Barclays Hounds Ex-Brokers Over Recruiting Loans
Barclays isn’t letting the brokers of its shuttered U.S. wealth operation go quietly.
Since the British bank announced plans to close the unit last June, it has brought arbitration claims against an estimated 50 former brokers in attempts to recoup unearned balances on recruiting loans, according to attorneys representing brokers in the cases.
Claims have not been made against brokers who accepted Barclays-sanctioned offers from Stifel Financial. The St. Louis-based company bought Barclays wealth unit in December 2015 for an undisclosed sum.
Around 100 of Barclays’ approximately 180 U.S.-based brokers took the Stifel deal, the St. Louis-based company said. Others jumped to firms much larger than Stifel, such as Bank of America’s Merrill Lynch wealth unit, which they said had more resources to deal with their wealthy clients.
Brian Neville, a lawyer at Lax & Neville in New York who represents several former Barclays brokers, described the British bank as cold-hearted.
“The people at Barclays should be ashamed of the fanfare with which they went around recruiting these people and saying that they were going to recreate a world-class private wealth management firm,” he said. “They did the opposite. They created a firm that failed pretty quickly.”
Barclays spokespeople did not respond to an e-mailed request for comment.
Barclays built its U.S. retail brokerage business in the dark days of the financial crisis by acquiring many assets of the failing Lehman Brothers. It ramped up the business through aggressive hiring under the baton of former Merrill Lynch executive Mitch Cox, but the efforts were quickly sidelined by scandal.
Barclays was the first global power found liable for rigging London Interbank Offered Rates, leading to financial problems and the forced departure of its top executives, including Barclays PLC CEO Bob Diamond, an American. Cox’ U.S. wealth unit floundered as well, shadowed by disclosure of an internal report that accused his management team of bullying employees and creating a broadly inhospitable work environment.
In their counterclaims, brokers are accusing Barclays of “fraudulent inducement” in recruiting them with forgivable loans that amortize over long-term contracts.
“There’s not only an implicit, but an explicit, [promise] that if you’re bringing me here for a seven-year deal, you’re going to be in business for that long,” Neville said. “When you don’t stay in business that time, you shouldn’t ask for your money back….They were promised Barclays would be better [than their previous firm] and it turned out to be a cesspool.”