A parade of Wall Street figures is set to testify in a highly anticipated case starting Friday surrounding Perella Weinberg Partners' decision a decade ago to fire a star executive who the elite investment bank says was planning to launch a rival firm.
PWP founders Joe Perella and Peter Weinberg, along with prominent rainmaker Robert Steele, will tell a New York court that they revealed a secret plan by Michael Cramer, the founding head of the bank restructuring practice, to launch a new competing company with three of his relatives. peers.
PWP fired Kramer and his alleged co-conspirators via voicemail in February 2015 after it said it learned of a conspiracy that it alleged was a clear violation of their employment contracts. It alleges their departure cost the bank tens of millions of dollars in lost revenue, illicit bonuses and expensive replacement hires.
Kramer responded that PWP's leadership was consumed with long-standing hostility against him and were intent on ousting him and others from the company in an attempt to seize $60 million in wages and stock, which Kramer now wanted back.
The scale of the dispute between PWP and Kramer has so far prevented a settlement in a case that financial institutions are closely watching to understand the status of non-compete clauses in employment agreements, which in recent years have faced criticism for being inappropriate restraints on trade.
“If anything, anticompetitiveness is more prominent than ever,” said Jeffrey Ellender, a partner at Schlam, Stone & Dolan, who was not involved in the case. “Companies that rely on relationships or sales are very aggressive in their application.”
In a preliminary ruling, the judge overseeing the case ruled in 2023 that non-compete agreements remain permissible in New York.
One of the main topics of the court proceedings will be an examination of PWP's actions towards Kramer's clients in the days following his dismissal.
Among the witnesses corroborating Kramer's account is an executive from Monsanto, the chemicals group that worked for him for a long time, who will testify that PWP management was more interested in retaliating against Kramer than serving Monsanto's needs after he was fired.
Kramer's lawyers are also scheduled to question PWP's former communications chief about what they said was a secret media campaign to discredit the late executives after they were fired.
Kramer has separately defeated allegations that he improperly solicited from Monsanto and another one of PWP's clients in the months after his employment was terminated in 2015.
PWP says Kramer and his restructuring colleagues, most of whom he had worked with for years across multiple companies, had been planning for months to leave and start their own competing firm.
Among the documents found in the discovery was a pitch book from a trademark consultant as well as business plans and spreadsheets detailing compensation and stock terms for a hypothetical company.
One email between Kramer and two of his allies, Deron Slunker and Joshua Shearer, contemplates naming the company KSS, which Shearer wrote reminds him of the private equity group KKR.
PWP later learned that after a dinner Kramer had with Weinberg in early 2015 where Kramer allegedly announced his resignation, some of Kramer's restructuring colleagues met for “ceremonial drinks.”
Perrella, 83, is a leading M&A dealmaker, while Weinberg, 67, comes from the family that has run Goldman Sachs for multiple generations. Steele, 73, was a longtime Goldman banker and deputy mayor of New York City, regularly advising the likes of BlackRock founder Larry Fink.
However, the star witness at the trial may be Kevin Kofsky, who a decade ago was a junior executive at PWP in his 30s who early in his career worked for Kramer.
Kowski had attended a fateful Sunday meeting in January 2015 at Kramer's home in Connecticut, where about 10 members of the then People's Action Party restructuring group had gathered.
Weeks later, Kowski told PWP management that the purpose of the meeting was to move forward with the creation of the competing company.
Kramer said in his court filings that Kofsky embellished his story after he was offered a $500,000 bonus and the opportunity to lead PWP's restructuring group after Kramer was let go.
PWP has described the dispute as a “textbook solicitation case.” However, Kramer's court filings indicate that each of the eight PWP restructuring bankers who later in 2015 joined his new firm, Ducera Partners, will testify under oath that Kramer never asked them to design a new venture or join him in New company while they do it. They are employed by PWP.
Kramer insisted he was the target of a vendetta in which Weinberg sought to put him back “in his cage,” a phrase found in an internal PWP email.
“PWP marginalized the restructuring group that Kramer led and built from scratch, underpaid them, gave them poor year-end reviews, and made it clear that PWP's prospects for advancement were narrow or nonexistent,” Kramer wrote in court papers. that his team were “unceremoniously fired before any of them had decided for sure whether they wanted to leave”.
PWP was formed in 2006 to great fanfare given the lineage of its founders. Kramer was quickly called upon to begin the restructuring practice following previous stints at Houlihan Lokey and Greenhill & Co.
He says Kramer's status as a partner at PWP prevented his summary termination.
Since 2015, Kramer's Ducera Partners has become one of the largest restructuring advisory firms, with revenue last year approaching $150 million with fewer than 50 employees, according to a person familiar with its operations.
The firm is increasingly turning to traditional mergers and acquisitions coverage, last year hiring longtime Goldman Sachs heavyweight John Vaske, who was a colleague of Weinberg's.
PWP rebuilt its restructuring group following Cramer's departure and the company listed its shares in 2021. Its share price doubled last year and its market capitalization now stands at around $2 billion.
Kofsky, the only PWP banker who was present at the meeting at Kramer's home in early 2015 and who did not later join Ducera, remains at PWP.
The trial is scheduled to last for three weeks.
