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An advisor who sold his Ohio firm to Mariner last year accuses the financial services company of fraud, alleging it engaged in a bad-faith effort to take control of his $325 million book of business for far less than it was worth.
James Hyre, who said in a federal lawsuit filed last week that he had spent his adult life developing Hyre Personal Wealth Advisors, has lodged fraud, breach of contract, negligent misrepresentation, computer abuse, tortious interference with business relationships and other claims against Mariner.
He also asks the court to invalidate the non-competition agreement made in connection with Mariner's acquisition of the firm, based in Columbus, Ohio.
A spokesperson for Mariner told ThinkAdvisor on Monday that the firm doesn't comment on pending litigation.
Hyre, who names Hyre Personal Wealth Advisors as his co-plaintiff, alleges in U.S. District Court in Kansas that Mariner's business development recruiter "made several significant promises and representations to Plaintiff Hyre on behalf of Mariner in order to induce Plaintiff Hyre to sell HPWA to Mariner."
The recruiter, for example, promised that Hyre would be able to keep operating HPWA with autonomy, manage client relationships as he previously did and be permitted to take whatever actions he saw fit, including hiring personnel, the lawsuit contends.
The recruiter also promised that Hyre's compensation from fees at Mariner would eventually increase to at least $1.5 millon a year after the advisor received a management incentive program fee, and that Hyre would be able to reduce his workload because Mariner would provide support.
Hyre contends he agreed to sell his firm's assets to Mariner, with Hyre operating his firm as a Mariner branch office, based on the national wealth management company's promises and representations.
The asset purchase agreement called for a $39 million purchase price, including $25 million in Mariner equity, $1 million in cash at closing, and up to $13 million to be paid as a management incentive three years after close based on HPWA's earnings, the complaint states.
Mariner paid Hyre a $350,000 salary, far less than he earned before the deal, on the understanding his compensation would increase substantially after the management incentive was paid, the lawsuit states.
"Unfortunately ... it became clear that many of the representations made by Defendant Mariner turned out to be false, incorrect, or misleading and that from the beginning Defendant Mariner acted in bad faith to defraud Plaintiffs of the book of business for far less than it was worth," it contends.
Hyre alleges, among other points, that after the sale closed, he was working over 80 hours a week on Mariner matters despite being promised he'd be able to cut his workload, and that Mariner's representations about providing support for HPWA and allowing the acquired firm to operate client relationships autonomously were false.
Due to the "chaotic, overburdensome work environment" that Mariner's lack of support created, HPWA's longstanding chief operating officer quit shortly after the deal closed, Hyre alleges. In addition, many Mariner operating practices imposed on HPWA, including a lack of bulk trading software, "were badly outdated and required significant hours to accomplish what were formerly simple tasks for HPWA," the complaint states.
The longtime industry pro also alleges that Mariner meddles in his client asset management by forcing Hyre to push clients into Mariner investment models rather than his own, prevented him from hiring a new advisor, and failed to provide promised client referrals.
Hyre alleges the firm terminated his employment without warning or explanation in October, later fabricated various reasons, improperly canceled his management incentive compensation, and offered and then revoked a severance payment.
When porting work information from Hyre's personal laptop to Mariner during onboarding, the company wiped important personal information from his laptop, transferred it to a Mariner device, and he has been unable to retrieve this data since his termination, the lawsuit also alleges.
Hyre also contends Mariner engaged in "predatory, extortionate, and fraudulent" conduct tied to his termination, including "making a thinly veiled threat" to file a false U5 termination form, or a "slightly less damaging" but also untrue version, if Hyre accepted "grossly one sided terms." The firm never filed a U5 form, he said.
The Financial Industry Regulatory Authority's BrokerCheck and Securities and Exchange Commission records show Hyre has over 30 years of industry experience, including roughly 20 affiliated with Raymond James before the sale to Mariner last year. They identify him as a previously registered investment advisor and broker.
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