Ex-Citi Broker Wins $4 Million in Wrongful Termination Case
(Clarifies last paragraph to say broker considered a move several years ago, not after the moratorium.)
A former Citigroup broker has been awarded $4 million in an arbitration in which his lawyer argued that his managers fired him in order to split up his large book of business with Latin American customers before he left voluntarily out of concern over the bank’s “moratorium” on opening new international accounts.
The novel argument was made in the wrongful termination case of Christian Gherardi, who worked at Smith Barney and other Citigroup units in Miami from the start of his career in 1996 until he was fired in December 2015.
“A centerpiece of the case was my theory that Citi fired him to keep his $200 million book of business because it was afraid he would leave the firm,” said Ethan Brecher, his New York-based lawyer.
The three arbitrators who made the award on February 28 did not explain their decision in the document published on the Financial Industry Regulatory Authority’s arbitration website.
They ruled that Citi was liable to pay Gherardi $3.45 million in compensatory damages for wrongful termination, $150,000 for “lost-quarter” trail fees and almost $396,000 of deferred compensation. The trails represented mutual fund sales, Brecher said.
The deferred pay represented money Gherardi earned at Citi’s former Smith Barney unit but that the bank said he had forfeited it because of personal and business conduct issues cited on his U5 termination regulatory filing, according to Brecher.
The arbitrators recommended changing the U5 language to “terminated without cause” but did not order expungement of the reason for the termination.
A Citigroup spokesman did not immediately respond to requests for comment on the award or on Brecher’s characterizations of the bank’s motive. Gherardi initially filed his complaint in April 2016, with a claim of $16.5 million of lost earnings as well as unspecified punitive damages.
The broker, who since March 2016 has been affiliated with Bulltick Wealth Management, a Miami firm specializing in servicing Latin American clients, did not return a call for comment.
According to his lawyer, Gherardi was the largest producer in the Miami Citi Wealth Management Latin America office, generating more than $2 million of revenue annually on a book of more than 500 clients. But Brecher said the advisor was unable to transfer most of the accounts following his dismissal.
The arbitrators denied Gherardi’s claim of tortious interference from his former complex manager, Michael Averett, in restarting his business. Averett, now head of the U.S. “managed business” for CIti’s AHS (Affluent, High Net Worth and Specialized Services) unit, could not be reached for comment. All claims against Averett in the arbitration were denied.
Citi managers alleged that Gherardi had physically threatened other brokers who were trying to poach his accounts, at least once in front of a client, and a human resources official said he had shown abusive tendencies toward a woman, according to Brecher. Though the broker had received warnings about his conduct, Citi officials were unable to substantiate their claims with evidence or had their claims countered by videotapes of some encounters, the lawyer said.
Gherardi’s managers manufactured charges for firing him because they worried he would leave in response to a 2015 moratorium on opening new accounts for non-U.S. clients, Brecher said. The alleged moratorium followed a regulatory consent order relating to deficiencies in the bank’s anti-money laundering and Bank Secrecy Act reporting procedures, he said. (In January 2018, the Office of the Comptroller of the Currency imposed a $70 million penalty on Citigroup Inc. for failing to adhere to the order.)
“They were worried that the moratorium would be used as a recruiting tool,” Brecher said, adding that one manager told arbitrators he updated plans to reallocate Gherardi’s book as soon as the new account freeze became effective.
Brecher also said that Gherardi several years ago considered a lucrative offer to join a wirehouse, but decided it would be too difficult to move his book of mostly Brazilian account holders because they were relatively small accounts.