This post is part of a series on some of the most memorable companies that have disappeared.
"When E.F. Hutton talks, people listen," claimed the well-known slogan from the respected broker's ubiquitous ads in the 1970s and 1980s. Well, it seems people stopped listening when E.F. Hutton & Co. was caught check kiting and money laundering.
The American firm was founded in 1904 by Edward Francis Hutton. It grew to become one of the most respected U.S. financial firms, and for many years was the second-largest brokerage in the United States. Edward Hutton held the reins at the company until his death in 1962.
But in 1980 some Hutton branches began shifting funds from one account to another, effectively giving itself interest-free loans until the checks cleared. Of course the scheme eventually came to light, and in 1985 Hutton pleaded guilty to 2,000 counts of mail and wire fraud. However, the SEC uncharacteristically allowed Hutton to stay in business.
An internal investigation in 1987 uncovered that a Providence, Rhode Island, branch was laundering money for a crime family. Hutton voluntarily brought this matter to the SEC, but all signs suggested Hutton couldn't count on leniency a second time. However, this happened just before the stock market crash of 1987. With that, along with all the bad press, the firm's deep debt going back to 1985, and its star performers defecting to other firms, Hutton was on the verge of collapse by the end of the year, and so agreed to be acquired by Shearson Lehman Brothers.
Several mergers later, what remains of the once proud firm is now part of Citigroup Inc. (NYSE: C).
I wonder what Edward Hutton would have to say about how things turned out -- and would anyone these days listen?
Let us know in the comments what you remember about EF Hutton. And be sure to check out other Companies That Have Vanished.
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Reader Comments (Page 1 of 1)
6-06-2008 @ 2:13PM
mopsy said...
E.F Hutton was the husband of the richest woman in America, Marjorie Merriweather Post (cereal heiress) and together, they built Mar-a-Lago a fabulous estate in Florida now owned by Trump. They had a daughter who is the movie actress, Dina Merrill. Just some trivia---
6-06-2008 @ 2:16PM
haroldbhofmann2 said...
I was corp exec thru EFH demise. I loved working there, especially the people who were extremely honest and competent. To this day I wish I could reassociate with these outstanding individuals. And by the way, contrary to the press, there were no illegal activities. Shearson was a preditor who destroyed EFH. Someone needs to set the record straight.
6-09-2008 @ 12:08PM
DHH said...
I worked for in a branch office for several years at E.F. Hutton. Yes, there were illegal activities specifically those surrounding tax shelters/limited partnerships and check floating. Unfortunately, the outside vendors hired reps that could present a story of a perfect investment opportunity and the brokers and clients feel hook, line and sinker because of purposeful fraud and misrepresentation.
Brokers and managers who questioned the practices were chastized and told they weren't team players.
I'm certain there were more honest, good people working at Hutton than those with a criminal mindset, but nevertheless we all were painted with the same brush. Fortunately, I survived the 1987 crash and left Hutton in early 1991 without having any customer complaints to mar my license.
6-12-2008 @ 1:13AM
B. Harrison said...
Isn't this the classic, quintessential story of what corporate America has come to be?
A good corporation "taken down" from within by unscrupulous business managers who, in their unbriddled zeal to maximize business profit and to cover up losses, corrupt the entire organization. Isn't that what happened in our banking and financial institutions with the subprime mortgage loan debacle, which was noting less than an orchestrated industry fraud and pyramid scheme.
Not to be overly niave; but ethics are the cornerstone of a stable healthy industry. With all of the MBAs, PHDs and "experienced professionals" in the finance industry, the subprime mortgage loan debacle did NOT occur in a vaccum. Corporate management certainly KNEW what they were doing. To leave this managment in place to handle the recovery from this debacle is sheer insanity. This managment has already demonstrated its lack of integrity and reliability. They are more concerned with CYA from personal criminal prosecution, than they are in recovery.
The story of E.F Hutton's demise is a classic tale, and description of what occurs when there is inadequate industry oversight and regulation, and a few corrupt managers are allowed to undermine the integrity of a good corporation. The subprime mortgage loan debacles merely shows that corporate America has become infected with a total disregard for business ethics; it has established a mindset that is equivalent to cancer spreading throughout a person's body. It's just a matter of time before the cancer kills the patient.
There should be a purging of inept, indifferent, unethical, and criminally corrupt CEOs and management personnel who orchestrated and perpetuated this travesty against our nation. How many of these individuals still hold high paying management positions, and are enboldened with the impunity of thier actions. It's time for a radical change in corporate America.
6-12-2008 @ 2:12AM
B. Harrison said...
gijnabar 02:03:42 AM Jun 12 2008
Report This! See how much damage people like Wright can do?
That one person and his antics may have cost Obama his chance at presidency.
Why not leave those people alone, let them go their own way and take care of yourselves?
Don't give up black men and women, wash your hands of those who are holding you back, believe in the dream, someday you will be recognized.
6-30-2008 @ 8:59PM
jdaly said...
What's so surprising is the ignorance of the truth in most of these blogs - with the exception of HaroldBhoffman and Mopsy, who didn't talk about the firm,no one knows what they're talking about. And, by the way, Sylvan C. Coleman was running the firm in 1962. He took over in the late fifties, when the firm was still a partnership and E. F. Hutton retired and ran the firm until 1970, when Bob Fomon took over.