E. F. Hutton Group said Monday that it has appointed a new president and realigned its top management, partly in reaction to its brokerage unit's guilty plea last month in a multimillion-dollar check-kiting scheme.
Hutton's new president is Robert P. Rittereiser, 46, who was executive vice president, chief administrative officer and chief financial officer at Merrill Lynch & Co., the nation's largest brokerage firm. Rittereiser will join Hutton's newly established office of the chairman, where he will share top management duties with Chairman Robert Fomon and two other top executives. Hutton is the fifth-largest brokerage in the country.
Rittereiser and Fomon both acknowledged that the former's appointment is partly a result of the company's guilty plea. Hutton's brokerage unit agreed May 2 to pay a $2-million fine after pleading guilty to 2,000 federal counts of mail and wire fraud stemming from a scheme that gave it the use of hundreds of millions of dollars in cash from its 400 banks without paying them interest. Hutton also established an $8-million fund to reimburse the injured banks. No Hutton executives or employees were personally charged in the scheme, however.
Called in Early May
"Our recent experience, painful as it has been, has also given us a mandate to consider far-reaching changes in our entire top management approach," Fomon said in a prepared statement.
In a telephone interview, Rittereiser said that, although he and Fomon had had discussions over several years about "the future of the business," the Hutton chairman called to offer him the job in early May, after disclosure of the firm's legal problems.
"There's no question that those events precipitated a climate that made it easier to bring an outsider into a firm that had never had an outsider in top management," he said. But while the timing of his appointment "might have been opportunistic, the focus of our talks was much more fundamental."
He added that the management reshuffling is "not a panic situation."
"The recent events were an aberration that clearly slowed the company's momentum," he said, "but the fundamental picture is sound."
Fomon also announced other steps in reaction to Hutton's guilty plea. Paul Hines, now an executive vice president for planning, control and executive development, will take over authority for treasury functions--the kind of cash management at the heart of the check-kiting scheme. The treasury functions also will be subject to "periodic review" by the Hutton board of directors' audit committee, Fomon said.
Will Share Management
"In part, our recent problems were symptomatic of a structural weakness: Our cash concentration and control functions were not integrated. This reorganization will remedy that weakness," Fomon said.
Fomon and Rittereiser will share management of Hutton with Scott Pierce, president of E. F. Hutton & Co., the brokerage unit, and Thomas Lynch, who preceded Rittereiser as president of the parent company. Lynch will be a vice president of the parent.
Rittereiser said he expects the individual responsibilities of each of the management quartet to "evolve."
The new president, who Fomon called a "rising star" of the securities industry, was a 26-year veteran of Merrill Lynch, which he joined in 1958 as a margin clerk trainee while studying nights at the Bernard Baruch School of the City University of New York. In 1977, he attended the advanced management program of the Harvard University Graduate School of Business Administration.
At Merrill Lynch, Chairman and Chief Executive William Schreyer said Rittereiser would be succeeded as executive vice president and chief administrative officer by the company's general counsel, Stephen L. Hammerman. Schreyer said Merrill Lynch would search for a new chief financial officer.