Three former brokers at the Salomon Smith Barney branch in Richmond, Va., have filed for NASD arbitration hearings, accusing the firm and its Atlantic Coast regional director with mismanagement, Registered Representative has learned.
Although details of the claim are sketchy, the brokers will be asking an arbitration panel to help them recover deferred compensation such as company stock awarded as sign-on bonuses and the value of their Capital Accumulation Plans (CAP) they allegedly lost when they resigned in February 1998. The brokers contend that they were pressured into contributing to the plan and were eventually forced to resign. (Unlike court cases, filings in industry arbitrations are not public.)
SSB responded to the charges with this statement: "Each of these claimants left SSB voluntarily for what we believe were generous financial inducements from one of our competitors. We believe their allegations against our firm and the management of the Richmond office are baseless."
The three former SSB brokers filing for arbitration in this case--Reed Northern, James Wilson and Karen Higgins--all work at the J.C. Bradford office in Richmond. They are represented by the law firm of McGuire Woods Battle & Boothe in Richmond.
These reps as well as other former brokers at the office claim that SSB management was determined to shake things up at the old Robinson-Humphrey branch.
Atlantic Coast Regional Director Kirby Kuklenski "came in and announced that he had fired existing manager Mike Bannon, and that he wasn't there to be liked," says a former rep at the branch who is not involved in the litigation. "This was an office of seasoned brokers who did large business, but management was determined to have a changing of the guard from Robinson-Humphrey."
In fact, several former brokers tell RR that the atmosphere was so emotionally charged in Richmond that as many as 20 brokers may have fled the branch in the past several years. Many have joined competitors in the neighborhood, such as Merrill Lynch, Wheat First Union and J.C. Bradford.
Under Bannon's management, the Richmond office was generating $12 million in revenue and was profitable, according to the former SSB broker. Kuklenski replaced Bannon with producing branch manager Denver Rawlings, who is specifically mentioned by several former brokers as the main source of their angst.
"Rawlings takes a very strong, by-the-book approach to management" and is "bottom-line oriented," says another broker who used to work at the branch. The branch suffered a "run on producers" that reduced the office's sales force from approximately 25 to about nine currently when Rawlings took over 21/2 years ago, the broker says.
Rawlings did not return calls, and Kuklenski had no comment.
A firm spokesperson confirms, however, that Rawlings left the Richmond office in November. Rawlings will manage the firm's Albuquerque, N.M., branch replacing BOM Ray Miller, who will manage the Austin, Texas, office.
Meanwhile, disgruntled brokers who have left the Richmond office say Rawlings was--at least during his tenure--well connected in the Southeast region. According to one source, he is a member of the same college fraternity as SSB Southern Divisional Director Doug Van Scoy and the two worked together at an SSB branch in West Virginia earlier in their careers. Both Rawlings and Van Scoy were registered as agents in West Virginia on the same date--Oct. 4, 1981, according to CRD reports. And Kuklenski was appointed to Robinson-Humphrey's board of directors at the same time that Van Scoy was appointed to the 28-member board, according to the May 19, 1997, Atlanta Business Chronicle.
Brokers suing to recover deferred compensation is not "all that new or novel, " says securities lawyer Brian Carlis, chairman of the securities arbitration group at the Princeton, N.J., law firm of Stark & Stark, which is not involved in the Richmond case. Deferred compensation is a golden handcuff, he warns. "They're trying to encourage longevity from brokers and they rope them in by tying up this money. There are viable arguments that they should get this money back, but [the brokers] did sign off on it."
Without citing specific cases, several brokers have told RR that most of these types of deferred compensation claims are settled quietly.
Apparently, the controversy in SSB's Richmond office is not the first time legal problems have erupted after Robinson-Humphrey brokers left the company to join Nashville, Tenn.-based J.C. Bradford. In January 1997, Robinson-Humphrey sued Bradford and six reps who defected to the company, alleging that Bradford had imposed a "nationwide strategy" of raiding its top-producing brokers. Like the statement issued by SSB in the current Richmond case, the 1997 lawsuit also took issue with the hefty signing bonuses allegedly offered by Bradford.