Problems at Perella Winberg?

FBN's Charlie Gasparino reports that Perella Weinberg is facing a possible lawsuit.

The $100 Million Feud: Kramer vs. Perella Weinberg

The story has been updated with additional comments;

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One of Wall Street’s top corporate restructuring experts is threatening to go to war with investment banking titan Joseph Perella over an estimated $100 million in compensation he says Perella’s banking boutique owes him, the FOX Business Network has learned.

Michael Kramer (pictured below) and his team were fired from Perella Weinberg in February 2015 for allegedly violating their employment agreement, but according to people with knowledge of the dispute, he believes the firm owes him about $70 million and three members of his advisory group around $30 million in compensation that has been improperly withheld since their ouster. In recent weeks, Kramer’s attorneys have been negotiating with lawyers for the firm about the money, and have made it clear during these discussions that they are planning to file a lawsuit against Perella Weinberg if the money isn’t paid in the near future, according to sources close to the parties.

Kramer is widely regarded as one of Wall Street's top bankers in the business of corporate restructurings and bankruptcies, both considered among Wall Street’s most lucrative sources of revenue. He joined Perella Weinberg in 2006 after the firm bought his corporate restructuring company, the Stamford,Connecticut-based Kramer Capital Partners. He had previously worked at Greenhill & Co. (GHL), a global investment banking firm.

A spokeswoman for Perella Weinberg said in a statement: “Our decision to terminate these individuals for cause was correct. Trust is the   cornerstone of our business and they not only breached our agreements and our trust, but their actions were a clear dereliction of their duties to the Firm, our partners and our clients. We believe their assertions are entirely without merit. We will vigorously defend ourselves against their claims and we will continue to protect and enforce our rights under our agreements.” A spokesman for Kramer declined comment.

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The battle comes at a critical time in Perella Weinberg’s nine-year history. The firm was created by Perella, one of the best known bankers on Wall Street, and former Goldman Sachs (GS) partner Peter Weinberg in 2006 as a boutique that offers more personalized service to corporate clients than big houses such as Morgan Stanley (MS) and Goldman Sachs, and has managed to carve out a successful niche in the banking and corporate advisory business.
But in recent months, the firm has shown signs of strain - even as a firm spokeswoman maintains that Perella Weinberg is “on track for its third consecutive year of record revenue.”

Firm executives are scrambling to raise money across the globe, and they have recently gone on a hiring spree to replace a number of executives who have left in recent months. Meanwhile, people inside Perella Weinberg fear at least two original investors in the firm, a trust that manages the holdings of the wealthy Getty family, and Fisher Brothers, a real estate family, could ask to take their money out of the firm —a move a company spokeswoman would not deny. Representatives of the Getty family and Fisher Brothers couldn’t be reached for comment; a senior executive inside Perella Weinberg says there has been no formal discussions from either party about withdrawing their investments.

In addition to the departure of Kramer and his staff, other top executives have bolted from Perella Weinberg since the beginning of the year. Veteran investor Leon Bressler and his real estate advisory team separated from the firm late last month. But before Bressler left, he outlined a series of management changes that he thinks the company should enact, according to people with direct knowledge of the matter.

One suggestion included the replacement of the firm’s asset-management chief Tarek Abdel-Meguid with someone who he believes has more experience in managing money, these people add. Meguid is a close associate of Perella, but he has spent most of his career in investment banking. Bressler couldn’t be reached for comment and a spokeswoman for Perella Weinberg had no comment on the memo. Also heading for the exit: David Schiff, who runs the firm’s asset-based value fund, a portfolio that invests in a variety of companies including those that make auto loans. Schiff has recently told management he and his team will leave to start their own firm, the FOX Business Network has learned. Schiff couldn’t be reached for comment and a Perella spokeswoman had no comment on his planned exit.

The turmoil stems at least in part from what appears to be a clash in styles between some of these executives and Robert Steel who was appointed chief executive of the firm in May 2014. Perella himself has remained as chairman, and Weinberg heads the firm's advisory business, but Steel, the former CEO of Wachovia Bank, which he sold to Wells Fargo during the 2008 financial crisis (WFC), runs Perella Weinberg’s day-to-day operations. 

Most recently he had been a deputy mayor under former New York City Mayor Michael Bloomberg. Kramer is said to have clashed with both Steel and Perella over his views on how to run the restructuring business, and his departure is regarded on Wall Street as the most prominent and controversial the firm has suffered in its relatively short corporate history. Over the last nine years, Kramer worked on a number of high profile bankruptcy reorganizations, and since he left the firm in February, it has lost key assignments including work on the restructuring of a unit of Caesars Entertainment (CZR).

Kramer was fired by Perella Weinberg after he and his team told the firm’s senior partners that they wanted to create their own firm, people with direct knowledge of the matter say. But Perella Weinberg said Kramer and his team violated the terms of their employment agreement by seeking a change in their employment status. The firm then issued what was considered by company executives as an unusual internal memo announcing the ouster of Kramer and the three other executives. The memo quickly leaked to the media. 

“As you know, trust is the foundation of our business and we believe they fundamentally breached both our trust and our agreements,” Weinberg said in the company memo that was sent to the firm’s 450 employees.

In May, Kramer filed a noticed with the New York State Supreme Court stating that he was improperly fired and that Perella Weinberg owed his group tens of millions in “deferred compensation and equity.”

Since then, both sides have been locked in negotiations over what could amount to $100 million in back pay that Kramer and his team believes the firm still owes them, according to people with knowledge of the matter. At the heart of Kramer’s argument is that he didn’t violate his employment agreement by seeking an amicable separation from the firm.

Kramer has since launched his own advisory firm and hired the people who were fired by Perella Weinberg. The FOX Business Network has learned that if Kramer and his team file a lawsuit they will seek damages in excess of $100 million.

Following Publication, FOX Business received the following comment;

"Fisher Brothers continues to have confidence in its investment in Perella Weinberg."

-Fisher Brothers, Spokesperson 

 

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