E. F. Hutton was founded in San Francisco in 1904 and grew over the century into the second-largest retail brokerage in the United States. It was best known in the 1970s and early 1980s for its advertising line, ‘When E.F. Hutton talks, people listen’ — a slogan that became part of American commercial culture and reflected the firm’s real standing with retail investors.
The firm’s downfall was an internal fraud. For years its branches wrote checks against accounts with insufficient funds at regional banks and covered them from accounts elsewhere before they cleared — a scheme that generated large interest-free float across hundreds of banks. In 1985 Hutton pleaded guilty to 2,000 counts of mail and wire fraud and paid penalties; the reputational damage was severe. The October 1987 stock-market crash drained what confidence remained, and Shearson Lehman acquired Hutton in a deal signed in December 1987, taking effect in 1988 as Shearson Lehman Hutton. Thousands of staff were let go and scores of offices closed.
Worth remembering
- Hutton's 1970s slogan, 'When E.F. Hutton talks, people listen', became one of the most recognised taglines in American advertising.
- The check-kiting scheme ran for years: branches wrote checks against unfunded accounts at regional banks and covered them with checks drawn elsewhere, generating large interest-free float.
Sources
- E.F. Hutton pleaded guilty in 1985 to 2,000 counts of mail and wire fraud over a check-kiting scheme that generated large unauthorised float across hundreds of banks. Wikipedia
- Shearson Lehman acquired E.F. Hutton for roughly $1 billion, with the integration involving thousands of layoffs and office closures. Encyclopedia.com
- Hutton's decline accelerated after the October 1987 crash; the board accepted Shearson's offer with the merger agreement signed in December 1987. Encyclopaedia Britannica
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