A Washington-based former Hightower advisor won a temporary restraining order against the firm after it accused him of bringing a gun into one of its offices and violating restrictive covenants by soliciting clients after it fired him.
Lars Knudsen also successfully moved a lawsuit against Hightower back into Washington state court after the RIA attempted to move it into federal jurisdiction (Hightower is also suing its former employee in Illinois federal court).
“Hightower seems to think they can say anything, even the most egregious accusations, without repercussions. But we have the truth on our side,” Knudsen said. “They’re bullies, plain and simple.”
In his complaint filed in Washington state court on March 20, Knudsen accused his former employer of a scheme to bring him into the Hightower fold, obtain his signature on a legally unenforceable non-solicitation agreement and push him out so they could keep Knudsen’s book of business for themselves.
“Hightower’s motivation in severing advisors like Knudsen from their clients is clear: greed,” the complaint read. “At a company level, Hightower is trying to steal clients from successful advisors that are departing or that it is trying to force into retirement (like Knudsen) so that it can prop up its valuation as it looks to find an acquirer.”
In its Illinois-based lawsuit, Hightower claimed it fired Knudsen in late February for bringing a gun into the firm’s Bellevue, Wash., office in violation of company policy, among other allegations. After firing him, the RIA claimed Knudsen reached out to former clients to disparage his former employer while starting work at a competitor.
Hightower declined to respond to this story, with a spokesperson saying it doesn’t comment on pending litigation.
Knudsen founded Triad Wealth Management and transitioned that business to Hightower in 2014, working in the firm’s Bellevue branch. In 2018, that firm’s principals founded HT Bellevue Advisors, gaining more independence and ownership stakes while remaining Hightower advisors, bringing their clients onto Hightower’s systems.
One year later, Hightower acquired a greater interest in the firm, and as a result, Knudsen allegedly signed a non-compete agreement with that RIA. However, Knudsen alleged in his complaint that the restrictive covenants are extremely harsh, with stipulations that could last beyond 2028 and extend throughout the country.
According to Knudsen, Hightower brought two new advisors into the Bellevue firm via an acquisition, resulting in an “immediate” change in culture. Despite Knudsen’s assertions he had no plans to retire anytime soon, the advisor said Hightower repeatedly pressured him to plan his retirement. He claimed other members of the firm made disparaging complaints about him to clients, all to push him out.
However, in its suit, Hightower alleged that an investigation found Knudsen hadn’t split earnings with his firm partners, diverted about $225,600 in client fees belonging to the firm, and spent firm funds on personal items.
One managing partner also alleged that Knudsen brought a loaded firearm into the office on multiple occasions, that he discussed it frequently and that she often heard the sound of him taking his gun in and out of his holster from outside his office. In one instance, he allegedly kept the gun on the table during a “termination conversation.”
Knudsen denied all this, including the firearm accusations, though he acknowledged that several years prior, he accidentally brought his firearm into the office. Upon realizing the mistake, Knudsen said he immediately brought the gun back to his car and never “brandished” it. Nevertheless, Hightower fired Knudsen in February.
The RIA claimed in its Illinois suit that Knudsen repeatedly reached out to former clients while preparing to start work at the Seattle-based Hohimer Wealth Management (Knudsen is not currently registered with Hohimer or any other firm). Hightower claimed Knudsen warned advisors their money was “not safe.”
An Illinois federal court judge denied Hightower’s motion for a TRO on Knudsen while considering the advisor’s motion to stay the court proceedings because of the ongoing court battle between the two parties in Washington state.
But in Washington state court this week, Judge Jason Holloway ruled in favor of Knudsen’s TRO against Hightower, demanding that the RIA not distribute Knudsen’s Form U5 to anyone besides a regulatory authority, not state that regulators endorse anything in that document and not to disparage Knudsen to its clients.
More than a dozen of Knudsen’s clients filed sworn declarations supporting Knudsen’s TRO, according to Andrew Escobar, a partner at Seyfarth Shaw, who is representing Knudsen. His attorneys will now move to block Hightower from enforcing its non-solicitation contract with the advisor.