$6M RAID ON MORGAN STANLEY PARADE: EVEREN AWARD BAD NEWS FOR BROKER STEALERS

The $6 million awarded Everen Securities Inc. in a four-year-old case involving raiding of brokers is a record that isn’t likely to stand long.

A New York Stock Exchange arbitration panel ordered Morgan Stanley Dean Witter & Co. to pay the eye-popping sum early last month as compensation for the mass defection to Dean Witter of about 20 brokers from four central Illinois branches in 1994.

“It just shocks me, frankly, to see an award of that amount,” says Michael J. McAllister, a New York attorney who has handled numerous securities-industry raiding cases.

“That’s a punitive award in my mind,” he adds. “To me, there was some egregious conduct to get to that amount.”

A spokesman for Morgan Stanley Dean Witter did not return phone calls.

Arbitration panels typically use a formula — for example, one year’s lost profits plus the costs of replacing the lost brokers — to determine appropriate compensation in a raiding case, experts say. But until this award, plaintiffs have never won everything they asked for.

More unpredictable

Mr. McAllister says arbitration panels have become more unpredictable since the U.S. Supreme Court ruled in 1989 that they had to include non-industry representatives.

“You’re going to get these envelope-pushing judgments as a result,” he says.

That’s welcome news in some quarters. In particular, American Express Financial Advisors has two major raiding complaints pending against Los Angeles-based Sun-America Inc. and Hantz Financial Services, the Roseville, Mich.-based financial planning firm started by a former Amex top producer.

Amex is pleased

“It just demonstrates you can get effective relief in arbitration,” says Eric Brandfonbrener, a Chicago attorney with Grippo & Elden representing the Minneapolis brokerage in both complaints. “It is encouraging.”

The award is the second major victory for Chicago-based Everen stemming from the exodus of more than 100 reps in 1994, a tumultuous year for the
firm as its parent, Kemper Corp., saw two buyout deals fall apart before finally selling out to the Zurich Group early the next year. Then dubbed Kemper Securities, the brokerage unit was spun off in an initial public offering soon after and renamed Everen Capital Corp.

Everen won a $2.2 million arbitration judgment against Milwaukee-based Robert W. Baird & Co. in 1995 for the defection of the reps in Everen Capital’s Peoria, Ill., branch.

Still pending: a complaint against St. Louis-based A.G. Edwards alleging improper raiding of Everen Capital Corp.’s Galesburg, Ill., branch.