When E. F. Hutton talked, Arthur Bacon listened.

And he liked what he heard: If you'll quit your job as a stockbroker at Merrill Lynch and come to work for us, we'll guarantee you $500,000 over the next three years.

It was an offer not many people could refuse, so at 4 p.m. one Friday afternoon a month ago, Bacon handed in his resignation -- effective immediately -- and cleaned out his desk at 1100 Connecticut Ave. NW.

Half-million dollar job offers do not come to lackadasical stockbrokers and by Saturday morning Bacon was on the phone to his clients assuring them they no longer had to eavesdrop to hear what E. F. Hutton is saying, they could just dial his new number.

It took Merrill Lynch Pierce Fenner and Smith until Monday to figure out what was happening and until Tuesday to hit Bacon with a $1 million lawsuit.

By the time the lawsuit was dropped 10 days later, every brokerage office in Washington was buzzing over an incident that says a lot about what's happening these days in the brokerage business:

Good stockbrokers are making a bundle in this bull market and raiding the competition has become the easiest way to get good brokers.

There was a time when most of the big Wall Street firms ran extensive training programs for stock brokers. But just as corporations have decided its easier to take over another company than to build a new business from scratch, the brokerage firms have turned to "acquisitions" for new talent.

Hiring experienced brokers from other firms is simply business as usual insists Perry Bacon (no relation to Arthur) who runs E. F. Hutton's downtown office in the International Square building on K Street NW. In the last year, the Hutton office has grown from 12 account executives to 40.

Ordinarily, raiding the competition produces only screams of outrage. But when Hutton snatched away Arthur Bacon, Merrill Lynch's response was anything but ordinary. Merrill sued Bacon for breach of contract, claiming he conspired with Hutton to steal Merrill Lynch customers.

David A. Lefeve, Merrill Lynch's resident vice president in charge of the Washington office, says the lawsuit was a routine move to enforce Bacon's employment agreement with Merrill Lynch. The lawsuit says Bacon signed a standard contract in which he promised not to solicit business from Merrill Lynch customers for a year if he left the firm.

Bacon does not deny that he talked to his clients within 24 hours after leaving Merrill Lynch, but insists the people he called were his clients, not Merrill's. Bacon said he worked for Bache Halsey Stuart Shields before being hired by Merrill Lynch, and several of his customers were people he brought with him when he jumped from Bache to Merrill.

The lawsuit was dismissed because the employment contract provides for the New York Stock Exchange rather than the courts to handle disputes between brokers and their employers. Merrill Lynch has now taken the matter to the exchange, Lefeve added.

Regardless of the legal issues, being slapped with a $1 million lawsuit would be at least a little embarassing to most people, but Bacon is not a bit chagrined. From his point of view the lawsuit is a backhanded compliment from his old employer.

Though Merrill officials go out of their way to avoid saying anything good about Bacon's skills as a stockbroker, an affidavit filed in federal court by his old boss makes clear that Bacon was having a very good year before he switched jobs. In the first 10 months of this year, the Merrill executive said, Bacon's clients paid $650,000 in sales commissions to Merrill Lynch.

Most brokers get a 20 percent cut of the commissions they generate; at that rate Bacon would have earned $130,000 by Nov. 1, enough to make him one of the highest-paid account executives in Washington, and enough to explain how he could afford to take his wife Shirley on a two-week vacation to Tahiti earlier this year.

The word on the street is that Hutton offered Bacon the kind of deal that more often goes to All-America football players -- a $250,000 up-front bonus, plus the usual split of the commissions.

"You hear a lot of numbers," Bacon shrugged with an enigmatic smile the first time he was asked about his deal from Hutton. Later he confirmed that the total three-year package will be worth about $500,000.

For a half-million dollar man, Bacon is low key and unassuming. A 47-year-old former computer salesman, he has his own IBM personal computer to calculate complex strategies for trading bonds, stocks and more exotic investments like mortgage certificates.

Licensed as both a stock and commodities broker, Bacon was quick to see how new stock index futures contracts could be used to capitalize on this year's raging bull market.

Though he is now a vice president of E. F. Hutton, Bacon says he has "no desire to be in management. I like being an account executive. It's a good feeling when I make money for the clients. In every endeavor, there's a lot of personal satisfaction in going into a new area and coming out a winner."