In the latest contentious case following its exit from U.S. wealth management three years ago, Credit Suisse has been ordered to pay two advisors $1.6 million over their claims the firm wrongfully withheld deferred compensation owed to them.
In a two-to-one decision, a FINRA arbitration panel found in favor of the advisors. They are two of dozens who
Credit Suisse is currently asking state courts to vacate four of those awards.
In this most recent case to reach a conclusion — one that comprised 35 hearing sessions stretched over 10 months —
New York-based advisors Richard Joseph DellaRusso and Mark Lawrence Sullivan accused Credit Suisse of breach of contract; breach of implied covenant of good faith and fair dealing; conversion; fraud; unjust enrichment; false and misleading Form U5,
The divided arbitration panel awarded DellaRusso and Sullivan approximately $818,000 and $416,000, respectively, for their deferred compensation claims. The arbitrators further ordered Credit Suisse to pay interest on that amount “at the rate of 4% per annum from October 21, 2015, through and including [the] date of the award.”
The advisors had sought $2.5 million, according to a copy of the award.
The arbitrators also ordered Credit Suisse to pay approximately $370,000 in attorneys fees, plus a change to the explanation of the reason for the advisors’ termination listed on their Form U5 to “termination without cause” from “other.”
Arbitrator Robert E. Anderson dissented from the majority, writing in a short statement that “he does not believe either the facts or the law adduced during the course of the proceedings support a recovery,” according to a copy of the arbitration award. He did not elaborate on his reasoning and the other two arbitrators did not explain their ruling, as is typical for FINRA arbitration cases.
DellaRusso and Sullivan had joined Credit Suisse from Lehman Brothers in 2008, according to FINRA BrokerCheck records. After Credit Suisse told employees in October 2015 that it would exit the U.S. wealth management business, DellaRusso and Sullivan moved a month later to UBS, according to BrokerCheck.
They weren’t the only former Credit Suisse advisors to find employment elsewhere. When the firm made its announcement, , it gave advisors the option to move to Wells Fargo under an exclusive recruiting arrangement between the two companies. Only about one-third of Credit Suisse’s nearly 300 advisors took the deal. The majority went to competitors, with the largest share going to UBS. That sparked a raiding claim case brought by Credit Suisse against UBS. In September, a FINRA arbitration panel ordered UBS to pay Credit Suisse $9 million.
When asked for comment on its loss to DellaRusso and Sullivan, Credit Suisse pointed to its win in the raiding case, saying that the arbitration panel overseeing the matter is the only one to “have broadly considered the circumstances under which over 100 RMs left Credit Suisse in the fall of 2015.”
Credit Suisse said its loss to DellaRusso and Sullivan was “contrary to the legal conclusion in the UBS case” and noted that one arbitrator dissented.
“Credit Suisse will vigorously defend any case that seeks unjust double compensation or otherwise seeks to paint individuals who ‘hit the lottery’ as ‘victims,’” the firm said.
Asked for comment, a UBS spokeswoman said in a statement the DellaRusso and Sullivan case and others like it “have nothing to do with UBS, but rather Credit Suisse's decision to abandon its private wealth business in 2015."
Attorneys for DellaRusso and Sullivan pointed to the six arbitration awards that have gone against Credit Suisse as well as the firm’s attempt to vacate a losing award in state court.
“Six FINRA panels and a New York State Supreme Court judge have considered Credit Suisse’s ‘vigorous defense’ of its refusal to pay more than $240 million of deferred compensation its investment advisors earned over years of service. Six FINRA panels and a New York State Supreme Court judge have rejected it, awarding the advisors all of their deferred compensation,” Barry Lax and Brian Neville said in a statement.
The attorneys represent roughly 30 Credit Suisse advisors, including several who won damages in arbitration this year.
