An article in yesterday's Business section about Connecticut's investigation of E.F. Hutton & Co. reported conflict-of-interest allegations stemming from state banking commissioner Brian J. Woolf's plan to join Richard Roberts Group Inc. During editing, the company was identified as a brokerage firm, but should have been described as a real estate concern with a small in-house broker-dealer operation.
A new hearing on whether to suspend or revoke E. F. Hutton & Co.'s licenses to do business in Connecticut will be held in Hartford Oct. 7, state Deputy Banking Commissioner Howard B. Brown announced yesterday.
A Connecticut law allows the banking commissioner to take action against a broker-dealer or investment adviser convicted of a felony. Hutton pleaded guilty in May to 2,000 federal counts of mail and wire fraud involving illegal abuses of bank "floats" in a check-overdrafting scheme.
The announcement of a new hearing surprised state government officials who had expected Brown merely to ask for written briefs from state Attorney General Joseph I. Lieberman and attorneys for the broker-dealer and investment-adviser firm.
Lieberman said Monday he felt "very strongly" that the case for punishing the corporation had been made, that no further hearings on that issue were needed and that he would recommend to Brown the imposition of "timely sanctions." But Brown said yesterday that the record is still incomplete.
The outcome of the case could be influential, because laws similar to Connecticut's are on the books of most states. The North American Securities Administrators Association, composed of securities regulators from all 50 states and the District of Columbia, has formed a task force to investigate the Hutton situation and report its findings in October.
State Banking Commissioner Brian J. Woolf held a hearing June 20 at which two Hutton executives testified that the illegal practices occurred without the knowledge of senior management and were ended promptly after being discovered.
Later, Hutton said it found 18 documents that had been covered by federal grand jury subpoenas but had not been turned over, leading Woolf to order the hearing re-opened after Hutton submitted the documents to the Justice Department and a congressional committee. In a surprise move last Monday, however, Woolf, whose resignation takes effect Sept. 12, presided at the reopened hearing just long enough to read a statement in which he disqualified himself and named Brown in his stead.
Yesterday, in setting the Oct. 7 hearing, Brown said he wants to examine new evidence, particularly the 18 documents and a report by former U.S. attorney general Griffin B. Bell on his investigation into who at Hutton who was responsible for the illegal practices. Bell, hired by Hutton to make an internal investigation, is expected to release his report Sept. 5. The Justice Department and Hutton have implicated two unnamed midlevel officials in the scheme.
Brown said he will have in hand for the hearing the results of an investigation into the involvement and accountability of Hutton employes and into the extent of possible victimization of Connecticut banks.
Banking department spokesman Cindy Weiss said that Brown has yet to decide whether Hutton officials will be asked to testify and when he will finally decide whether to penalize the company. James E. Kennedy, a Lieberman aide, said the attorney general will be prepared at the October hearing to address the issue of individual responsibility for the illegalities.