EXCLUSIVE: HighTower Sues Former Executive Ed Friedman for Disparagement
HighTower Holdings, the parent company of Chicago-based HighTower Advisors, has sued former managing director Edward Friedman for disparaging the firm in violation of his $230,000 severance agreement, according to a lawsuit filed in Chicago this summer.
The lawsuit, which was moved in August to U.S. District Court in the Northern District of Illinois, accuses Friedman of “railing against the company” and its officers in “false, negative and/or disparaging” comments to financial advisors HighTower was trying to recruit as well as to current and prospective company employees and industry recruiters.
The previously unreported lawsuit opens a window into the competitive tactics used by firms seeking to sell regulatory, marketing and product support to the growing number of experienced brokers leaving larger firms to establish their own investment advisory practices.
Friedman, who joined HighTower in its first year of operation in 2008, was fired in 2011 for poor performance, according to the lawsuit. It says he received $229,684 in severance payments and was conditionally allowed to retain equity in the firm.
HighTower, whose website says it works with 161 independent financial advisors in 53 HighTower-branded offices, is seeking return of the severance but did not specifically ask for return of the equity.
Friedman, currently a strategic relationships manager at New York-based Dynasty Financial Partners, did not return calls for comment.
In court filings last week, however, he denied that he has disparaged or defamed HighTower or its executives and also said he was not fired from the firm. His response papers also dispute HighTower’s characterization of his $230,000 severance payment and his retention of 190,000 shares as “substantial consideration.” HighTower did not attempt to recoup the equity as part of its complaint.
“Motivated to gain an edge in recruiting financial advisors for his new firm and disrupt HighTower’s business, Friedman has resorted to making disparaging remarks about HighTower, and its officers, to current and potential employees of HighTower, industry vendors, recruiting firms and other members of the industry,” HighTower alleged in the complaint.
Although Friedman was fired in September 2011, HighTower’s lawsuit said it did not learn of his allegedly “disparaging, inflammatory and harmful remarks” until December 2015.
Friedman allegedly contacted an unnamed financial advisor that month “in a desperate effort to dissuade him from joining HighTower,” telling him to “‘be prepared to lose control of [his] business” if he affiliated with the firm, the lawsuit claims.
The complaint says that despite a warning letter it sent him last December 30 about violating his contractual obligations, Friedman this year criticized the firm’s management and culture to a HighTower employee at an industry conference to such an extent that the business colleague “unsuccessfully tried to make Friedman stop.”
It also says he disparaged the firm and its management to former Dynasty employees Loren Morris and Ronald Sallet, who the suit says now work with firms that do business with HighTower.
“I’ve never heard him badmouthing [HighTower],” Morris, now with compliance consultant MarketCounsel, said about Friedman.
He and Sallet, who operates his own consulting firm and said he does not have a business relationship with HighTower, also said they were unaware that they were cited in the lawsuit.
Christian Kemnitz, a lawyer at Katten Muchin Rosenman who is representing HighTower, declined to discuss the business or litigation strategy behind the complaint.
“Because Mr. Friedman repeatedly violated his contractual obligations by engaging in unprofessional and disparaging conduct, Hightower has been forced to resort to litigation and will pursue all possible remedies under the law,” he wrote in an emailed statement.
HighTower was founded in 2007 by Chief Executive Elliot Weissbluth, with backing from former Morgan Stanley Dean Witter CEO Philip Purcell, former Charles Schwab Corp. CEO David Pottruck and several investment product manufacturers and wholesalers. Earlier this year, it told its affiliated advisors who have equity in the company that it will delay making a decision about whether to go public until at least 2018.