known forever.
During the recession in my area checks were bouncing like mad. I looked into check guarantee services, but the cost per check was too high for me.
I stopped accepting checks. People were unhappy, but I persisted. Seriously, a piece of paper promising payment? That’s nuts. I haven’t accepted a single check since then, and my competition all stopped accepting checks as their bouncers increased.
My dad (who owns the business) is pretty quick at thinking on his feet. Back when we used to take checks, we required a driver’s license (or some type of ID) and phone number. I recall one person writing a check, he asked for their phone number and the person refused. When asked why, the customer said “I don’t trust you with my phone number” (implying we would sell it or use it to cold call them or something). My dad, without missing a beat, says “you don’t trust me with your phone number but you want me to trust you that this piece of paper is worth fifty dollars?”.
Another thing we learned is that if someone debit (not credit, debit) card declined, we wouldn’t take their check. Granted, the float may buy them some time, but we know, at least as of right now, they don’t have the funds to cover the check. Hunting down people that accidentally wrote bad checks was enough of a PITA. The ones that were doing it on purpose was almost pointless. It got to the point when, I’d call once, follow up with a certified letter and then turn it over to the police and let them handle it. Letting the police do it was free and more effective than me calling them over and over.
You were patient. I’d have someone call one time, explaining cash had to be brought in immediately or it would go to a collection agency. My business did not offer billing.
That was what I said when I’d call. Tell them they have to bring in the cash to cover the check plus the bank charge (typically $35) within the next day or so. Some people, you can tell on the phone, are going to make good on it. It’s the rest of them, the ones that didn’t sound like the were embarrassed by the whole situation and/or didn’t even realize their mistake until I called them, that I made sure to follow up with the certified letter and the police report (the certified letter is/was required for the police report).
Now that I think of it, we did also offer them the option of giving us a credit card number over the phone. In retrospect, I suppose they could have done a chargeback, and probably won it, but I get the feeling a lot of people that are purposely bouncing checks are happy to move that debt over to their credit card. They probably won’t pay the credit card company either, but it’s one less person calling/suing/reporting them.
In any case, checks, at least from non-business customers are not something I miss at all. I fought for years to stop taking checks. It wasn’t until we lost a few hundred dollars to that mother/son team that we finally stopped. That was probably 5 years ago and last I checked the son died and the mom is still in jail for writing bad checks. And, when I poked around, I saw that when she was in my store, she had just gotten out of jail for writing bad checks. The son, when he wrote the bad check, had an active warrant out for writing bad checks.
It’s those people that ruined it for everyone else.
Years ago I was kayaking the upper Allegheny river and stopped in a little store. They had a Wall of Shame posted with bad checks! No idea if it’s legal, but public shaming seems like it would be effective.