Firstar Corp. of Milwaukee has sued a team of investment advisers who defected from its St. Louis institutional investment management firm last month to a newly formed unit of First Banks Inc.
Firstar, which last week agreed to purchase U.S. Bancorp of Minneapolis, accused 21 former employees of its Mississippi Valley Advisors. The suit names five of them, but Firstar's attorney in the suit said more of the 21 would be named.
The lawsuit, filed Sept. 15, says the 21 either deleted, copied, or stole from it over 1,300 essential documents and computer files. It also says they lied to customers about Firstar and breached contractual obligations in helping St. Louis-based First Banks Inc. form the new firm, Missouri Valley Partners in nearby Clayton, Mo.
The employees quit the Firstar unit at 3 p.m. Aug. 28, the suit says. The next morning, it says, the First Banks unit opened for business and the people in question began calling their old clients to get them to switch.
The new company was formed solely to compete with the Firstar unit, the suit says. It says Ralph W. Webster 3d, who retired from the Firstar unit in February, secretly retained two former colleagues there, Robert J. Anthony and Gregory Glidden, and began encouraging their co-workers to join the planned First Banks unit.
"This sorry tale of faithless service will warrant a finding that these defectors are enjoying an unfair competitive advantage and have breached their duties" to Firstar, says the suit, Firstar Corp. v. Missouri Valley Partners Inc. et. al.
It was filed in U.S. District Court for the Eastern District of Missouri.
The complaint specifically names five investment managers - Mr. Webster, Mr. Anthony, Mr. Glidden, Louis Jarodsky, and Tommy E. Dezort. Firstar's attorney, Gerald Ortbals, a partner with the St. Louis law firm of Stinson, Mag & Fizzelli, said all five had signed confidentiality agreements with Mercantile Bancorp., which owned Mississippi Valley Advisors before Firstar bought Mercantile a year ago.
The case seeks "several million dollars of monetary relief" as well as steps to ensure that the First Banks unit does not take advantage of information illegally taken from the Firstar unit, Mr. Ortbals said. He declined to be more specific.
U.S. District Judge Catherine D. Perry granted a preliminary consent injunction in the case Sept. 28, restraining Missouri Valley Partners from soliciting employees and customers from Firstar and from divulging or using confidential information relating to Firstar.
The First Banks attorney who is handling the case, Donald Gunn, a partner with St. Louis' Gunn & Gunn, said the injunction does not restrict Missouri Valley Partners from doing anything except taking and using proprietary information and documents.
"We will honor the injunction and not take restricted documents," Mr. Gunn said, adding, "This suit does not have any merit whatsoever, and we are proceeding accordingly."
Dennis Nahnsen, president of Missouri Valley Partners, told American Banker in August that the new firm was formed because the group was upset by change that had followed Firstar's acquisition of Mercantile. He said the new firm would target the same institutional clients as Mississippi Valley Advisors.
Mr. Ortbals said there has been some client shifting, but not enough to cause concern. "Our objective is to ensure that any competition that ensues between Firstar and Missouri Valley Partners is fair," he said. "We don't question their right to compete - we just want them to compete on a level playing field."
But Missouri Valley Partners has already begun to get some of Firstar's pension management business. So far, $130 million of Missouri Valley's $1.3 billion in Taft-Hartley assets under management has gone to the new company, according to Chris Bohner, a senior research director for the Hotel Employees and Restaurant Employee's International Union.
Mr. Bohner runs a Web site, firstarwatch.com, that reports on problems the Milwaukee banking company is having. The union is one of several entities that invests its pension assets with Missouri Valley Partners.
"A lot of people are interested in staying with this team," Mr. Bohner said. "People are pulling their money away from Firstar and staying with the people that they know and trust."