JPMorgan Says Ex-Broker's E-Mails on Bank Fees Went Too Farby
Bank says ex-employee is improperly soliciting former clients
Alesia joined Morgan Stanley after 'abrupt resignation'
JPMorgan Chase & Co. says one of its former financial advisers has gone too far. Two e-mails too far.
Earlier this year, the biggest U.S. bank by assets accused financial adviser Salvatore Alesia of breaking contracts when he resigned from JPMorgan’s private banking business and joined another firm the same day, alleging he tried to take clients with him. In April, JPMorgan won a court order prohibiting Alesia from contacting the old clients while the case was in arbitration.
Returning this week to court, JPMorgan accused Alesia of violating the court’s injunction by sending out e-mails to at least one of the ex-clients. He lied in an e-mail to a former client on Dec. 8 by “implying that JPMorgan charges its clients “‘hidden’ fees,” the bank said in a petition filed in Manhattan state court.
Alesia also sent former clients a news article about a recent settlement the bank reached with the Securites and Exchange Commission, along with a message indicating that the clients "may not be aware of all the fees they are charged," the bank said.
“Such a scare tactic is clearly designed to interfere with JPMorgan’s relationship with its clients” in violation of the injunction, the bank said in the petition filed Monday.
Alesia, who couldn’t be reached for comment, hasn’t responded to the petition. A lawyer who has represented him in the matter didn’t immediately respond to requests for comment. Alesia denied wrongdoing in an April filing, saying he left the bank shortly after it had threatened to dismiss him and had acted in accordance with an industry protocol.
Kaitlin Finnerty, a spokeswoman for JPMorgan, declined to comment.
Alesia is the latest broker to raise questions surrounding JPMorgan’s fees. The dispute also reflects a growing strain on what has been a longstanding gentleman’s agreement in the financial industry setting ground rules on brokers’ movements between firms.
The so-called Protocol for Broker Recruiting, signed by more than 1,000 firms, attempts to tamp down on expensive lawsuits over brokers who join competing firms and often try to take clients with them. It allows registered investment advisers to take names, contact details and a few other pieces of information to new firms.
But with many firms declining to sign the protocol or moving to set stricter in-house rules, some disagreements are spilling into industry arbitration and into courts. In June, two JPMorgan units sued six former executives who defected to rival Morgan Stanley, seeking a court order blocking them from enticing clients and co-workers to follow.
Alesia worked for JPMorgan at its Melville, New York, office until his "abrupt resignation" on March 27, the bank said in its petition. He joined a Melville office of Morgan Stanley the same day, JPMorgan said. He improperly took contact information on some 30 clients and then tried to contact them to have them switch to Morgan Stanley, JPMorgan alleged in its petition, filed on March 31.
Alesia’s departure violated his agreement to provide 60 days’ written notice, the bank alleged, adding he also violated an agreement prohibiting him from soliciting the bank’s employees within 12 months of his exit.
Morgan Stanley spokeswoman Christy Jockle declined to comment.
Alesia, in a filing, said he quit less than two weeks after JPMorgan had warned him that he was at risk of being fired, citing concerns about his productivity. “I don’t understand how JPMorgan can claim, less than two weeks later, that it will be irreparably harmed by my departure,” he said.
Alesia also argued that JPMorgan and Morgan Stanley are both signatories of the broker-recruiting protocol. Responding to the bank’s allegation that he took confidential customer data when he left, he said he got the information by searching public sources.
JPMorgan said Alesia’s exit isn’t covered by the protocol because he worked for JPMorgan Private Bank, a part of the bank that isn’t a signatory.
In April, JPMorgan and Alesia reached an agreement to keep him from soliciting former clients, pending the outcome of an arbitration filed with the Financial Industry Regulatory Authority, a self-regulatory body. The Finra arbitration continues, according to JPMorgan’s Dec. 28 petition.
JPMorgan’s filing came after one of its clients flagged the bank about Alesia’s continued efforts to persuade her to move her account. The client “has complained to JPMorgan several times” since April that the ex-broker has called her to solicit her business, according to the petition. The customer wasn’t identified.
On Dec. 8, Alesia wrote to her with an offer to book a meeting in the new year.
“Over the course of the past few weeks, we have been fortunate to be provided statements from former clients,” Alesia wrote to his former client, according to the petition. “Through a thorough analysis of their portfolios, we have discovered that in many cases clients are paying fees that are 30 percent to 60 percent more than they believed they were. Additionally, their performance has been lackluster.”
The bank countered: “Not only does the respondent’s e-mail seek to encourage JPMorgan’s client to move to Morgan Stanley, his e-mail makes misrepresentations about JPMorgan fees to its clients,” according to the petition.
In another e-mail later in the December, Alesia wrote: “I thought you might find this of interest.”
Attached was a Dec. 18 Bloomberg News article describing the bank’s $307 million settlement with federal regulators over whether the bank adequately disclosed conflicts of interest from 2008 to 2013. The bank failed to tell customers that it profited by putting their money into mutual funds and hedge funds that generated fees for the company, the SEC said. The bank settled a parallel action by the Commodity Futures Trading Commission.
Forwarding the article to the bank, the client added this message: “This was sent to me from our friend Sal. . . . Interesting article! Should I be concerned?”
The bank is seeking sanctions against Alesia and costs of bringing the suit.
The case is JPMorgan Chase Bank NA v. Alesia, 163047-2015, New York State Supreme Court. New York County (Manhattan).