WASHINGTON — E. F. Hutton & Co. is "attempting to frustrate" a congressional investigation into the controversial case against it by tardily delivering key company documents, the chief congressional investigator charged Thursday.
Rep. William J. Hughes (D-N.J.), chairman of the House Judiciary subcommittee on crime, told a news conference that his panel's inquiry into the Justice Department's handling of the Hutton case has uncovered "very damaging documents" that suggest that some of the brokerage firm's top officers knew of or approved excessive, illegal overdrafts of Hutton's bank accounts.
Hughes said it is "unrealistic" and "inconceivable" that the multimillion-dollar overdraft scheme, to which the company pleaded guilty last May, could have existed without the concurrence of Hutton's top policy-makers.
Hutton Chairman Robert M. Fomon disputed Hughes' statements, however. Fomon, in a telephone interview from his New York office, said: "I take exception to Mr. Hughes' remarks. I've told the subcommittee they will have full cooperation. I permitted their staff to interview 20 employees on our premises."
Fomon added that "I have no evidence whatsoever" that senior Hutton executives knew of large-scale illegal overdrafts. Some documents have indicated approval of overdrafting by George L. Ball, Hutton's president from 1977 to 1982, although he denies improper conduct.
The Justice Department has been subjected to intense congressional criticism for negotiating an agreement under which Hutton pleaded guilty to 2,000 felony counts and paid more than $2.7 million in fines and legal costs, although no individual officers were prosecuted.
The House Judiciary subcommittee is conducting a post-mortem of that agreement, and Hutton has hired former Atty. Gen. Griffin B. Bell to conduct an internal probe to determine how the illegal practices developed.
Hughes accused the Justice Department of "stonewalling" Congress in its refusal to "give us Hutton documents and other documents in their possession." However, Stephen S. Trott, chief of the department's criminal division, said the three-year Hutton probe involved considerable grand jury information that must be protected under law.
The department has offered to help the subcommittee prepare a federal court application for release of the materials, Trott said.
But Hughes charged: "I find it unacceptable that the Justice Department is stonewalling us in our attempt to get the information we need to evaluate, among other things, the department's self-serving claim that no higher-ups were involved."
The SEC currently is investigating certain aspects of the Hutton case because the commission regulates Hutton's brokerage activities.
On Wednesday, Hutton acknowledged that it had belatedly discovered 18 documents that should have been turned over to a federal grand jury three years ago and made the documents public. Fomon said that Hutton was acting in "good faith" and that employees had simply overlooked the papers.
Hughes criticized Fomon for publicizing the materials, which Hughes suggested were not as damaging as some other files that his subcommittee has obtained. The disclosure, he said, violated a joint agreement with Hutton that no documents would be released except through congressional hearings.