A top Mellon Bank Corp. official is vowing to rebuild a money management unit that has been rocked by a wave of defections.
Twenty employees - including 10 top executives - have quit Mellon's Boston Company Asset Management subsidiary in the past week, in the wake of a dispute over the unit's autonomy.
The employees, who were rebuffed last week in their bid to buy the unit from Mellon, are setting up their own money management firm in Boston. They are expected to take business away from the bank.
But Mellon vice chairman Christopher "Kip" Condron, who was named chairman of the troubled unit on Monday, put a brave face on the exodus.
"We have a few holes, and we'll plug them," Mr. Condron said in a telephone interview. He pointed out that most of the unit's 150 employees had stayed, including 40 of its 50 top executives.
Mr. Condron said the company, which manages $26 billion of pension assets, has been working the phones to dispel concerns among its 275 corporate and public-sector clients.
In addition, he said, the company has moved to "stabilize the situation" by requiring executives to sign contracts saying they will remain with Boston Co. until at least summer. Nearly all employees have signed the agreements, Mr. Condron said.
Even so, the shakeup has raised serious questions about Mellon's ability to win the allegiance of its money management employees - and thereby retain the institutional assets it covets.
When it bought Boston Co. from Shearson Lehman Brothers in 1993, Pittsburgh-based Mellon touted the deal as a key to its plan to diversify beyond traditional commercial banking activities. It paid $1.5 billion.
Analysts said it is too soon to know how Mellon will handle the fallout. "They will have to figure out where the assets settle and go from there," said Dennis F. Shea, a managing director at Morgan Stanley.
Mr. Condron acknowledged that the efforts to allay customers' concerns haven't been a complete success. "A couple of clients have pulled their accounts, or said they are going to," he said. He declined to name them or to say what amount of assets the accounts represent.
Among the defectors was the asset management unit's chairman, Desmond J. Heathwood, an 18-year veteran of Boston Co. In a telephone interview, Mr. Heathwood said he and his colleagues left because they were chafing under Mellon's control.
"We had differences over ownership of the business and how the business should be run," he said.
Mellon, in an effort to disband the new enterprise, filed a civil suit last week against Mr. Heathwood and four of the former Boston Co. executives.
The complaint, filed in Suffolk County Superior Court in Massachusetts, charges that the money managers took trade secrets, customer lists, and confidential information when they resigned abruptly last week.
Mr. Heathwood called the allegations "ridiculous."