Citing “morally reprehensible” conduct by Wedbush Inc., an arbitration panel has ordered the Los Angeles securities firm to pay a former bond trader $3.5 million in withheld compensation.
Stephen Kelleher, who won the award, alleged in his complaint that company Chairman Edward Wedbush had personally withheld pay from many high-level staff members in recent years.
“This guy has been doing this to a lot of people for a long time,” Kelleher said in an interview Tuesday.
John Stenson, a lawyer for the company, declined to comment on the ruling except to say the firm would appeal it.
Several current and former employees of Wedbush have brought legal actions over compensation issues. An arbitration panel this year awarded $36,105 to Wedbush’s former secretary, who alleged that her onetime boss stripped her of company stock after she quit.
Jack Luikart, a former chairman of the firm’s Wedbush Securities unit, testified in Kelleher’s arbitration that Wedbush, who co-founded the brokerage in 1955, had withheld payments from certain top employees and from some outside lawyers and an accounting firm.
“I spoke to Ed in a polite fashion about this, and I spoke to his two sons about this, and they both agreed that it was a practice that was concerning to them and he was becoming more difficult in his management style,” Luikart testified. “He was delaying payment of bills. He was delaying payment of compensation.”
The sons are executives at the company.
In a November report, The Times detailed Wedbush’s frugal habits, including gathering paper clips left behind after meetings and personally signing employee expense checks to remind staff members that he keeps a close eye on them.
The story also revealed that the executive’s neighbors in Ladera Heights had tried for years to get the multimillionaire to repair his badly leaking and unsightly roof.
Wedbush said in interviews last year that he merely followed prudent business practices in an industry renowned for profligacy.
Kelleher, who ran the company’s municipal-bond department, had sought $4.2 million in promised bonuses and other incentive compensation, plus interest.
Arbitrators rarely give detailed explanations for their decisions, but the three-member panel in Kelleher’s case shed some light on the thinking behind its ruling.
“The panel concludes that a major cause of this dispute is a poorly written and ambiguous employment contract and a corporate management structure that required personal approval” from Wedbush himself “for all incentive payments to senior employees — which approval was routinely withheld.”
The arbitrators cited the firm’s “morally reprehensible failure and refusal to compensate [Kelleher] in a timely fashion.”
“There was just this visceral reluctance to pay anything,” Kelleher’s attorney, Kit Knudsen at Commins & Knudsen in San Francisco, said in an interview.
Luikart testified that compensation disputes with traders such as Kelleher were typically resolved within 45 days because there were definitive records of trading results on which bonuses were based. But Kelleher alleged that Wedbush withheld his pay for more than two years.
Wedbush Inc., which is privately held, earned $26.5 million in the 2009 fiscal year, according to a shareholder letter released as part of the case.