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Wedbush Ordered to Pay $3.5 Million for Reprehensible Failure to Compensate Worker

Financial regulatory panel says the brokerage stiffed a municipal sales trader who was owed years worth of incentive compensation.

July 12, 2011

Wedbush Securities Inc. was ordered to pay a former municipal sales trader, Stephen Kelleher, $3.5 million for failing to give him years worth of the incentive-based compensation he was owed.

A three-person Financial Industry Regulatory Authority Inc. panel found the firm’s “morally reprehensible failure and refusal to compensate” Kelleher in a timely fashion broke California’s labor laws. A “poorly written and ambiguous employment contract” was partly to blame, the Finra panel said.

“Bringing the suit was a last resort for Mr. Kelleher,” said his attorney, Kit Knudsen, a partner at Commins & Knudsen. “No one wants to be on record being in an adversarial relationship with an employer.”

Kelleher, who joined Wedbush in 2007, had requested $4.2 million in bonus compensation he was due, but is satisfied with the arbitration award, Knudsen said.

Kelleher resigned days after the arbitration case finished up, and he is not working right now, the lawyer said.

Wedbush plans to appeal the ruling, its attorney, John Stetson, said July 8. He would not comment on the case.

Wedbush had been paying Kelleher’s salary, but not the incentive compensation that he was due, Knudsen said. The arbitration panel also blamed “a corporate management structure” that required Edward Wedbush, the majority shareholder in the firm, to approve bonus pay to senior employees. That approval “was routinely withheld,” the Finra panel wrote.

Another Wedbush employee testified that he also went for two years without receiving the incentive-based compensation due him, Knudsen said.

Edward Wedbush was originally named in the lawsuit. Kelleher dropped the case against him during the hearing, however, after Wedbush requested to testify in person, which would have delayed the hearing.  

Filed by Liz Skinner of InvestmentNews, a sister publication of Workforce Management. To comment, email editors@workforce.com.

 

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