Difference between revisions of "E.F. Hutton"

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===Check Kiting Scandal===
 
===Check Kiting Scandal===
  
In 1985, E.F. Hutton & Company Inc. was charged with 2000 counts of wire and mail fraud in connection with a scheme similar to "check kiting" to fraudulently obtain $250 million.<ref>{{cite web|url=https://www.latimes.com/archives/la-xpm-1985-05-03-mn-11827-story.html|name=E.F. Hutton Guilty in Bank Fraud : Fined $2 Million for Scheme Similar to ‘Check Kiting’|org=LA Times|date=March 27, 2020}}</ref> Trading in Hutton's stock would be suspended due to the charges, and the stock would reopen $3.75 lower at $29, 25 per share. The firm would be fined $2 million for the scheme and paid a $750,000 fine to reimburse the government for the investigation.<ref>{{cite web|url=$2 million in fines and $750,000 to reimburse the government |name=E.F. Hutton Co. pleaded guilty to 2,000 federal felony|org=UPI|date=March 27, 2020}}</ref> No Hutton employees were charged in the case, though there were U.S. House of Representative committee hearings into the case. Additionally, Hutton would hire former Carter Administration Attorney General Griffin Bell to investigate the case.<ref>{{cite web|url=https://apnews.com/5b8e55416b05db393f6042c10e15c9b3|name=E. F. Hutton Case: The Quiet Settlement That Exploded|org=Associated Press|date=March 27, 2020}}</ref>
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In 1985, E.F. Hutton & Company Inc. was charged with 2000 counts of wire and mail fraud in connection with a scheme similar to "check kiting" to fraudulently obtain $250 million.<ref>{{cite web|url=https://www.latimes.com/archives/la-xpm-1985-05-03-mn-11827-story.html|name=E.F. Hutton Guilty in Bank Fraud : Fined $2 Million for Scheme Similar to ‘Check Kiting’|org=LA Times|date=March 27, 2020}}</ref> Trading in Hutton's stock would be suspended due to the charges, and the stock would reopen $3.75 lower at $29, 25 per share. The firm would be fined $2 million for the scheme and paid a $750,000 fine to reimburse the government for the investigation.<ref>{{cite web|url=$2 million in fines and $750,000 to reimburse the government |name=E.F. Hutton Co. pleaded guilty to 2,000 federal felony|org=UPI|date=March 27, 2020}}</ref> No Hutton employees were charged in the case, though there were U.S. House of Representative committee hearings into the case. Additionally, Hutton would hire former Carter Administration Attorney General Griffin Bell to investigate the case.<ref>{{cite web|url=https://apnews.com/5b8e55416b05db393f6042c10e15c9b3|name=E. F. Hutton Case: The Quiet Settlement That Exploded|org=Associated Press|date=March 27, 2020}}</ref> Bell's report would not be able to link any specific criminality, but would find management deficiencies.<ref>{{cite web|url=https://www.csmonitor.com/1985/0906/ahutton.html|name=Bell probe of E. F. Hutton check scam finds conduct unethical. Report recommends major shuffle in investment firm's management|org=Christian Science Monitor|date=March 27, 2020}}</ref>
  
 
===Sale to Shearson===
 
===Sale to Shearson===

Revision as of 10:05, 27 March 2020

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E.F. Hutton
Founded 1904
Headquarters San Francisco, CA

E.F. Hutton was a U.S.-based brokerage firm founded in 1904 by Edward Francis Hutton and his brother Franklyn Laws Hutton. Their firm became one of the most respected U.S. financial firms and was at one time the second largest brokerage firm in the U.S.

E.F. Hutton would merge with Shearson Lehman/American Express in 1988. At the time of its sale, Hutton had 6500 brokers.[1][2]

The merger was precipitated by Hutton pleading guilty to charges it overcharged bank customers for fees. The "check kiting" scandal hurt Hutton's reputation, but the stock market crash of 1987 also played a factor.

Hutton was known for its marketing campaign, "When E.F. Hutton talks, people listen."[3][4]

History

E.F. Hutton was founded in 1904 in San Francisco, CA and would see its offices destroyed in 1906 by an earthquake. Hutton was one of the first brokerage firms in California and would grow into a nationwide firm. It also opened season offices in summer locations to cater to customers by their summer homes in Saratoga Springs, New York or their winter homes in Palm Beach, Florida.

Hutton was later led by Gerald M. Loeb, who joined the firm in New York in 1924.

In 2012, the firm was re-established under new management under the leadership of Frank Campanale.[5]

Check Kiting Scandal

In 1985, E.F. Hutton & Company Inc. was charged with 2000 counts of wire and mail fraud in connection with a scheme similar to "check kiting" to fraudulently obtain $250 million.[6] Trading in Hutton's stock would be suspended due to the charges, and the stock would reopen $3.75 lower at $29, 25 per share. The firm would be fined $2 million for the scheme and paid a $750,000 fine to reimburse the government for the investigation.[7] No Hutton employees were charged in the case, though there were U.S. House of Representative committee hearings into the case. Additionally, Hutton would hire former Carter Administration Attorney General Griffin Bell to investigate the case.[8] Bell's report would not be able to link any specific criminality, but would find management deficiencies.[9]

Sale to Shearson

In 1988, the board of directors of Hutton put the company up for sale. Shearson Lehman/American Express was approached as they had made a failed bid for Hutton the previous year. Shearson reportedly floated a $50 per share offer for Hutton in 1986. Peter Ueberroth, the commissioner of baseball and a board member since 1984, was a major player in the sale process. Robert Rittereiser, who joined the firm in 1985 from Merrill Lynch would replace Robert Foman as CEO.

Rittereiser and his team and committees would produce a simple-minded coloring book distributed to Hutton employees to explain what had been done and why it had to be done quickly. The coloring book reportedly insulted the intelligence of the Hutton brokers.

The Hutton board was told by Rittereiser he expected the firm to make $74 million in the first nine months of 1987. Instead it made $15 million and after the stock market crash of 1987, the stock fell to $15 a share, versus the $35 a share it was trade at prior to the crash. Once the stock traded under $20, the firm was a takeover target and talks of selling the firm began.[10][11]

Products and Services

Key People

References

  1. E.F. Hutton, Losing Two-Year Struggle, Is Looking for Buyer. New York Times.
  2. Shearson Reported To Acquire Hutton In a $1 Billion Deal. New York Times.
  3. When E.F. Hutton talks, people listen. vintage tv commercial. Youtube.
  4. The Leadership Law of E. F. Hutton. SISLeadership.com.
  5. E.F. Hutton is Back, But Will Anyone Listen?. WealthManagement.org.
  6. E.F. Hutton Guilty in Bank Fraud : Fined $2 Million for Scheme Similar to ‘Check Kiting’. LA Times.
  7. [$2 million in fines and $750,000 to reimburse the government E.F. Hutton Co. pleaded guilty to 2,000 federal felony]. UPI.
  8. E. F. Hutton Case: The Quiet Settlement That Exploded. Associated Press.
  9. Bell probe of E. F. Hutton check scam finds conduct unethical. Report recommends major shuffle in investment firm's management. Christian Science Monitor.
  10. THE SLOW DEATH OF E.F. HUTTON. CNN Money.
  11. E. F. Hutton in Merger Talks With Shearson : Troubled Securities Giant Says Other Suitors Have Also Expressed Interest. LA Times.