Hutton Charged in Mob Money Laundering Case : 3 Criminal Felony Counts Are Filed; Sources Say Firm Will Plead Guilty

E. F. Hutton & Co. was charged Friday with three criminal felony counts in connection with an alleged scheme by Hutton brokers in Providence, R.I., to launder more than $532,000 for Rhode Island organized crime figures and others in 1982 and 1983.

The brokerage, now part of the huge Shearson Lehman Hutton investment firm, was charged with two counts of failing to file currency-transaction reports and one count of causing another firm to fail to file such reports.

Hutton is expected to plead guilty to all three charges at a May 16 court hearing and pay a fine of $1.01 million, according to company and Justice Department officials.

Alleged Tax-Dodging

The alleged scheme came to light early in 1987 and deepened the considerable public relations problems of Hutton, a one-time Wall Street wonder that had drifted during the past few years under the leadership of former Chairman Robert Fomon. In 1985, Hutton pleaded guilty to 2,000 criminal counts relating to a nationwide check-kiting scheme.

Two former Hutton brokers were named in the new charges, including one, Stephen Fusco, who died of cancer in 1985; the second, Brian Lareau of Jamestown, R.I., has since left the firm.

John Voorhees, in charge of the Justice Department’s Organized Crime Strike Force in Providence, said prosecutors plan to identify the organized crime figures and other clients involved in the scheme at the May 16 hearing.

The laundering was intended to conceal the origin of funds raised from illegal activities, he said, and to dodge the Internal Revenue Service.

Voorhees said prosecutors have evidence that the brokers laundered about $1.5 million, though a figure of only $532,000 was cited in the felony charges.

Could Face Suspension

The laundering was accomplished through several steps. The clients would deposit cashier’s checks for sums of less than $10,000 to fictitious Hutton accounts. Later, the clients would be paid with municipal bearer bonds that they could cash without being identified, according to Voorhees.

Hutton disclosed to the Securities and Exchange Commission in March that it expected to plead guilty to as many as three felony counts and pay an undetermined fine in connection with the case.

The SEC could temporarily suspend Hutton’s trading privileges because of the felony conviction, but a Shearson spokesman said Friday that the company is “confident” that it will obtain the SEC waivers necessary to avoid such a penalty.

“This is a very, very old event,” the spokesman said. “We don’t see it as having an adverse impact on the company.”

Hutton signed an SEC consent order last October in which it admitted no wrongdo

ing but agreed to take steps to improve its record keeping. Since its merger with Shearson, completed in February, Hutton follows Shearson’s policy of accepting no cash, the spokesman said.

Perrin Long, an analyst with Lipper Analytical Services in Manhattan, agreed that the criminal charges would probably “not have much effect on the company.”

When the federal investigation of the scheme was first made public in early 1987, there were reports that similar activities might be taking place at Hutton offices in Worcester and Springfield, Mass. But prosecutors have not brought charges connected to the activities of those offices.