Nov. 7 (Bloomberg) -- Thomas P. Lynch, the E.F. Hutton & Co. chief financial officer blamed in part for the check-overdraft scandal that contributed to the brokerage’s demise in the 1980s, has died. He was 88.
He died on Oct. 28 at his home in Vero Beach, Florida, according to his daughter, Francine Lynch. No cause was given. He was a longtime resident of Madison, New Jersey.
Lynch’s appointment as E.F. Hutton’s CFO in 1972 was a milestone in a career that began at Haskins & Sells, an auditor of Wall Street firms. He was a top lieutenant of Robert Fomon, E.F. Hutton’s longtime chairman and chief executive officer, according to Mark Stevens’s 1989 book, “Sudden Death: The Rise and Fall of E.F. Hutton.” In 1983, Lynch became president of E.F. Hutton Group, the holding company for its divisions.
He was part of a management team that propelled the firm from its initial public offering in the early 1970s to become what the New York Times described in 1975 as the nation’s second-largest brokerage. A television advertising campaign -- with the slogan, “When E.F. Hutton talks, people listen” -- solidified the company as a household name.
The scandal that singed Lynch and other E.F. Hutton executives involved the intentional overdrawing of its bank accounts by as much as $250 million a day, creating phantom interest-free funds to invest elsewhere. The scheme, known as check-kiting, took advantage of the delay in the clearing of checks. In May 1985, the company, then the fifth-largest U.S. brokerage, pleaded guilty to 2,000 counts of mail and wire fraud and agreed to pay a $2 million fine.
Griffin Bell, who had served as attorney general under President Jimmy Carter, was hired by E.F. Hutton to conduct an internal investigation. While pinning primary blame on six branch managers, Bell’s report held more than a dozen senior officials, including Lynch, partly accountable.
“Lynch, as de facto chief financial officer, failed in his responsibility to ensure that adequate controls were established to prevent abuses in the Hutton cash management system,” Bell wrote. Lynch “should have been aware of potential abuses of over-drafting,” Bell wrote.
E.F. Hutton in 1985 announced Lynch’s resignation as vice chairman, chief financial officer and secretary, as well as the resignation of Thomas Morley as senior vice president and Thomas Rae as chief legal counsel, according to a Time magazine account. Lynch remained a company director and continued to receive his full salary. He retired in 1986.
Francine Lynch said yesterday in an interview that her father “knew he had been responsible in doing his job” and believed the check-kiting incident had exposed a governance flaw within E.F. Hutton.
“The impression on Wall Street was that he took the fall,” Lynch said. “He was blamed and he was made responsible because it happened on his watch.”
In 1988, the New York Stock Exchange censured Lynch and George L. Ball, who had been E.F. Hutton president from 1977 to 1982, for their roles in the check-kiting case. Lynch and Ball, who by then was chairman of Prudential-Bache Securities Inc., consented to the findings of the exchange’s hearing panel without admitting or denying guilt, according to a New York Times account.
Also in 1988, Shearson Lehman Brothers acquired E.F. Hutton.
Thomas Peter Lynch was born on May 3, 1924, in New York City, according to a death notice on the website of Strunk Funeral Home in Vero Beach. He attended Syracuse University before entering active duty with the U.S. Army’s 69th Infantry Division during World War II, according to the death notice. He was awarded a Bronze Star for his service in Germany, according to the notice. He graduated from Baruch College.
After working at Haskins & Sells, now part of Deloitte LLP, he was a general partner at Bache & Co. before joining E.F. Hutton.
Lynch’s wife, the former Madeleine D’Eufemia, died in 2009. In addition to their daughter, Francine Lynch of New York City, the couple had a son, Richard Lynch of Vero Beach, according to the death notice.
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