Sterne Agee Group Inc. on Monday confirmed that the decision to fire its former chief executive, James S. Holbrook, came after the firm was notified by federal investigators that he was the target of an investigation.
“The firm was notified that Mr. Holbrook is the subject of an investigation” by the Treasury Department and Justice Department, according to Mr. Holbrook's BrokerCheck report, on which broker-dealers reveal information including federal investigations. “The investigation relates to the possible misuse of holding company assets but the firm cannot confirm the full scope or subject matter of the investigation.”
According to the BrokerCheck report, Mr. Holbrook was under internal review by Sterne Agee for the potential misuse of holding company assets when he was fired.
Mr. Holbrook was fired at the end of May, replaced by Eric Needleman, who also was appointed CEO of Sterne Agee & Leach, one of the firm's broker-dealers. Mr. Holbrook's son, Billy Holbrook, Sterne Agee Group's chief operating officer, and an unknown number of other executives also were dismissed.
Last month, Bloomberg News reported that Mr. Holbrook was facing such a federal investigation, attributing the investigation to an unnamed source.
Mr. Holbrook's attorney, Bruce Gordon, declined to comment on the report on BrokerCheck.
Sterne Agee's board had been discussing the need for a new direction and leadership for months, well before any allegations of misconduct were raised.
“Although the Holbrooks' termination was likely a fait accompli by the time members of the group board were made aware of the investigation, learning of the investigation reinforced to the group board the need to accelerate change,” Sterne Agee spokesman Mike Goodwin, wrote in an e-mail to InvestmentNews. “The group board acted promptly to install new and experienced leadership and launched its own internal investigation.”
Last week, the company was scheduled to hold a special shareholders meeting to vote on removing the Holbrooks from its board of directors.
Meanwhile, Sterne Agee also faced further embarrassment last month when it had to inform its clients that an employees had lost a firm-issued laptop computer with client information that may have included personal information such as name, address, account number and Social Security numbers, according to a letter to clients dated June 27. The data did not include date of birth, account holdings, account passwords and access codes.
“The company is unaware of any customers whose personal information has been accessed as a result of the loss,” Sterne Agee said in a statement. “Protection of personal information is critically important to us and to our customers. In an abundance of caution, we are providing customers with extended identity theft protection services and identity theft insurance.”
The shake-up at Sterne Agee came more than a year after a former chief financial officer, Brian Barze, filed a complaint against James Holbrook and the company, alleging fraud, breach of contract and defamation at Sterne Agee.