Two former First Republic brokers are suing the Federal Deposit Insurance Corp., the receiver of First Republic, because they were “fraudulently induced” to accept jobs at the bank “mere weeks” before its March 2023 collapse.
Alexander Kadish and Nicholas Davey filed a complaint in California last week seeking compensation for damages suffered “as a result of the Bank’s fraudulent misrepresentations and omissions,” court documents show.
While the FDIC is named as defendant, the plaintiffs plan to name specific defendants later, according to court documents.
Kadish and Davey allege that senior bank executives, including Head of Private Wealth Management Robert Thornton, Wealth Management Vice President Thomas Glamuzina, and Head of West Coast Lending Mohamed Fahmi, who began recruiting them in 2022, made “misrepresentations, and omitted important facts, regarding the Bank’s stability and financial health to induce Mr. Kadish and Mr. Davey to enter into employment agreements.”
The suit alleges the bank also misrepresented, in Securities and Exchange Commission filings and numerous public statements, the strength of its balance sheet, liquidity and market position.
“Among other things, the Bank understated and concealed the magnitude of the risks facing its business model that would result from any decision by the Federal Reserve System raising the federal funds rate, thereby undermining the value of the Bank’s loan and securities portfolios and liquidity.”
Prior to joining First Republic, Kadish and Davey led a team that generated $9.2 million in annual revenue at Morgan Stanley, according to AdvisorHub. Upon accepting their new jobs, they requested to delay their tentative start date — March 3 — by two weeks. Glamuzina denied their requests.
“Had they been permitted to delay their start date, they would never have joined the Bank, given the information that came to light during that time period,” the suit alleges. “[M]ere weeks after entering into their employment agreements with the Bank, the Bank’s precarious financial situation was exposed, leading to the Bank’s ultimate demise.”
On April 28, it appeared likely that the bank would be soon taken over by the FDIC. In fact, on May 1 it was, and purchased by JPMorgan Chase.
In the days between, however, Kadish and Davey asserted that First Republic “falsely represent[ed] … the Bank was not going to go into receivership and insisted that [the brokers] would be foolish to leave.” In the meantime, competitors allegedly enticed their customers to move their accounts, and damaged Kadish’s and Davey’s reputations.
Both men resigned on May 2 and have since moved to Wells Fargo Advisors.
Alleging millions of dollars per year in lost income, they now seek both actual damages and “punitive damages in an amount sufficient to punish the Bank and to deter future wrongful conduct.”
Their attorney, Jeffrey Riffer at Elkins Kalt Weintraub Reuben Gartside in Los Angeles, did not return a request for comment. Representatives for JPMorgan and the FDIC declined to comment.