Wachovia appeals $1.1M arb loss over reps who fled for Stifel

Wachovia Securities LLC on Friday filed a court action to vacate a $1.1 million arbitration claim the firm lost last month.
The firm was ordered by an arbitration panel to pay the money to cover the legal costs of Frank “Buddy” Brand, Marvin “Sonny” Slaughter, Stephen Jones and George Stukes — four legacy A.G. Edwards & Sons Inc. advisers in Florence, S.C., who went to work for Stifel Nicolaus & Co. Inc. in 2008. Wachovia had sued the men to prevent them from contacting the firm’s clients.
The arbitration panel cited South Carolina’s Frivolous Civil Proceedings Act in its decision.
But Wachovia, now known as Wells Fargo Advisors LLC, said it never got a chance to respond to the brokers’ claim for attorney’s fees. The firm added that South Carolina law requires that it be given fair notice and an opportunity to be heard before damages can be awarded.
Wachovia “had full opportunity” to argue the issue of attorneys’ fees during the arbitration, countered Joe Dougherty, an attorney at Buchanan Ingersoll & Rooney PC, who represents Stifel and the brokers. He said he will be responding shortly to Wachovia’s motion to vacate the award.
Teresa Dougherty, a spokeswoman for Wachovia, declined to comment.
Wachovia is also taking issue with the arbitrators’ assertion that it may have misled a South Carolina federal court about video surveillance used as evidence against the brokers. The video was used to help get a restraining order against the brokers.
At a June 2008 hearing before the court, Wachovia’s outside lawyer, Kathryn Bedke of Paduano & Weintraub LLP, claimed that the video showed some of the brokers removing documents from their Wachovia branch and taking them to a new Stifel office in Florence. The video was not shown at the hearing.
In their decision last month, the arbitrators said the videotape “does not support the allegations” made by Wachovia, and ordered the parties to inform the court.
In the court filing last week, Ms. Bedke said she did not have time to view the video prior to the 2008 hearing. She said the surveillance of the brokers, done by a private investigator, actually shows them taking boxes out of Wachovia and bringing bottled water into the Stifel branch.
Wachovia claims the inaccurate portrayal of the video was not material, given that the brokers later admitted in arbitration that they had taken non-public client information.
The non-public information the brokers took “was very little,” Mr. Dougherty said.
Before Wachovia sued the brokers, the firm was informed that the non-public information was being returned, he said.
The four reps were the largest producers in the Wachovia office, generating approximately $2.9 million on $471 million in assets, according to the firm.

Related Topics: Wachovia, Wells Fargo & Co.