Word: hutton
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When E.F. Hutton Chairman Robert Fomon gave a 30-minute talk over the company's public-address system last week, everybody listened. His 17,000 employees and the rest of Wall Street had been waiting four anxious months for the results of an internal probe into the check-kiting scheme for which Hutton paid a $2 million fine in May. "It won't make pleasant reading," Fomon advised as he gave a preview of the 183-page report issued last week by former Attorney General Griffin Bell, whom Hutton had hired...
...specific Hutton employees had been singled out for blame back in May, when the company pleaded guilty to 2,000 counts of wire and mail fraud. The Justice Department's failure to charge any of Hutton's executives raised howls of criticism that cast further harsh light on the company's operations. But, as expected, Bell's report did single out offenders and called for changes in the way Hutton does business. "I think we got the facts," declared Bell, whose team of 14 lawyers interviewed more than 370 current and former Hutton employees. Says James Hanbury, who studies Hutton...
Bell's report criticized 15 executives in particular, and Hutton promptly announced plans to discipline 14 of them. Three senior officials will leave the company: Thomas Lynch, a vice chairman; Thomas Rae, chief legal counsel; and Thomas Morley, a senior vice president in charge of cash management. Lynch, however, will keep his director's post and continue to receive full pay; Rae will retire early. Two mid-level executives will be officially reprimanded, three regional managers will be suspended for 30 days without pay, and six branch managers will be fined between $25,000 and $50,000. The payments from...
While many large companies today manage their money by aggressively moving it among various accounts, some of Hutton's branch managers went much too far. They issued a flurry of overdraft checks in order to obtain no- interest loans at a time when rates were about 20%. For 20 months beginning in July 1980, the company obtained as much as $250 million a day in freebie loans on which it could earn interest. Bell termed the overdrafts "so excessive and + egregious" that "no reasonable person could have believed that (their) conduct was proper...
Bell's report concludes that Hutton's upper officers put excessive pressure on branch managers to boost their cash-management income and then failed to monitor how it was being done. One senior vice president gave underlings envelopes containing play money equal to how much extra profit he thought they could be bringing in. But in attempting to trace the blame for the check-kiting scheme as high as possible on the corporate ladder, Bell discovered a "peculiar management structure" at Hutton with fuzzy personal responsibilities. No one, for example, was willing to admit being the immediate boss of Morley...