Former Salomon Smith Barney brokers Phil Spartis and Amy Elias have formerly filed an arbitration claim against their former firm and a number of officers and attorneys employed there. The pair had already counter-sued the firm–and telecom analyst Jack Grubman–after being named in a number of client complaints relating to losses suffered through investing in WorldCom stock.
This suit, however, marks the pair’s actual claim against their old firm. They’re asking for a round number in compensatory, general and punitive damages: $100 million, each, or the same amount that New York State Attorney General Eliot Spitzer was paid by from Merrill Lynch.
The claim, filed in New York Stock Exchange arbitration by their attorney, Jeffrey Liddle of Liddle & Robinson, names Citigroup president Sanford Weill, along with Grubman, and former CEO Michael Carpenter, who was recently fired as head of Smith Barney’s global investment banking unit.
Spartis and Elias–based in an Atlanta branch and who had been among the top producers because of their dealings with WorldCom executives–claim that they were wrongfully fired from their positions in February of this year after the firm, in their eyes, did not adequately represent them in complaints filed by customers related to WorldCom. Spartis, who says he generated $2.3 million a year on average in production, was a corporate client director at WorldCom, and supervised the exercise of options by WorldCom employees exclusively from 1998 until the time he was fired.
In addition to claims of defamation and wrongful termination, the brokers’ suit argues that Smith Barney executives and the other respondents are liable under the "Racketeer Influenced Corrupt Organizations" Act (RICO), the act that gives authorities broad power to pursue cases against corrupt organizations (largely used against the Mafia). It says Smith Barney is liable through a "scheme that was designed, through misrepresentations and concealments, to generate investment banking business to SSB and compensation to Grubman."
Further, Spartis alleged in a The New York Times story on Sunday, 22 September, that the Smith Barney trading desk may have taken advantage of the knowledge of when a large block of shares were to be exercised, either selling short or going long to make money on the exercise of options by WorldCom employee/shareholders. The practice is best known as front running and has been illegal for decades.
A Smith Barney spokesperson did not return a call seeking comment, but in the Sunday edition of The New York Times, a spokeswoman was quoted as saying that Spartis’ "numerous past claims have been without merit," cautioning that they had not seen his newest claim.
Others named in the case include the brokers’ former Atlanta branch manager, Michael Grace, H. Wayne Hutton, district head at Smith Barney, and Jeff Friedman, Victor Machinski and Brett Rogers, all in-house counsel at Smith Barney.