The insurer maintained that the
check kiting losses were in the nature of an extension of credit by the bank to which the exclusion should apply.
The board should have known that the subsidiaries didn't have the money in their bank accounts to cover the checks to Affiliated, "but nevertheless close to half a billion dollars in insufficient checks were being written on these accounts to perpetrate this massive
check kiting scheme," Cox said.
If the auditors had inquired, they would have learned that Minkow submitted phony tax returns and that banks closed his accounts for
check kiting, writing excessive non-sufficient-fund checks, using fictitious checks, and conducting loan fraud.
Difficult to detect and prosecute,
check kiting schemes have gained popularity in recent years.
The Department of Justice will aggressively investigate and prosecute Ponzi schemes, bank fraud,
check kiting, and other similar types of financial 'shell games' specifically designed to lull banks, investors, and employees into having a false sense of security."
Schick was sentenced in August 2004 to 97 months in federal prison for an unrelated scheme to defraud several banks through
check kiting.
District Court for being involved in a
check kiting scheme, according to information sheet filed by the U.S.