A Firefight in the Street's Gender War

Former Merrill Lynch broker Nancy Thomas' sex-discrimination charges are finally being aired in a stormy and acrimonious hearing

By Emily Thornton

Most of the war over Wall Street's sexual discrimination claims has been fought behind doors. Details of most individual settlements reached as part of class actions brought against major firms such as Merrill Lynch (MER ), Morgan Stanley (MWD ), and the Smith Barney division of Citigroup (C ) have been treated as top secret. As a result, troubling questions regarding whether women are treated fairly on Wall Street have gone unanswered. And doubts have lingered about whether hundreds of cases that have waded through mediations have been dealt with justly (see BW, 9/20/04, "Fed Up -- And Fighting Back," and 7/26/04, "A Bad Deal for Women").

As the Street's gender-discrimination battles go, Nancy Thomas' fight for justice is one of the toughest. For years, the plaintiff in the gender discrimination class action brought against Merrill Lynch in 1997 has refused to settle, instead insisting on taking her case to arbitration so that she can have a public hearing. And during the week of Sept. 13, the former financial adviser finally got one under crystal chandeliers in a small second-floor "parlor" of a Manhattan hotel.

If the first two days of Thomas' hearing are any indication, the public proceedings will be lengthy and contentious. Already, arbitrators are scheduling hearing dates through June, 2005. Lawyers ended the second day in a shouting match after they went into an off-the-record session -- behind doors that were closed even to the plaintiff. (The heated discussion was audible to those outside the room, but what was being said was not clear.)


  Thomas, who left Merrill in 2000, sat quietly throughout the two days as lawyers appearing before three arbitrators and a handful of reporters dissected her 18-year career with the world's largest brokerage. She wore a teaspoon pin, signifying her admiration for Elizabeth Cady Stanton, one of the founders of the women's movement in the 1840s. On the first day, Sept. 13, one of Stanton's descendants even attended.

The case is an embarrassment for Merrill, which has been striving to put its history of alleged sexual discrimination behind it. Merrill says it has settled all but roughly 30 of 912 claims that were filed against it as part of the 1997 class action. Since then, it has undertaken a number of reforms, including adopting a gender-blind method of allocating individual accounts to its brokers in order to address one of the chief complaints of the suit's members.

In April, 2004, after Merrill was ordered to pay a former financial adviser more than $2 million in an arbitration award in a gender discrimination suit, CEO Stan O'Neal sent a note to employees saying that he viewed the conduct brought to light by that case, which occurred in San Antonio, Tex., as "an embarrassing blot" on Merrill's reputation. "We can and should use constructively the attention this adverse award has generated to recommit ourselves to continue to build an organization based on meritocracy, mutual respect, and a commitment to helping each and every employee reach their full potential as professionals," he wrote.


  In his opening argument, Thomas' lawyer described her as a victim of years of gender discrimination, starting when a manager in Merrill's New York office allegedly "grabbed her breasts and tongue-kissed her" during a birthday party at a Mexican restaurant in 1985. Thomas alleges that over the years, men were assigned bigger accounts to manage than women, putting her at a disadvantage.

When Thomas complained of discrimination to Merrill's in-house counsel, she alleges that she was told her claims had "no substance" after a "thorough" investigation. Thomas' lawyer alleges that a few months later, the same in-house counsel e-mailed another Merrill manager to say that she didn't have the manpower to conduct an investigation to "positively determine if there was discrimination." Thomas suffered "the ancient Chinese torture of death by 1,000 cuts," argued Jeff Liddle of Manhattan-based Liddle & Robinson LLP.

Merrill's counsel, Andrew Schaffran at New York-based Morgan, Lewis & Bockius LLP, argued that Thomas was a casualty of her own incompetence, and he presented slews of supporting tables and slides. Schaffran produced data that showed other female financial advisers working in the same New York office during the period Thomas identified in the class action have done well at Merrill.

Schaffran alleged that Thomas' performance never recovered after she broke off her engagement to a fiance in Merrill's Atlanta office, where she had relocated. Even after moving back to New York, her work still suffered, Schaffran alleged. Then she discovered that she had chronic fatigue syndrome. Schaffran also pointed out that producing new business is key to a broker's success, and he alleged that Thomas had failed to produce.


  On the second day, Thomas' lawyer called his first witness -- David McWilliams, who was Thomas' boss in 1989 and 1990 in Merrill's Atlanta office, where she departed after he accused her of rudeness toward himself and clients. When asked about six other women who filed claims of sexual discrimination against him in connection with the class action, McWilliams, now a regional managing director in Florida, testified that he was unaware of the claims until Merrill's counsel alerted him to them in a three-hour phone call on Sept. 10. McWilliams also said he had not seen the claims. Under questioning, it came out that McWilliams had documents relating to the suits in his briefcase.

Liddle, Thomas' lawyer, accused McWilliams of false testimony. Schaffran responded that the witness was confused and that the claim forms in his briefcase, provided by Schaffran's staff, were incomplete.

When asked later by BusinessWeek how a Merrill manager could be unaware of seven sexual-discrimination claims filed against him, a Merrill spokesman noted that McWilliams has yet to complete his testimony. "We are confident...he will have an opportunity to explain his answers and provide a clear picture of the relevant facts," said Merrill spokesman Mark Herr. McWilliams had better if he and Merrill hope to resolve the matter.

Thornton is Finance & Banking editor for BusinessWeek in New York

Edited by Patricia O'Connell

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