Friday, May 30, 2008, 10:23 AM

Securities Advisor Enjoined by Federal Judge in Pittsburgh

By Todd
The authors of this blog have experience litigating departing broker and financial advisor cases - and as market turmoil and institutional shake-ups continue to roil that industry, these cases are flourishing.

The cases all seem to allege a common theme - a financial advisor with an employment agreement promising to be loyal and not to solicit customers upon termination has privately decided to leave for greener pastures communicates with customers advising of the departure and, when the employer catches wind of the same, all hell breaks loose. Millions of dollars of customers' invested money, and the fees generated therefrom, are at risk and everybody lawyers up for a federal court injunction hearing.

Well, the Pittsburgh Tribune-Review is reporting that a federal judge in Pittsburgh issued an injunction against an investment adviser who defected to another company, taking from his old employer a number of clients and their $4 million worth of investment assets.

U.S. District Court Judge Gary Lancaster's order on Thursday bars Mark A. Kovacs of Uniontown from using any confidential information from his former employer, NatCity Investments, Inc.

Kovacs resigned last month from NatCity and joined BPU Investments Inc.

Kovacs joined NatCity's Private Client Group in 1996 and handled "many of NatCity's largest and most valuable individual and institutional clients," according to the motion.

NatCity accused BPU of using the client information to "divert potential customers away from NatCity to BPU," according to the filing.

NatCity is an investment unit of National City Corp., with offices in Pittsburgh, Ligonier and Uniontown.

BPU Investments has offices in Pittsburgh and Greensburg.

Kovacs was accused by NatCity of breach of contract and fiduciary duty, misappropriation of trade secrets, conversion of corporate assets, unfair competition and unjust enrichment.
According to the injunction motion, Kovacs, who managed $100 million in investments at NatCity, resigned from NatCity on April 18 but four days earlier began "to systematically e-mail highly confidential NatCity documents" containing the names, account numbers and financial information to his new employer.

Four days after he resigned, NatCity alleged that BPU President Robert Unkovic sent letters to NatCity clients announcing that Kovacs was joining BPU. NatCity alleges that the company lost $4 million worth of business when 18 clients jumped to BPU.

Seeing as the financial advisor only successfully persuaded $4 million worth of assets-under-management to leave with him, we'd consider this a big win for NatCity. They've still got 96% of the financial advisor's book-of-business under control and have an injunction against the financial advisor that likely impairs his ability to service the $4 million the client's transferred to the new operation.


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