Perella Weinberg feud goes to trial a decade after schism

A parade of Wall Street luminaries will testify beginning Friday in a highly anticipated case surrounding the decision a decade ago to fire a star executive at Perella Weinberg Partners, who The elite investment bank says there was a conspiracy to launch a rival firm

PWP founders Joe Perella and Peter Weinberg, along with top rainmaker Robert Steele, will tell a New York court that they uncovered a secret plan by Michael Cramer, the founding head of the bank’s restructuring practice, to launch a new, rival business with three of his closest associates. Colleagues

PWP fired Kramer and his alleged co-conspirators via voicemail in February 2015 after it said it learned of a plot it claimed was a clear violation of their employment contracts. It claims their departure cost the bank millions of dollars in lost revenue, unearned bonuses and costly replacement hires.

Cramer countered that PWP’s leadership was consumed by lingering animosity against him and forced him and others out of the firm in an attempt to forfeit $60 million in salary and equity, which Cramer now wants returned.

The amount of bad blood between PWP and Cramer has so far prevented settlement of a lawsuit that financial institutions are closely watching to understand the status of non-compete clauses in employment contracts, which have drawn criticism in recent years for being inappropriately restrictive. trade

“If non-competes are more important than ever,” said Jeffrey Eilander, a partner at Schlam, Stone & Dolan who is not involved in the litigation. “Relationship or sales-oriented firms are very aggressive in their application.”

In a preliminary ruling, the judge overseeing the case ruled in 2023 that non-compete agreements were permissible in New York.

Among the key issues in the court proceedings will be an examination of PWP’s actions toward its clients in the days following Cramer’s termination.

Witnesses supporting Cramer’s account will include an executive from Monsanto, the chemical group he has long worked with, who will testify that PWP’s management was more interested in retaliating against Cramer than meeting Monsanto’s needs after his termination.

Cramer’s lawyers are also set to question the PWP’s former communications chief over what they say was a covert media campaign to get ousted officials fired.

Cramer has separately contested claims that he improperly solicited Monsanto and another of his PWP clients in the months following his 2015 termination.

PWP said Cramer and his restructuring colleagues, many of whom he had worked with for years at multiple firms, had been plotting for months to leave and start over at their rival firm.

Documents found in discovery include a branding consultant’s pitch book as well as business plans and spreadsheets detailing compensation and equity terms for a hypothetical firm.

An email between Cramer and two of his associates, Deron Sloneker and Joshua Scherer, suggested a firm was considering naming it KSS, which Scherer said reminded him of private equity group KKR.

PWP later learned that after a dinner Cramer had with Weinberg in early 2015 where it alleged Cramer announced his resignation, some of Cramer’s restructuring colleagues met for “celebratory drinks.”

Perella, 83, is a pioneering M&A dealmaker, while 67-year-old Weinberg comes from the family that ran Goldman Sachs for multiple generations. Steele, 73, was a longtime Goldman banker as well as a deputy mayor of New York City and regularly advised the likes of BlackRock founder Larry Fink.

Yet the star witness at trial could be Kevin Kofsky, who a decade ago was a PWP junior executive in his thirties and worked with Cramer early in his career.

Kofsky attended an ill-fated Sunday meeting at Cramer’s Connecticut home in January 2015 where about 10 members of the then-PWP reconstruction group had gathered.

Kofsky told PWP management weeks later that the purpose of the meeting was to create a rival firm.

Cramer said in his court filing that Kofsky embellished his story after being offered a $500k bonus and the opportunity to lead the PWP restructuring group after Cramer was jettisoned.

PWP described the dispute as a “textbook solicitation case”. Cramer’s court filing, however, mentions each of PWP’s eight restructuring bankers who later joined his new firm, Ducera Partners, in 2015, will testify under oath that Cramer never asked them to design a new venture or join a new firm. was employed by PWP.

Cramer insisted he was the target of a vendetta in which Weinberg wanted to “put him back in his cage,” a phrase found in an internal PWP email.

“For the restructuring group that Cramer led and built from scratch, PWP marginalized them, underpaid them, impoverished their year-end reviews, and made their prospects for advancement at PWP seem narrow or non-existent,” Cramer said in court papers. wrote, adding that his team had been “uncertainly fired before deciding whether any of them wanted to go”.

PWP was formed in 2006 with a pedigree of its founders. Kramer was brought in quickly to start a restructuring practice after his previous stints at Houlihan Law and Greenhill & Co.

Cramer’s status as a PWP partner, he says, prevented him from being summarily terminated.

Kramer’s Ducera Partners has become one of the top restructuring advisory firms since 2015, generating $150mn in revenue last year with fewer than 50 employees, according to a person with knowledge of its operations.

The firm is increasingly pushing into traditional M&A coverage, last year hiring longtime Goldman Sachs heavyweight John Vask, who was a colleague of Weinberg’s.

After Cramer left, PWP reorganized its restructuring group and the company listed its shares in 2021. Its stock price has doubled in the past year and its market capitalization is now around $2 billion.

Kofsky, a PWP banker who attended meetings at Cramer’s home in early 2015 who later did not attend Ducera, remains at PWP.

The trial will continue for three weeks.