Cantor Fitzgerald LP, the New York brokerage run by Howard Lutnick, was sued by two former managing directors who claim they were wrongfully denied payment for some partnership interests after joining a Chinese investment bank.
Jason Boyer, ex-head of Cantor’s Hong Kong office, and Bradford Ainslie, formerly the co-head of equity sales and trading in the same branch, alleged in the Delaware Chancery Court lawsuit that they “did not receive any payment for the value” of the partnership interests after they left in 2001 to join Reorient Group Ltd.
The men said they have been damaged by Cantor Fitzgerald’s alleged breach of the partnership agreement and are entitled to payment. The case was originally filed under seal March 11, and parts of the complaint were made public today.
The suit is the latest round of litigation between Cantor, one of the largest U.S. independent brokerages, and the former traders over their move to Reorient. The startup is backed by an asset manager under China’s state-owned Assets Supervision and Administration Commission and seeks to become a global investment bank.
In 2011 Cantor filed a lawsuit in China against Boyer, Ainslie and other traders who left its Hong Kong office, accusing them of breaching their employment agreements and causing a 29 percent drop in average monthly revenue at the branch. Two years later, Cantor officials settled their claims against the former executives, according to filings with the Hong Kong Stock Exchange. The terms weren’t made public.
Sheryl Lee, a Cantor spokeswoman, said today by phone that the company has a policy of not commenting on litigation.
Lutnick, who’s also chief executive officer of interdealer broker BGC Partners Inc., has been diversifying into real estate, hedge funds and money management as commissions fall in his firms’ core business of trading stocks and bonds for banks and institutional investors. He sold ESpeed, BGC’s electronic bond-trading unit, to Nasdaq OMX Group Inc. last year.
Cantor officials this month said they acquired hedge fund Fintan Partners LLC as part of a push to expand its money-management business. Terms of the deal weren’t disclosed.
In the Delaware suit, Boyer and Ainslie contend their agreement with Cantor required the New York firm to prepare and file the traders’ U.S. federal and state tax returns in connection with their partnership interests.
The company made a series of errors involving the former traders’ tax liabilities, according to the suit. In Boyer’s case, Cantor officials prepared his taxes as if he were a U.S. resident and overestimated his taxable income, according to the suit.
Ainslie said in the suit that Cantor officials refused to return a $200,000 cash contribution the trader made to the partnership.
Joining Boyer and Ainslie in the suit were three other former Cantor traders who left the Hong Kong branch in 2011, and a trader who left the Paris office in 2012, according to court papers.
Christophe Cornaire, John Kirley, Pierre-Henri Mallez and Remy Servant said they were denied proper payments for some partnership interests and ran into tax problems because of Cantor’s handling of their returns, according to court filings.
Bloomberg reported last year that Cantor has paid most salesmen about 10 percent of their compensation in partnership units for about the past four years, according to more than 21 current and former partners.
Lutnick’s push to turn one of the largest independent U.S. brokerages into a rival to Wall Street’s investment banks has been pocked with dismissals and defections. Forty-one percent of the 158 traders and bankers whose hirings Cantor announced in news releases since 2009 have left, industry records show.
The Delaware case is Brad Ainslie v. Cantor Fitzgerald LP, CA No. 9436, Delaware Chancery Court (Wilmington).