Lawsuit shows how money fractured friendship

February 27, 2011|By Jay Hancock

Never mix friendship and money. Stanford Rothschild did, in large quantities.

He ended up losing both, according to a lawsuit filed last week that virtually wails betrayal.

The longtime Baltimore money manager became estranged from one of his best friends and his biggest customer — a tie torn apart by friction over Rothschild's wife and the defection by his own employees and accountant, alleges a civil complaint filed in Baltimore City Circuit Court.

Bosom pal Manuel Dupkin worked behind the scenes to withdraw his fortune from Rothschild's firm and set up Rothschild employees in a new company that would manage the money, the complaint said.

"These are trusted, longtime confidants and fiduciaries," said Rothschild spokeswoman Mary Beth Kissane. "They betrayed their trust. They betrayed their duties. They betrayed Rothschild's ability to grow the business."

In plaintive detail worthy of the Oxygen channel, the lawsuit recounts Dupkin's and Rothschild's 70-year friendship as well as an alleged raid on Rothschild computers and the withdrawal of millions of dollars that had resided under Rothschild management for years.

A lawsuit is only one side of a legal dispute, and there is doubtless another version of the story. None of the lawyers for Dupkin or other defendants responded in detail to the allegations, although all said their clients would fight them.

Dupkin "had every right to move his assets," said his lawyer, Melvin Sykes, adding that his client would vigorously contest the allegations. "He never intended to set up a competing firm. He never had any interest in competition. He needed somebody to manage his own money."

What seems clear from the complaint, however, is that no relationship is so sacred it can't be undone by dollars and dudgeon. The lawsuit also offers a rare view at the big dollars managed by Baltimore investment boutiques such as Rothschild.

Dupkin, 86, and Rothschild, 85, had been friends since Franklin D. Roosevelt was president. They "thought of each other as brothers," the lawsuit said. They held each other's power of attorney. Dupkin was godfather to Rothschild's son, David. Dupkin was an "honorary vice president" of the Rothschild firm. They talked and dined together "on a virtual daily basis."

Over the years, the suit says, Rothschild increased Dupkin's wealth nearly tenfold, outperforming the overall stock market.

But after Rothschild married in the 1980s, the complaint says, the relationship began to sour. Dupkin resented not being able to spend as much time with his friend and "over time, developed an overbearing hatred" for Rothschild's wife, Cory, the lawsuit says.

From time to time, Dupkin threatened to pull his considerable fortune out of Towson-based Rothschild Capital Management, but the Rothschilds viewed these as "hollow threats" to defect to money managers with inferior investment results. Dupkin responded, the complaint alleges, by "very nearly duplicating" Rothschild's business by recruiting not only key Rothschild employees but also Rothschild's accounting firm, Gorfine Schiller & Gardyn.

Gorfine, with offices in Owings Mills, had a "secret plan" to share ownership stakes with Rothschild employees in a new firm that would manage Dupkin's money, the complaint alleges. If Dupkin's portfolio really would have generated $1.5 million in annual management fees, as the lawsuit contends, such stakes could have been quite valuable.

Reached in California, Gorfine partner Douglas Lederman declined to comment, saying he hadn't seen the complaint.

"We strongly believe that there is absolutely no merit to the claims against Gorfine," said the firm's lawyer, Kevin M. Murphy.

Gorfine joined with Fremont Knittle, a Rothschild vice president and member of the firm's four-person investment committee that managed more than $500 million, the lawsuit says. The complaint alleges that Knittle and others who worked for both Gorfine and Rothschild improperly accessed Rothschild computers and obtained confidential information last year on the Friday before Labor Day weekend, when few people were in the office.

"We will vigorously defend the vengeful and baseless allegations," said Knittle's lawyer, Leslie D. Hershfield.

Rothschild's suit includes allegations that the withdrawal and the departure of Knittle and another employee to work for the new firm disrupted big plans to expand Rothschild.

Neither side would give the size of Dupkin's portfolio. But with $1.5 million in potential management fees, it's easily in the scores of millions of dollars. When that kind of dough moves from one firm to another, hard feelings almost always result.

But not usually lawsuits. And not the destruction of personal bonds forged seven decades ago. Rothschild's organization seeks $100 million in compensatory damages, alleging breach of loyalty, business interference, conspiracy and other sins.

A court of law must decide whether those allegations have merit. Or whether they're merely shards of bitterness from a fractured friendship.

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