NEW YORK -- A top executive at E.F. Hutton & Co., under investigation by the U.S. Attorney's office, stepped aside Friday while the brokerage firm examines his alleged involvement in a mob-run money-laundering scheme.
Arnold Phelan has taken a leave of absence pending a management review into 'events in 1982 that involved the receipt of cash deposits in certain accounts originating in Europe,' said E.F. Hutton spokesman Robert Sharkey.
Sharkey said he did not know how long the review would take, adding that Hutton would not discuss the matter further until the review was complete.
Phelan is under investigation by the U.S. Attorney's office in New York for alleged involvement in a mob-run money-laundering scheme. Under question is how and why Phelan made known to one of his clients in September 1982 that the Federal Bureau of Investigation had been asking questions about the client.
Sharkey said once Hutton learned that the authorities believed some of the client's cash deposits may be linked to organized crime, it 'immediately' stopped doing business with the client.
The government had asked Hutton not to let the client know of the investigation, but the brokerage firm said the request came after it had already contacted the client. Hutton termed its handling of the matter 'appropriate under the circumstances.'
The brokerage noted it has cooperated with federal authorities throughout the investigation. The inquiry focused on an account Hutton maintained for a client who made substantial cash deposits.
Sharekey said that when the client, 'an established Swiss broker-dealer,' opened the account, Hutton contacted Merrill Lynch, where the account was then maintained, and was told that the customer was in good standing.
Sharkey said Hutton reported 'each and every cash deposit directly to the government in a timely manner and that the customer was made aware of this procedure at the outset.
'Hutton never knowingly assisted in the laundering of drug money or any other illicit funds,' he added.
During the investigation, Hutton's Futures Division is being managed by James F. Curley, a Hutton executive vice president who had reported to Phelan.
