Nomura ‘Lost Control’ in Firing Salesman Over $40 Million Loss

  • Bond salesman’s firing ruled unfair, but compensation limited
  • Nomura disciplinary process had ‘multiple defects’: judge

Giovanni Lombardo, a bond salesman for Nomura Holdings Inc. in London, was starting to worry about Alberto Statti.

Statti, a trader with a taste for red wine and three-piece suits, had come from obscurity offering to buy hundreds of millions of dollars of bonds from Nomura. Yet his brokerage, Invexstar Capital Management Ltd., failed to come up with the cash for trades in May 2015, and the bank was now staring at its biggest-ever individual trading loss. Lombardo couldn’t get him on the phone.

“Resolve this thing today,” Lombardo said when he eventually contacted Statti by chat, according to a transcript included in the judgment of a lawsuit over the former’s firing. “Otherwise, we’ll both end up in the meat grinder.”

Statti never produced the cash, triggering a fallout that has been costly for Nomura. The Tokyo-based lender, whose London trading operations were already under pressure, lost more than $40 million on its dealings with Invexstar. The firm then blundered when it fired Lombardo after what a judge described Aug. 3 as a disciplinary process littered with “defects.”

Giovanni Lombardo, a former Nomura Holdings Inc. bond salesman, leaves an employment tribunal in London on May 17.

Photographer: Simon Dawson/Bloomberg

The decision is one of the final chapters in a tale that shows how chaotic finance firms can become when mistakes are made, money is lost and jobs lie in the balance. Top Nomura executives in charge of meting out discipline “lost any control,” the judge wrote, as they moved from one error to another while colleagues turned on each other trying to explain how the firm lost so much money on such an unusual client.

Banter Stops

“When a deal goes bad, it’s rotten, all the humor and the banter stops,” said Christopher Wheeler, a bank analyst in London with Atlantic Equities LLP. “When large trading losses occur that reveal faults in the system, there’s a tendency to react irrationally in an attempt to cauterize the wound.”

Bloomberg first reported the judge’s decision Aug. 5. Nomura “will review in detail the employment tribunal’s written decision whilst we consider our options,” spokeswoman Aoife Reynolds said then. She declined to comment Tuesday beyond that statement.

For more on the employment lawsuit, click here.

Nomura fired Lombardo for failing to tell his bosses about Invexstar’s souring trades soon enough. Judge DA Pearl agreed that the salesman had been “negligent” and slashed the amount of compensation he can receive from the suit.

Yet Lombardo’s supervisor, a managing director named Francesco Di Giura who was aware of the Invexstar trades, according to the judgment, received only a warning. This, along with a series of missteps in a process run by Mike Ward, the head of equity sales for Europe, the Middle East and Africa, and Morven Jones, head of debt capital markets for the same region, amounted to an unfair dismissal, the judgment shows.

‘Overall Muddle’

The bank didn’t disclose key evidence to Lombardo during the internal probe, and its investigators didn’t compile a written report on the Invexstar losses, leading to confusion among Nomura executives running the process, according to the judgment. Jones, who oversaw Lombardo’s internal appeal, received “erroneous” information from Ward, who had approved the firing, all of which helped turn the process into “an overall muddle,” the judge wrote.

“The process had been defective from the outset and the procedural shortcomings were substantial,” Pearl wrote. “No reasonable employer could have proceeded in this way.”

Reynolds declined to comment on behalf of Di Giura, Ward and Jones. The three men didn’t respond to additional requests for comment. Statti couldn’t be reached.

‘Chequered History’

Lombardo is one of more than half a dozen traders and sales people to sue their former employers in recent months, claiming they were made scapegoats by banks. They’ve had mixed success, often winning rulings on technicalities because banks didn’t follow proper employment law, but failing to get substantial compensation.

Statti, Invexstar’s sole employee and manager, wasn’t registered with the Financial Conduct Authority, records show. Statti had previously run two firms, both of which had closed down with losses, Bloomberg reported in January.

“There has been some debate during the hearing as to whether or not the ‘on-boarding’ procedures were sufficiently stringent,” Judge Pearl wrote, referring to Nomura’s decision to begin the trades. “Invexstar and the claimant’s contact there, Mr. Statti, had a chequered history.”

Other Banks

Invexstar soon amassed U.S. Treasury and German bund trades with Nomura that would eventually amount to a pledge to buy $666 million of bonds. Lombardo began to get worried May 11 after Statti had failed to come up with the cash for a number of deals, the judgment shows. The next day, with other Nomura officials putting him under pressure, Lombardo tried once more to get payment from a stalling Statti.

“If this all blows up,” Lombardo wrote to Statti, “I think we both need to find new jobs.”

Nomura canceled the trades May 13, informed its regulator, and sold the bonds on the market at a loss of more than $40 million. Invexstar collapsed into administration two days later, causing losses of about 120 million pounds ($156 million) for five banks including Nomura, BNP Paribas SA and Morgan Stanley, U.K. company filings show.

Nomura’s disciplinary process centered on when Lombardo told his superiors about Statti’s failure to pay. His supervisor, Di Giura, placed “blame in his direction” during the disciplinary process and ultimately got a warning. Yet Di Giura “was as much in breach” as Lombardo, had not always been “candid” with interviewers while some of his evidence was “suspect,” the judge wrote.

Firing Lombardo but not his manager required “a stronger rationale” than the bank was able to provide, the judge stated.

Lombardo has since moved to Sicily with his family, where he set up a travel business this year called Free Wheeling Tour that organizes tours and airport transfers. He hopes to earn 1,500 euros ($1,670) per month once it is established, according to his statement in the trial.

“I still don’t understand why I’ve been treated like this,” Lombardo, who’d worked at Nomura for almost a decade, wrote in an e-mail. “I had to quit my kids from their school and relocate my whole family back in Italy as I was unable to find a new job in banking.”