UBS Ordered to Pay Florida Broker $3 Million for Defamation
An arbitration panel has ordered UBS Financial Services to pay a former top producer in Florida $3 million for defamation as a result of its attempts to keep his clients after he left the company.
The award, posted late Thursday on a Financial Industry Regulatory Authority website, is one of the largest related solely to defamation and sends a strong signal that broker-dealers “can no longer use these types of inappropriate tactics to retain clients,” said Michael Taaffe, whose Sarasota law firm represented the broker.
The broker, James L. Springer, could not be reached for comment at Stifel, Nicolaus & Co. in Sarasota.
Since joining the firm in August 2014, after UBS fired him for allegedly submitting personal expenses on his corporate credit card, Springer’s trailing-12 production has been about halved to $2 million annually, according to his lawyer.
Springer’s former branch manager and colleagues at UBS retained most of his clients by telling them in a flurry of emails and calls after the broker left that he had overcharged them on their fee-based accounts and by reimbursing them thousands of dollars, Taaffe said.
The broker, who had been managing more than $350 million of client assets, was able to transfer only about 25% of them to his new firm as a result of UBS’s actions. He also received an avalanche of UBS-induced customer complaints on his BrokerCheck record, according to the lawyer.
Spokespeople at UBS did not respond to requests for comment on the award or the circumstances behind it.
The award decision does not spell out the three arbitrators’ reasoning for their decision, other than to specify that the $3 million of damages related specifically to the alleged defamation. The panel rejected Springer’s request to expunge from his regulatory records the reason UBS Wealth Management Americas discharged him in 2014 after working at the company for more than a dozen years.
He was terminated for expense account submissions to help him “get back funds set aside from his own pretax earnings to pay for business expenses,” according to UBS’s statement on his BrokerCheck history.
While Springer does not deny the expense account violations, which Taaffe said were de minimis and resulted from clerical errors, he produced evidence to indicate that he was fired (on a Wednesday in July 2014) after his UBS managers learned that he planned to move to Merrill Lynch that Friday. His two sales associates had already transferred their registrations to Merrill, but the firm rescinded its offer when they learned of UBS’s plan to mark up his U5 with the expense-account violation, the lawyer said.
“You don’t fire a four-million dollar producer for a couple of hundred-dollar expense account errors,” said Taaffe.
Springer was a managing director at UBS and a member of its top-level Pinnacle Council recognition club, indicating that he was among the firm’s uppermost echelon of producers with the highest payout of over 50%. (Pinnacle Council members also are granted a high annual expense account allowance. The amount in UBS’s 2015 compensation plan was $10,000.)
Springer plans to seek expungement of each of the 18 customer disputes on his BrokerCheck/U5 records that were made since his departure from UBS, according to Taaffe.
Far from overcharging customers in the discretionary fee-based accounts in which he specialized, Springer declined to participate in a UBS program called “Realize Your Value” that encouraged brokers to raise advisory account fees to customers, the lawyer said. His former manager, who had recently become a producing manager, nevertheless orchestrated fee-reimbursement offers to Springer’s customers to help build his own book, Taaffe said. (The manager subsequently almost doubled his production to $400,000 and tripled his assets under management, according to evidence the lawyer said was submitted to the panel.)
The manager also allegedly told his boss at the Florida complex that UBS could use the $800,000 promissory note payment Springer was making to the firm to fund the fee offers the firm was making to his clients, according to email evidence that Taafe said was presented at the arbitration hearings. The boss allegedly responded, “Cool.” (Springer’s payment represented the balance of a forgivable loan tied to retention bonuses when UBS bought PaineWebber, Taaffe said.)
At the end of his arbitration sessions, Springer requested damages, attorney’s fees and costs of between $64 million and $97 million, sums that reflected the all-in compensation he theoretically would have received from Merrill if his initial plans had succeeded, according to Taaffe.
“He got caught in a perfect storm,” the lawyer said of his client. “We’re very happy with the award, but Jim Springer still wants to get his reputation back by showing that he didn’t overcharge clients.”