Hutton Reveals More Overdraft Memos
E. F. Hutton & Co. has belatedly discovered 18 documents that should have been turned over to a federal grand jury investigating Hutton’s multimillion-dollar overdrafts of its bank accounts nationwide, the brokerage house announced Wednesday.
Employees had overlooked some files left behind by former Hutton President George L. Ball, who left the firm in 1982, company Chairman Robert M. Fomon said.
“There appear to be good-faith explanations” for the documents’ discovery only recently rather than when they were subpoenaed three years ago, Fomon said in a statement. Later, in an interview, he said he could not rule out the possibility that more relevant documents would be uncovered.
Hutton, in releasing the documents to combat what it called “news leaks,” said that, on June 25, five had been given to the Justice Department, the Securities and Exchange Commission and the House Judiciary subcommittee on crime. Thirteen additional documents, all of which came from Ball’s files, were turned over to the three government agencies Wednesday.
Some of the files, disclosed earlier this week by The Times, showed that in 1981 Ball approved the deliberate overdrafting of bank accounts after being told that one branch office was earning $30,000 a month in interest through such practices. Another document, released Wednesday, showed that Ball in 1982 helped settle an internal dispute over the division of profits generated by overdrafting.
Memo From Firm’s Controller
“Any branch which cannot overdraft, because it is in the same city or uses the same bank as the region, should be rebated a fair amount of the interest earned from overdrafting the regional bank account,” Ball was informed in a memo written by Hutton Controller Michael P. Castellano.
Ball, now president of Prudential-Bache Securities, reiterated Wednesday that “I had no knowledge of any improper acts in Hutton’s cash draw-down system.” He has said he was only referring in such memos to “legitimate overdrafts that are a normal business practice.” In a separate statement, Hutton declared: “None of the documents released (Wednesday) necessarily indicate knowledge of improper banking practices on the part of any particular individual.”
Hutton pleaded guilty May 2 to 2,000 counts of fraud arising from the company’s interest-free use of millions of dollars by intentionally writing checks in excess of its bank deposits. The negotiated plea with the Justice Department has sparked intense congressional criticism because no individual Hutton executives were prosecuted.
Fomon said that, although he was satisfied with the explanation for the belated discovery of the 18 documents, totaling 77 pages, he had asked former Atty. Gen. Griffin B. Bell to broaden the internal inquiry that he is conducting of the case to cover the circumstances of the failure to comply with the subpoena.
