Credit Suisse Notches Win Against Wells FA Who Alleged Fraud
An arbitration panel has ordered a former Credit Suisse Securities (USA) broker to pay the $1.8 million balance on his hiring-bonus promissory note, rejecting his claim that he was fraudulently induced to join the firm because it failed to disclose its plans to shutter the business.
Neal David Carlson, who joined the U.S. unit of Credit Suisse AG 17 months before it disclosed its exit plan, had sought some $2.2 million in his March 2017 arbitration filing for breach of contract, fraud by nondisclosure and tortious interference, according to the award decision posted late Monday on a Finra dispute resolution website.
Carlson alleged that he “suffered pecuniary losses” as a result of his forced departure from Credit Suisse.
The case appears to be the first in which Credit Suisse has prevailed against claims filed by dozens of its former U.S. brokers seeking to collect forfeited compensation or to walk away from promissory notes.
Most cases are ongoing, but in two previous arbitration decisions the bank was ordered to pay a Boston broker who joined Morgan Stanley almost $845,000 and a New York broker who joined UBS more than $975,000 in deferred compensation. (Credit Suisse is seeking to vacate the latter award, and the broker in the Boston case was ordered to pay off a small promissory note balance.)
The Carlson decision appears to be the first involving a broker who joined Wells Fargo, the firm to which Credit Suisse directed its orphaned brokers as part of an exclusive agreement that included a bounty to the Swiss bank for successfully placed brokers.
The award does not name Wells, but Carlson’s BrokerCheck history says he joined its broker-dealer in February 2016, when Credit Suisse was boarding up its U.S. operation. Carlson’s LinkedIn profile identifies him as a senior vice president at Wells Fargo Advisors.
Carlson did not return a call to his office at a Wells branch on Louisiana Street in Houston.
“We are pleased that the arbitration panel in this recent case fully rejected the claimant’s meritless claims and ordered the claimant to honor his financial obligations of approximately $2M owed to Credit Suisse, the full amount that we sought,” a spokeswoman for the Swiss bank wrote in an e-mail. “This was just one of many cases where Credit Suisse’s position has been vindicated.”
She said she could not comment on why the bank was seeking repayment of a balance from a broker who appears to have followed its guidance to join Wells. A person familiar with the process said all brokers were required to pay off their notes but that those who went to Wells received deferred compensation from their former employer.
In his arbitration claim, Carlson requested “pecuniary damages of about $2,220,422 or that portion of Claimant’s pecuniary damages in excess of such amount,” along with attorneys’ fees that included work related to “any successful attempts” the lawyers might make to modify an award.
Colin Guy, one of Carlson’s lawyers at Houston’s HooverSlovacek, declined to comment on whether his client will seek to vacate the decision or to explain how the claim amount was calculated.
In the bank’s counterclaim to Carlson’s March 2017 arbitration claim, it asked for the principal balance of $1.82 million on his forgivable loan, about $5,330 he owed in arrears, an overpayment of almost $11,000 in compensation, unspecified damages and attorneys’ fees.
The arbitrators did not explain their award, but specifically denied payment of attorneys’ fees.
“The causes of action related to [Carlson’s] allegations that [Credit Suisse], with false representations and promises, fraudulently induced him into joining the firm’s private wealth management division and entering into a promissory note as an employment incentive,” the award statement said in its summary of the broker’s claim. “Claimant alleges that Respondent failed to disclose it was in the process of eliminating the division and intended to direct employees to seek employment with other brokerage firms…[suffering] pecuniary losses as a result.”
Carlson’s LinkedIn profile says that as a senior advisor at Wells he serves “ultra-high net worth entrepreneurs and private investors.” The West Point graduate began his financial career with Goldman Sachs in 2006, joined Credit Suisse in 2014 and arrived at Wells in May 2016 as a result of its “acquisition of Credit Suisse’s private bank,” according to the profile and to his BrokerCheck record.
Carlson’s office address is in the same building as a Wells bank branch, not at the Houston private client group office in the city listed on Wells Advisors’ website. Wells recently put its bank-based brokers under the umbrella of its traditional brokerage operation.