A Verdict

When the Justice Department fined E.F. Hutton $2 million in May for engaging in a complex check-kiting scheme, many critics complained that Attorney General Edwin Meese had not applied to executive-suite crime the standard that the Reagan Administration invokes for less well-heeled violators. Even though Hutton pleaded guilty to 2,000 separate charges of mail and wire fraud, the Government did not charge any individuals with wrongdoing. Former Attorney General Griffin Bell, who was hired by Hutton to conduct an independent, internal investigation of the case, is expected to set the record straight when he releases his formal report this week.

According to articles published in several papers, Bell has found that top Hutton officials bear indirect responsibility for failing to install the types of controls that could have prevented or uncovered the scheme. Bell reportedly also found that Thomas Morley, a senior vice president in charge of cash- management activities, failed in his duty by not detecting the overdrafting.

In the Hutton scheme, several bank accounts were played off against one another to gain, in effect, interest-free loans. The operation gave the company use of as much as $250 million a day at no cost for 20 months beginning in July 1980. Short-term interest rates at the time were about 20%.

Bell reportedly also singled out Perry Bacon, a former manager at Hutton's Alexandria, Va., branch. Bacon's office sometimes had overdrafts of $9 million on deposits of only $100,000. He has since become vice president of a Hutton branch in Washington.

Whether Bell's findings will clear Hutton's name is uncertain. Some Wall Streeters think the worst is over for the company. Says Analyst Stephen Berman at L.F. Rothschild, Unterberg, Towbin: "Investigating Hutton has become the fashionable thing to do, but just how long can you beat a dead horse?"

But the Securities and Exchange Commission and several states, including Connecticut and Massachusetts, are investigating on their own. Brian Woolf, the Connecticut banking commissioner, says he doubts that a commissioned inquiry could be "thorough" and "independent."

Hutton has not said whether any employees will face disciplinary action as a result of Bell's investigation. Many people in the financial community, though, expect that the company will soon announce a shake-up.