PaineWebber sues to halt raiding amid Kidder deal

October 29, 1994|By New York Times News Service

NEW YORK -- Seeking to prevent wholesale defections at Kidder Peabody & Co., the PaineWebber Group Inc. sued two rivals yesterday, accusing them of offering "exorbitant" financial incentives to lure Kidder's top brokers away before PaineWebber completed its takeover of Kidder.

In separate lawsuits, filed in New York City and Chicago, PaineWebber contended that the recent hiring of Kidder brokers by Donaldson, Lufkin & Jenrette Inc. and Dean Witter Reynolds Inc. constituted a raid that could jeopardize its deal to buy Kidder from General Electric Co. for $670 million in stock.

PaineWebber requested a court order to stop both firms from continuing their hirings, lest it lose hundreds of Kidder's best brokers.

Several of the brokers who have left Kidder since the PaineWebber takeover was announced on Oct. 17 pulled in $1 million or more in commissions each year.

Still, PaineWebber's lawsuits stand out in a competitive industry in which rivals routinely hire top producers away from each other with bonuses and incentives.

In a telephone interview, Joseph Grano, who runs PaineWebber's retail brokerage operations, said the firm had not yet had an opportunity to discuss the details of the Kidder takeover with Kidder's brokers and it thought it needed to act quickly to stem defections until it could do so.

For their part, Dean Witter and Donaldson, Lufkin & Jenrette denied any wrongdoing.

"Kidder professionals have a right for whichever firm they choose," Cathy Conroy, a Donaldson Lufkin spokeswoman said. "Donaldson, Lufkin & Jenrette did not initiate any contact whatsoever with any current Kidder Peabody professionals," she added, contending that the firm had merely "responded to the incoming phone calls that we have received from Kidder Peabody professionals."

Dean Witter said it was "surprised" by the lawsuit, "and believes it is totally without merit."

Retaining a hoped-for 75 percent of Kidder's stable of 1,150 brokers -- while hanging on to its own top people -- was seen as a major chal

lenge confronting PaineWebber. Kidder's brokers, one of the most productive groups on Wall Street, were seen as the most attractive asset PaineWebber was acquiring.

Dean Witter has already added a half-dozen Kidder brokers. And James Flynn, a company spokesman, told the Wall Street Journal earlier this week that the firm would like to hire as many as 300.

Increasingly, loyalty does not stand for much on Wall Street. Earlier this year, PaineWebber itself was courting Kidder brokers with gross commissions of $1 million or more.

But Mr. Grano of PaineWebber said: "There is a difference between hiring another broker and raiding a business.

"When a firm says, 'We are going after 300 of Kidder's brokers,' that is not normal recruiting," he said.

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