GFI Group, the largest inter-dealer broker of credit derivatives, has sought a court order to block some former employees from working for Cie. Financiere Tradition, according to Bloomberg. New York State Supreme Court Justice Richard Lowe didn't rule immediately on GFI's request for a preliminary injunction to block its former employees for working for its rival (see Squawkbox April 21).
Tradition "plotted" as far back as December to lure the brokers before they departed in April, GFI lawyer Berry Crozier is said to have told the court last Tuesday in a state court in Manhattan. "This was an unlawful raid that resulted in the simultaneous resignation of 21 high-level employees," Crozier said. "This is an instance where a known competitor actively solicits, over a period of several months, a scheme to poach the most valuable GFI employees."
GFI said in April that the brokers who left were responsible for 5%, or $50 million, of the firm's $970 million revenue in 2007. Lawyers for Tradition and the brokers argued that GFI's employment agreements had expired. GFI failed to prove that it had lost even "one dollar" because of the departures, Daniel Brooks, a lawyer for Emil Assentato, head of Tradition's North American securities business, is reported to have told the court.
"The goal of GFI here is to stifle competition," said Milton Mollen, a lawyer for Standard Credit Group, a Tradition affiliate, according to the Bloomberg report.
Lowe questioned Michael Elkin, a Tradition lawyer, about an April 15 meeting at Smith & Wollensky steakhouse attended by Assentato and Chaim Levin, GFI's former general counsel. GFI says 10 of its former brokers attended, including Michael Babcock, the ex-head of GFI’s most-profitable credit-derivatives desk.
Lawrence Carnevale, a lawyer for GFI, said his clients also determined that Tradition officials held a "secret summit meeting" with at least eight former GFI brokers at the Embassy Suites Hotel in Lower Manhattan on December 15.
"The subject of this meeting was how to orchestrate the raid," Carnevale said, citing the affidavit of Tyler Eddy, who says Tradition tried to recruit him. "This was a concrete planning meeting, so the suggestion that this was a spontaneous departure is preposterous."
The case is GFI Securities LLC v. Tradition Asiel Securities Inc., 601183/2008, New York Supreme Court (Manhattan).