Williams v. Bank Of America Investments

CASE REPORT: Williams v. Bank of America Investments, NASD Arbitration, San Francisco.

In Williams v. Bank of America Investments, Levine & Baker LLP represented a former “financial advisor” (retail securities salesperson) briefly employed by BofA Investments (BofAI) in its “premier banking program,” a program placing the securities salesperson in a bank branch to prospect for sales primarily among the branch’s depositors. Mr. Williams was offered an “up-front bonus” by BofAI to induce him to switch firms. These bonuses, a common feature in the retail securities industry, are documented not as bonuses, but as loans which are forgiven pro-rata over some number of years – provided the sales person stays through the forgiveness period. Mr. Williams did not but, rather, resigned four months into his tenure. He resigned because the specific promises made to him about the program (promises material to forecasting his expected compensation) proved false and he could not make the projected income. Mr. Williams brought an action for fraud in NASD arbitration; BofAI counterclaimed on the unforgiven loan.

The only thing unusual about this case (indeed, sufficiently unusual that Bloomberg (PDF, 927KB) chose to report it) was the result: Mr. Williams prevailed, winning an award substantially in excess of the up front bonus. Typically, disappointed recruits who leave with an up front bonus unforgiven will claim broken promises as a defense, and lose. Here, however, the BofAI recruiter had made substantially similar promises to multiple recruits. Mr. Williams’ testimony was corroborated by another misled recruit who had left BofAI, but paid his loan off rather than pursue a fraud claim. He had no ax to grind. And, though the promises were not made in writing, Mr. Williams had made contemporaneous notes and had generated memos memorializing BofAI’s failures to honor its commitments during his employment. At the multi-day hearing, BofAI’s principal witness, the recruiter, proved less than credible in light of the third party testimony and Mr. Williams’ written record.

This case illustrates an important -- and very real -- lesson for prospective employees in the midst of the recruiting process. There comes a point at which “puffing” crosses the line and becomes a legally significant representation with respect to the terms and conditions of the promised employment. Even if the recruiting employer does not document such representations – you can! And if the representations prove unreliable, you can document that in a memo putting the burden on the employer to respond. Inducing someone to leave a job to take another by means of knowing misrepresentations about the new job’s terms and conditions is fraud. If the facts can be proved, even in a forum generally thought to be employer-friendly (such as NASD arbitration), a remedy for the defrauded employee may well be available.