Tuesday, April 24, 2007, 4/24/2007 10:20:00 AM

U.S. Investment Banking Firm BlackRock Sues U.K. Competitor, Shroders PLC, With Employee Raiding and Theft of Confidential Information Claims

By Todd
The financial services industry continues to be rocked by the continuing threats of key employee departures.

Portfolio Media is reporting that BlackRock Inc. has slapped U.K. investment bank Schroders PLC with a lawsuit, striking back at its asset-management rival for luring away the former head of its German business and potentially revealing confidential company information.

BlackRock filed suit Friday in the U.S. District Court for the Southern District of New York against Schroders, a move triggered by the latter’s hiring of Achim Kussner, BlackRock’s one-time operations manager. “The e-mails show Mr. Kussner and defendants Schroder acted in concert to solicit and entice a team of key employees to resign from BlackRock Germany and join defendant Schroders,” the suit said.

The dispute dates back to early March when Kussner, who fronted BlackRock's institutional and retail businesses in Germany and Austria, announced that he was leaving the asset-management firm. Though he tendered his resignation, he remained on "garden leave" from the company through June 30, according to the lawsuit. Under garden leave, an employee continues to receive a salary, but is asked to refrain from working during this time period in order to thwart employees from leaving to go work for competitors, according to court papers.

But Kussner’s resignation kicked off an exodus from the company, with five other employees also choosing to leave BlackRock, court papers reveal. BlackRock believes that Kussner and Schroders hatched a plot to steal key members of the firm’s management team, a violation of Kussner’s fiduciary duty, according to BlackRock."Defendant Schroders has knowingly and intentionally acted to deplete BlackRock's human resources at BlackRock Germany, and to obtain and use for defendant's own advantages BlackRock's confidential information about its operations, compensation and employees," the lawsuit said.

BlackRock maintains that Kussner began trying to recruit its employees and convince them to leave the company as early as December 2006, according to the suit. The asset management company is seeking an injunction that forbids Schroders' employment of Kussner and from interfering with his contractual obligations with BlackRock in addition to damages.

BlackRock expressed fear that Kussner will choose not to honor his obligations under BlackRock's confidentiality and employment policy, which he signed off on after becoming a managing director in September. "Instead, he has specifically contended to BlackRock that his restrictive covenants were not binding upon him, effectively repudiating his agreements and clearly demonstrating that he intends to solicit further employees away from BlackRock and BlackRock Germany and to utilize and disclose BlackRock confidential information to Defendant Schroders," the suit said.

Schroders, for its part, has denied the claims and maintains that the company has done nothing wrong."We do not believe that there is any basis for this claim against Schroders filed in the U.S. courts," a spokesman said, Dow Jones reported.The case is Blackrock Inc. v. Schroders PLC, case number 1:07-cv-03183, in the U.S. Bankruptcy Court for the Southern District of New York.

An interesting sub-text to this lawsuit is the transfer of a great deal of investment banking business from Wall Street to London. As labor resources follow the money, we predict we'll see more and more employee defections from Wall Street to U.K.-based firms. The literature on this evolution in the investment banking capital of the world is substantial - you can find an interesting report on this here: http://www.american.com/archive/2007/february-0207/a-non-random-walk-down-wall-street.

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