PaineWebber sues Wheat First Union for stealing employees and information.
Wheat First Union's aggressive expansion in the Tampa Bay area is prompting complaints of dirty dealing from brokerage competitor PaineWebber Inc.
Wheat First opened a downtown Tampa office Friday with nine people hired from the PaineWebber branch office across the street _ including the office's top four brokers.
PaineWebber is now suing Wheat First in U.S. District Court in Tampa for stealing employees and confidential information. The company got a temporary restraining order to stop the brokers from contacting their former clients.
Wheat First had no offices in Florida two years ago when First Union Corp. made a deal to buy the Richmond, Va.-based brokerage firm, then known as Wheat First Butcher Singer. In addition to Tampa, the firm has offices in Clearwater and Sun City Center, as well as in Coral Springs and Panama City.
"The market is obviously one that is lucrative," First Union spokeswoman Agnes Stevens said. "The demographics for us are very favorable. It's a place we're excited to be."
PaineWebber's lawsuit provides a glimpse of what makes the brokerage business so attractive. The departing brokers generated $5-million in commissions over the past 12 months, about 45 percent of the total for the Tampa office.
Joseph D. Valenti did $2-million of that, and three of the other brokers who left were approaching the $1-million mark in commissions.
Accompanying Valenti to Wheat First were his brother, Russell A. Valenti, and son, Thomas A. Valenti. The other departing brokers were Christopher J. Noble, and a husband-and-wife team, Joel L. and Rhoda L. Karpay. All six brokers are named as co-defendants along with Wheat First Union. Three assistants also left.
PaineWebber said the brokers sent a mass mailing to clients as soon as they left PaineWebber, including account transfer forms with the clients' account numbers and Social Security numbers. PaineWebber says the actions constitute unfair competition, conspiracy and theft of information.
To lure successful brokers from other firms, many brokerage firms offer big recruiting bonuses, typically paid out over five years. First Union said details of its compensation arrangements are secret.
Brokers who move from one firm to another usually try to take their clients with them, much to the consternation of their former employers.
"This is a very common kind of litigation," said John C. Coffee Jr., a law professor at Columbia University in New York. "An employee has the right to go to work for somebody who's paying him more, but the employee does not have the right to take the business secrets of the employer with him."
Employees also can get in legal hot water as a result of disloyal actions while still working for a company they plan to leave, Coffee said, but most lawsuits in this area are settled out of court.
In the PaineWebber case, the defection of the brokers had been rumored for weeks and prompted a little detective work by the company. Assistant manager Sean Farrell said he got a look at the blueprints for Wheat First's new office by striking up a conversation with a contractor on the site. The blueprint included office space labeled "Karpay Suite," confirming his suspicion that the Karpays would be leaving.
Neither Wheat First nor PaineWebber officials would comment on the suit.