Actions by the former Credit Suisse are still haunting UBS since the acquisition of its former banking rival nearly three years ago.
This week, a Financial Industry Regulatory Authority panel handed down a nearly $9 million dollar arbitration award to a former Credit Suisse broker who contends he was unfairly blamed for losses from the collapse of the massive family office Archegos Capital Management.
Paul Reid Galietto, who was at Credit Suisse from 2017 to 2021, was awarded just over $8.7 million in compensatory damages over the claims, including wrongful cancellation of payments he contends were owed him and false blame. UBS, which
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Blamed for losses from the collapse of Archegos Capital Management
Galietto's lawyer, Steven Eckhaus of Harris St. Laurent & Wechsler in New York, said Credit Suisse had denied Galietto compensation after trying to blame him for losses the firm had suffered from the collapse of Archegos, a family office that had one time had more than $36 billion under management. Archegos fell apart in 2021 amid a scandal, and its founder, Bill Hwang, was later sentenced to 18 years in prison.
Credit Suisse
"They fired him because the board of directors wanted to pin the blame on him rather than on themselves," Eckhaus said.
Before parting ways with Galietto, Credit Suisse enlisted the outside law firm Paul Weiss to conduct a third-party investigation of his conduct. Eckhaus noted that the FINRA arbitration panel questioned whether that report was truly independent in nature.
"We find that [Credit Suisse] acted in bad faith when they relied on the Paul Weiss Investigative Report that was not independently produced to cancel [Galietto's] deferred compensation," according to the report.
"It was all set up to try to blame Paul for problems that had nothing to do with Paul's performance," Eckhaus said.
Paul Weiss did not respond to a request for comment. UBS declined to comment.
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UBS's uneasy acquisition of Credit Suisse
This is far from the biggest legacy problem UBS has taken on from its acquisition of Credit Suisse. Earlier this month, a pair of UBS executives appeared before a panel of U.S. Senators in response to allegations that it wasn't cooperating with investigations into Credit Suisse's dealings with the Nazis during and before World War II.
Meanwhile, legal action over
Eckhaus said Galietto was fired by Credit Suisse in 2021, though his BrokerCheck page gives no reason for his departure. He's now no longer in the industry, and Eckhaus said his legal troubles have made him "radioactive" to firms that otherwise might hire him.
Galietto had at first asked the FINRA arbitration panel for quite a bit more than he ended up receiving. His initial claim against Credit Suisse had sought roughly $5 million in cash and $16.5 million in equity compensation, as well as interest on the unpaid amounts at a rate of 9% a year.
In a counterclaim, Credit Suisse asked the arbitrators to order Galietto to pay back a 2020 cash bonus in the amount of $825,000, plus interest. That request was denied.
Galietto started his career at Prudential Securities in 1985 and moved through a series of firms before arriving at UBS in 2010. He moved to Credit Suisse in 2017 following a short stint at Andrews Partners.
Eckhaus said his client's victory should give many people something to cheer.
"This is a big win for employees everywhere who are bullied by boards which are trying to shift the blame from themselves to an employee who doesn't have the resources to fight back," he said.
