A parade of Wall Street luminaries is expected to testify in a hotly anticipated trial that begins Friday over Perella Weinberg Partners' decision a decade ago to fire a star executive who said the investment bank was plotting to launch a rival company.
PWP The founders Joe Perella and Peter Weinberg, and the top rainmaker Robert Steel, will tell the New York court that they revealed the secret plan of Michael Kramer, the founder of the head of the restructuring of the bank, to start a new business, a rival and three close associates. .
PWP fired Kramer and the alleged co-conspirators via voicemail in February 2015 after it learned of the alleged conspiracy to violate their employment contracts. It claims that their departure is costing the bank tens of millions of dollars in lost revenue, ill-gotten gains and high hiring costs.
Kramer has contended that PWP's leadership was consumed by long-standing scandals around him and was bent on ousting him and others from the firm in an effort to capture the $60 million in compensation and equity, which Kramer now wants back.
The amount of bad blood between PWP and Kramer has so far prevented a settlement in which financial institutions are looking closely to understand the nature of non-compete clauses in employment contracts, which in recent years have faced criticism for being unfair restrictions. trade.
“Having anything non-compete is more important than ever,” said Jeffrey Eilender, a partner at Schlam, Stone & Dolan who is not involved in the case. “Companies that are affiliate or marketing-based are more aggressive in their enforcement.”
In the first decision, the judge presiding over the case ruled in 2023 that non-compete agreements remained legal in New York.
Among the main topics of the court proceedings will be an examination of PWP's actions toward Kramer's clients in the days after his termination.
Witnesses supporting Kramer's account would include a jury Monsantoa chemical group that has been working with him for a long time, who will testify that the PWP administration was more interested in returning Kramer than serving the interests of Monsanto after his termination.
Kramer's lawyers will also question the former PWP communications chief about what he said was a covert media campaign to smear the late administration after it was ousted.
Kramer has separately disputed claims that he improperly solicited Monsanto and one of his PWP clients in the months after his 2015 termination.
PWP says Kramer and his restructuring colleagues, many of whom he had worked with for years at several firms, had been plotting for months to leave and start a rival company.
Among the documents found in the discovery include a pitch letter from a brand consultant and business plans and spreadsheets detailing compensation and equity terms for a hypothetical firm.
One email between Kramer and two of his partners, Derron Slonecker and Joshua Scherer, is considering calling the firm KSS, which Scherer wrote reminded him of KKR's private equity group.
PWP later learned that after a dinner Kramer had with Weinberg in early 2015 where he allegedly announced Kramer's resignation, some of Kramer's reform colleagues met for “celebratory drinks”.
Perella, 83, is a staunch M&A pioneer, while 67-year-old Weinberg comes from a family that ran Goldman Sachs for generations. Steel, 73, was a longtime Goldman banker and New York City deputy mayor and frequent adviser to the likes of BlackRock founder Larry Fink.
Yet the star witness at trial may be Kevin Cofsky, who a decade ago was a PWP executive in his thirties and had worked early in his career with Kramer.
Cofsky attended a poignant Sunday meeting in January 2015 at Kramer's Connecticut home where about 10 members of the PWP reform group had gathered.
Weeks later Cofsky told PWP executives that the purpose of the meeting was to advance the design of a rival firm.
Kramer said in his court filings that Cofsky embellished his story after being offered a $500,000 bonus and the chance to lead a PWP restructuring team after Kramer was fired.
The PWP described the dispute as a “textbook begging case”. Kramer's court filings, however, state that each of the eight bank restructurings from PWP who later in 2015 joined his new firm, Ducera Partners, will testify under oath that Kramer never asked them to form a new business or join him in the new firm while still working. employed by PWP.
Kramer insisted that he was aiming for a vendetta in which Weinberg wanted to bring him back “to his house”, a phrase found in an internal PWP email.
“PWP was undermining the restructuring team that Kramer had led and built from scratch, paying them less, giving them bad year-end reviews, and making it clear that their prospects for advancement at PWP were slim or non-existent,” Kramer said in court papers, adding. that his team was “uncertainly fired before any of them decided whether they wanted to leave”.
PWP was founded in 2006 to great acclaim given the pedigree of its founders. Kramer was quickly brought in to start a restructuring practice after his previous stints at Houlihan Lokey and Greenhill & Co.
Kramer's status as a PWP partner, he says, prevented him from being terminated.
Kramer's Ducera Partners since 2015 has been one of the top restructuring advisory firms, last year approaching 150mn in revenue and fewer than 50 employees, according to a person with knowledge of its operations.
The firm has been making strides in M&A coverage, last year hiring longtime Goldman Sachs stalwart John Vaske, who worked with Weinberg.
PWP rebuilt its restructuring team after Kramer's departure and the company listed its shares in 2021. Its stock price has doubled in the past year and its market capitalization is now around $2bn.
Cofsky, another PWP banker who attended a meeting at Kramer's home in early 2015 and who later did not join Ducera, remains at PWP.
The trial is set to last three weeks.