An internal investigation of E. F. Hutton’s multimillion-dollar check-overdrafting scheme, released today, exonerated two of the firm’s top officials but recommended sanctions against 15 other executives.
In a statement later in the day, the company said it will carry out the recommendations.
The investigation headed by former Atty. Gen. Griffin B. Bell directed the harshest measures--including personal fines ranging from $25,000 to $50,000--against six branch managers in whose regions bank account overdrafting was “so excessive and egregious as to warrant sanctions.”
At a news conference to announce the findings, Bell said: “We tried to link the high officials at Hutton with the wrongdoing that the Justice Department found. We were never able to do that.”
The report cleared George Ball, who was president of the firm during the overdraft scandal, and Robert Fomon, current chairman and chief executive officer.
2 Dismissals Advised
But Bell urged sanctions against five corporate officials, including the dismissal of Vice President and General Counsel Thomas Rae, who plans to retire by the end of the year.
The report also urged the firing of Thomas Lynch, the firm’s chief financial officer during the period in question, 1980 to 1982.
Bell declined at a news conference to state whether he would have recommended their dismissal if the two had not told him in interviews that they were leaving the firm. He said the report speaks for itself.
Fomon issued a statement later in the day saying: “We accept (Bell’s) conclusions and will implement all his remedies. Where the company believes action beyond his specific recommendations is appropriate, we will take such actions.”
Pleaded Guilty in May
The overdrafting scheme allowed the company to have the interest-free use of hundreds of millions of dollars on certain days by drawing down bank accounts in excess of expected deposits.
In May, Hutton pleaded guilty to 2,000 counts of mail and wire fraud involving overdrafts between July, 1980, and February, 1982, at many of the 400 banks where it had accounts.
Bell’s 183-page report is the result of a three-month investigation during which his team of lawyers interviewed more than 300 Hutton employees and others. The report did find fault with top management because it “failed to implement an adequate system of internal accounting controls to safeguard against the possible misuse of overdrafts.”
Bell specifically recommended stepping up audit procedures and bringing in outside people to sit on the board of directors.
The report said Thomas Morley, the firm’s “money mobilizer,” should be removed from any responsibility involving money management, and the company said he is leaving Hutton. The report urged that reprimands from the chief executive officer be placed in the permanent personnel files of Richard Genin, senior vice president for trading operations administration, and Ernest Dipple, co-regional vice president for the central region.
Among the six branch managers identified for fines ranging from $25,000 to $50,000 was William Shaw of Fresno, Calif.