PaineWebber Fined $2.5 Million For Raiding Rival
GAINESVILLE, Fla. (AP) _ PaineWebber Group Inc. must pay rival Prudential Securities Inc. $2.5 million for hiring away seven employees, a record amount for employee raiding, an arbitration panel of the New York Stock Exchange ruled.
PaineWebber hired away four brokers and three sales assistants from Prudential’s Gainesville office in November 1993. With only one broker left after the raid, Prudential said it was forced to sell its Gainesville office to Legg Mason Inc.
Raids occur when a firm convinces employees at a second firm to leave in a group, taking with them their clients in a single move that cripples the abandoned firm.
The award covered $1 million in compensatory damages and $1.5 million in punitive damages.
``It’s a record fine in a case involving employee raiding,″ NYSE spokesman Raymond Pellecchia said Friday in New York, ``but not a record for an overall award in an arbitration case.″
The four former Prudential brokers all said they left their old jobs intending to launch their own business. Only after their resignations did they end up looking for a new employer, they maintained.
But Ernest Higbee, the only broker in Gainesville who remained at Prudential, told the arbitration panel that the job changes amounted to a planned raid.
PaineWebber lured the seven Prudential employees with ``financial inducements believed to be worth over $500,000, in addition to enhanced commission payouts to get them to resign en masse,″ the panel said it had been told by Higbee and Prudential officials.
A PaineWebber spokeswoman said that the award was ``out of line″ and that the firm may appeal the case in court.