A former Citigold broker has been awarded $4 million in a case claiming he was fired to stop him leaving with a $200 million Latin American client book after a temporary ban on opening new international client accounts was introduced.
The arbitration claim was brought forward by Christian Gherardi, who had worked for Smith Barney and Citigroup in Miami from 1996 until his involuntary termination in December 2015.
A three-person arbitration panel in Miami made the award on February 28, which was initially reported by AdvisorHub. The decision published on the Financial Industry Regulatory Authority’s (FINRA) arbitration website did not elaborate on the panel’s reasoning behind their decision.
They ruled that Citi was liable to pay Gherardi $3.45 million in compensatory damages for wrongful termination, $150,000 for ‘lost-quarter’ trail fees and $395,830 of deferred compensation.
It was also recommended that the reasoning for his firing be changed to ‘terminated without cause’ on Gherardi’s regulatory record. Citigroup did not respond to requests for comment on the ruling.
According to his lawyer, Ethan Brecher, the claims center on the firm pre-empting Gherardi's possible departure because of a moratorium on opening new accounts for non-US clients that was put in place in October 2015.
‘The theory we had was they were concerned that he would leave and other firms would recruit him because of this moratorium. That other firms would use that as an incentive to move,’ said Brecher. ‘Citi thought he would leave and walk out the door with $200 million that they could not replace because they couldn’t hire anyone to bring in new accounts.’
Gherardi, according to Brecher, was a top producer at Citigold’s Miami office generating $2 million in revenue annually with a book of more than 500 clients, made up of mostly Latin Americans.
In March 2016, Gherardi sued Citi for $16.5 million worth of lost earnings, including a $6 million or more hiring package he could have previously received, 10 years of wages and $400,000 in forfeited compensation.
He also claimed that his former supervisor Michael Averett made the decision to terminate his employment and tried to stop him from moving his business to another firm. The arbitrators denied the claims against Averett.
The alleged moratoriam followed a regulatory concent order by the Office of the Comptroller of the Currency relating to deficiencies in the bank's overall anti-money laundering compliance.
In its initial response to the claims, seen by Citywire Americas, Citi said that it acted ‘reasonably and appropriately at all times in addressing Claimant's unprofessional conduct, terminating his employment based on that conduct, and reporting the reason for his termination as FINRA requires.’
Citi alleged that Gherardi had been involved in three altercations with co-workers, the last event pertaining to concerns about an advisor trying to ‘poach’ his clients.
Citi said that upon review of the last event, which took place in October 2015, it determined that ‘despite Claimant's high level of production and the likely disruption to its business, Mr. Gherardi simply could no longer represent Citi.’
Brecher said Citi manufactured these claims and that despite a record of warnings on his conduct Citi was unable to substantiate its claims with further evidence, such as video tapes.
Gherardi is now registered with Miami broker-dealer Bulltick, which he joined in March 2016.