Thirteen former fixed-income salesmen from Gruntal & Co. LLC's New York corporate bond sales desk have filed a statement of claim--a copy of which was obtained by BondWeek--with the National Association of Securities Dealers, alleging that they were all denied severance after they were terminated on July 25. Similarly, five of the 13 allege that they were denied fair value for the stock they had purchased in privately held Gruntal. Michael Riordan, Gruntal's counsel at Ressler, Amery & Ross of Morristown, N.J., would only acknowledge that he is preparing a response and was uncertain as to whether he could comment on behalf of Gruntal. The claimants have retained Liddle & Robinson of New York as their counsel. An associate with Liddle & Robinson notes that Gruntal has to file a response with the NASD by Dec. 18.
The claim says that "Gruntal's managers made specific promises to the 13 to keep them with the firm," including the repeated assurances from senior Gruntal management that "even without a written contract, they would always be taken care of at Gruntal." One salesman, Bruce Irom, "was specifically promised that, in the event the company was sold or some other event resulted in the elimination of their jobs, he would receive severance pay." The claim says that the 13 were released July 25 "because the firm wished to immediately exit the high-grade corporate bond business" and they were told by firm CEO Robert Rittereiser that they would receive no severance. He cited a Gruntal internal survey of the practices of 15 other Street firms, indicating that commission-based employees generally did not receive severance upon termination.
In a late July interview with BW Rittereiser confirmed that he refused to offer severance to the 13, arguing then that his decision to withhold severance was "in the firm's best interests." He declined comment on the existence of oral agreements on severance between the firm and the 13. Rittereiser did not return repeated phone calls to his office for additional comment last week.
In a separate section of the claim, Irom and four others say they were encouraged to purchase shares of the privately held Gruntal but did not have their money returned to them upon termination. The statement of claim argues that this is a breach of established ERISA protocols governing employee stock ownership.
The claimants are Bruce Irom, James McHugh, Scott Princer, Hugh Wallace, Gregg Schonhorn, Arthur Wolf, Matthew Shakter, Donald Clark, Leonard Kuminski, Andrew Dedick, John Akalski, Lowell Kronowitz and Brian Sullivan. Irom and McHugh are now on the corporate bond sales staff at First Tennessee Capital Markets in New York; three others now work at Bond Direct, a New York corporate bond trading subsidiary of Jefferies Group, and six work at Future Share, a corporate bond trading subsidiary of Mellon Bank. Irom and McHugh, when reached at their desks last Friday morning, declined comment and referred phone calls to their lawyers.