Aug. 13 (Bloomberg) -- A former Citigroup Inc. broker in Ohio sued the bank, arguing that he shouldn’t have to pay all at once the $39,000 left on his forgivable signing-bonus loan when he quit in 2006.

Thomas Banus seeks class-action, or group, status for the suit on behalf of at least 500 brokers employed by Citigroup in the past six years who executed such promissory notes. Brokers who leave before the loan is retired must immediately pay the unforgiven portion with interest, which Banus called “unconscionable” in a complaint filed yesterday in New York federal court.

“They can terminate you at any time,” Banus said in a phone interview today. “That creates a very uneven relationship.”

The loans are intended to ensure employees don’t leave, according to the complaint. Banus left after two years because Citigroup “did not manage its business in such a manner as to provide the level of service and security necessary for any security broker and the plaintiff to attract and/or retain clients,” according to the complaint. The bank was “unstable, mismanaged and not a secure place for” his clients, “as can be seen from the value of defendant’s stock today.”

Citigroup rose 8 cents to $4.06 in New York Stock Exchange composite trading. The shares, which reached $57 in December 2006, have fallen 77 percent in the past year. The bank was rescued last year by a $45 billion U.S. bailout.

“We believe this suit is without merit,” Danielle Romero- Apsilos, a Citigroup spokeswoman, said in an e-mailed statement.

Smith Barney

Banus worked for Citigroup’s Smith Barney unit, now part of Morgan Stanley, he said. He’s now an independent adviser registered with MetLife Inc.’s Walnut Street Securities in Cleveland, he said.

The broker went to Citigroup with a book of at least $23 million in business, Banus said in the interview. His clients were told “they’d be accommodated with low stock- commission prices because of the amount of money they had there,” he said. “Citigroup started changing their tune and saying, ‘We’re not making any money off these stock trades.’ I was losing large clients.” He quit with a $12 million book, he said.

Banus’s loan was for $45,675. When he left, Citigroup demanded immediate payment of the balance, according to the complaint.

The employment agreement and note Banus signed are “an illusory contract” because the New York-based bank can terminate a broker’s employment and accelerate the loan with no loss to itself, while the broker must pay the debt with interest, according to the complaint.

‘Acceleration Clause’

“If the acceleration clause kicked in at the time you missed the payment, then arguably it’s just like every other acceleration clause,” Mark Thierman of Reno, Nevada, one of Banus’s lawyers, said in a phone interview today. “If it kicks in early at the time you leave, then it’s a penalty, and all states prohibit a penalty for leaving your job.”

Thierman said such arrangements are standard in the securities industry. He said Banus wants to either not have to pay back the rest of the loan because the contract is void or not have to pay it all at once.

“They started charging his clients differently from when he brought them in,” Thierman said. “His clients left and he couldn’t make his numbers, so he left.”

The case is Banus v. Citigroup Global Markets Inc., 09-cv-7128, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Thom Weidlich in the New York federal courthouse at 9245 or tweidlich@bloomberg.net.

Last Updated: August 13, 2009 18:15 EDT