Hutton, Shearson Sue Paine Webber : Job Shifts Spark Brokerage Battle

In the latest fallout from Wall Street’s retrenchment wave, Paine Webber Group, E. F. Hutton Group and Shearson Lehman Bros. began a legal battle in Switzerland on Thursday stemming from employees changing loyalties.

E. F. Hutton and Shearson, which late last year agreed to merge, said they filed a criminal complaint against Paine Webber in Switzerland for allegedly stealing client records and brokerage business from Hutton.

Also named in the complaint were four former Hutton employees, who left the firm in late December to work for Paine Webber.

A Paine Webber spokesman called the proceedings “a frantic, baseless attempt by Shearson to intimidate both Paine Webber and several disenchanted former Hutton employees who have chosen to work for the employer of their choosing.”

Hutton is expected to lay off up to 6,000 employees due to its merger with Shearson, a unit of American Express Co. The securities industry, hard hit by the Oct. 19 stock market crash and the sluggish bond market that preceded it, has entered a period of retrenchment, with many firms laying off workers and closing departments.

Due to the Hutton-Shearson complaint, Swiss authorities seized documents from a Paine Webber office in Lugano, Switzerland, on Thursday, Hutton and Shearson said.

Shearson spokesman Michael O’Neill said 10 of Hutton’s 13 brokers in its Lugano office, plus 10 support staff members, left the company in late December to open a competing office for Paine Webber in that city.

“After it happened, we had reason to believe that proprietary information had been misappropriated,” O’Neill said.

Among the four employees arrested was Peter Riedener, a former Hutton executive vice president based in Geneva, O’Neill said.

Paine Webber said that in Switzerland an individual can file a criminal complaint just like filing a civil lawsuit in the United States. Such a step does not involve any governmental conclusion that any wrongdoing has occurred, Paine Webber said.

“Paine Webber will respond with all appropriate legal measures,” the firm said.

Shearson and Hutton said in a statement they acted to “protect their business interests and to ensure the privacy of their clients.”