Hutton Broke Rules Again, Shearson Says

The parent company of E. F. Hutton & Co. told government regulators Tuesday it had uncovered more alleged cash-transaction reporting violations by Hutton branches.

On Monday, the brokerage firm pleaded guilty in Rhode Island federal court to similar violations.

Shearson Lehman Hutton, which bought E. F. Hutton earlier this year, told the Securities and Exchange Commission its own investigation turned up an undisclosed amount of large cash deposits at Hutton branches in the New York area that were kept secret from the government.

On Monday Hutton paid $1.01 million in fines and pleaded guilty to three criminal charges stemming from an alleged money-laundering scheme involving organized crime at its Providence, R.I., branch office in 1982 to 1984.

Hutton and its parent Shearson, a unit of American Express, are currently applying for an exemption from an SEC rule that automatically disqualifies a firm convicted of criminal charges from acting as an investment adviser.

Shearson disclosed the new allegations in the SEC application, but said they occured before its acquisition of Hutton earlier this year.

Michael O’Neil, a spokesman for Shearson in New York, would not comment on the extent of the new findings. “We have disclosed this to the proper authorities, and do not think it will have an impact on our continuing business,” O’Neil said.

He added that Shearson has turned over its findings to the U.S. Attorney’s office in New York and is cooperating fully with federal law enforcement authorities.

Shearson said it uncovered the new cash reporting rule violations in an internal investigation launched last December into Hutton’s compliance with federal law requiring reports to the government on single cash transactions exceeding $10,000.

The internal probe covered all 24 of Hutton’s New York area branch offices, and branches in the Los Angeles, Dallas, Chicago and Miami areas, but uncovered violations in the New York area only.