E. F. Hutton & Co. pledged yesterday to expedite payments to its New York State customers by writing checks on a New York bank rather than on the Bank of America in Los Angeles.
State Attorney General Robert Abrams said that a consent judgment containing the pledge was signed by a judge in Manhattan and by the broker-dealer following an investigation of its cash-management practices by Abrams' office.
New York is among numerous states that began investigations after Hutton pleaded guilty May 2 to 2,000 felony counts arising from a scheme to obtain what amounted to interest-free loans from banks.
"The judgment affirmatively states that its conclusions were not based on any findings of fraud in the sale or purchase of securities," Hutton said in a statement.
The company also said that it had paid the state $100,000 as reimbursement for the costs of the investigation and "is pleased that this matter has been brought to a satisfactory conclusion."
A Hutton spokesman had no immediate comment on whether the firm will make payments to customers in states other than New York from accounts in banks based in or near those states.
Meanwhile, the Securities and Exchange Commission is expected to announce today what action it is taking in connection with Hutton's guilty plea May 2. On that day, the SEC granted Hutton a temporary exemption from the Investment Company Act of 1940, which can make a convicted felon ineligible to serve as an investment adviser or as principal underwriter for certain mutual funds and trusts. The 180-day exemption runs out today unless made permanent.
On Thursday, a House Judiciary subcommittee is to take testimony from former Hutton president George Ball in the fifth in a series of hearings focusing on the Justice Department's handling of the case.
Yesterday's consent judgment was the second obtained by a state. Georgia, which signed the first one Sept. 26, put Hutton's Georgia operations under a 12-month administrative probation. It required Hutton to tell each of its Georgia employes that customers who specifically request it may have checks drawn on local rather than distant banks.
As reported previously, Maryland was conducting an investigation while the District of Columbia and Virginia declined to say whether they were conducting separate independent inquiries.
Under the New York pact, Hutton must take the following steps:
*Transfer within 120 days its principal checking account for paying New York customers from the California bank to a New York bank yet to be selected.
*Circulate a memo to Hutton management and employes "reiterating that it is Hutton's policy to remit funds to customers expeditiously and without undue delay."
*Set up a system of formal audit procedures to ensure that customers are protected against undue delays or other practices that might interfere with the prompt receipt of funds due them.
*Conduct during the next 2 1/2 years special audits of its New York branches to determine whether customers are being harmed by its pay-out practices and report the results of the investigations to state attorney general Abrams.
*Submit regular reports to the attorney general.
The Hutton statement pointed out that the consent judgment contained no "findings which would result in statutory disqualification or bar Hutton or any of its affiliates in New York."
The company also said that it "agreed to maintain and periodically review customer complaints" and to follow the recommendations in a September report by former U.S. attorney general Griffin B. Bell on his investigation into the background of the guilty plea.