UBS Brokers Win $1.6 Mln from Credit Suisse in Deferred Comp Case
(Adds the name and statement of the dissenting arbitrator in seventh paragraph.)
Another team of former Credit Suisse brokers has prevailed in collecting deferred compensation that the Swiss bank withheld on the premise they were terminated for cause following its decision to close its U.S. brokerage business.A divided Finra arbitration panel on Thursday awarded New York City advisors Richard J. DellaRusso and Mark L. Sullivan $1,235,817 in compensatory damages, plus attorneys’ fees of $371,858. The brokers, now managing directors at UBS Wealth Management USA, are at least the sixth group to have won awards from Credit Suisse in its heated pay battles with former brokers.
DellaRusso and Sullivan left the bank in late 2015 after it announced that it would release brokers’ deferred bonuses only if they joined Wells Fargo Advisors, which had agreed to pay Credit Suisse a placement fee for transferring its U.S. brokers and their accounts.
Credit Suisse has argued that brokers seeking to collect the awards were double-dipping because their new firms had compensated them for the value of what they left with their former employer.
Just over 100 of the approximately 325 brokers who worked at Credit Suisse Securities (USA) joined UBS, second only to the 111 who took the Wells Fargo offer, according to a document reviewed by AdvisorHub.
An arbitration panel in September ordered UBS to pay Credit Suisse $9 million to resolve a raiding claim. Lawyers for brokers said the amount far trails revenue that UBS has gained from its new hires, but Credit Suisse officials have been citing the decision in its arbitration and court arguments and believe it may have influenced at least one of the three arbitrators in Thursday’s case to dissent.
“Arbitrator Robert E. Anderson dissents from the majority Award in favor of the Claimants,” the arbitrator wrote in a two-sentence explanation included in the arbitration award document accepted by Finra on Nov. 14. “He does not believe either the facts or the law adduced during the course of the proceedings support a recovery.”
Anderson, who was designated a “public arbitrator,” could not be reached for comment.
Credit Suisse is seeking to vacate four of the six previous awards in court. It lost one of those cases, but has asked a New York appeals court to vacate a $975,531 award to another broker who joined UBS.
A Credit Suisse spokesman would not comment on whether the bank will move to vacate the DellaRusso/Sullivan decision.
DellaRusso on Friday confirmed that arbitrators granted an award, but declined further comment.
The $1.2 million awarded to him and Sullivan represents the value of Credit Suisse stock as of October 21, 2015 in the brokers’ deferred accounts, and their deferred stock severance, according to a memo from Lax and Neville, the New York law firm that represented them.
The arbitrators also recommended that the the brokers’ U-5 regulatory forms be partly expunged, with the reason for termination changed from voluntary—which Credit Suisse argued precluded their collection of the deferred comp—to “terminated without cause,” according to the memo.
In their initial claim filed in April 2017, the advisors sought at least $2.5 million in compensatory damages, and asked that the amount be doubled under New York wage law. Lax and Neville lawyers also asked for 9% interest but the arbitrators calculated the award at 4%.
They did not return a request for comment, but wrote in the memo to some of their clients that they will ask Finra to correct what they believe is a typographical error. People close to Credit Suisse said they believe the arbitrators simply turned down the New York labor law argument in calculating the interest owed.
“[T]his flawed award applies only to the specific claims of a small [brokerage] team, and awards them a fraction of what they sought,” a Credit Suisse spokesman said in a prepared statement. “Credit Suisse will vigorously defend any case that seeks unjust double compensation or otherwise seeks to paint individuals who ‘hit the lottery’ as ‘victims.’”
Dozens of other former Credit Suisse brokers have filed arbitration claims, but the “vast majority” do not involve claims for deferred compensation, the spokesman said.
Despite losing a string of multi-million-dollar arbitration decisions, including a $3 million award in September to brokers in Atlanta who joined J.P. Morgan Securities, Credit Suisse officials say dozens of brokers have either withdrawn arbitration claims or reached settlements below their initial claims. Credit Suisse also succeeded in defeating an attempt of some brokers to file a class-action claim.