Wedbush ordered to pay $3.5M for 'morally reprehensible failure'

Wedbush Securities Inc. was ordered to pay former municipal bond trader Stephen Kelleher $3.5 million for failing to give him years' worth of incentive-based compensation he was owed. A three-person Financial Industry Regulatory Authority Inc. panel found that the firm's “morally reprehensible failure and refusal to compensate” him in a timely fashion broke California's labor laws. A “poorly written and ambiguous employment contract” was partly to blame, the Finra panel said. “Bringing the suit was a last resort for Mr. Kelleher,” said his attorney, Kit Knudsen, a partner at Commins & Knudsen PC. “No one wants to be on record being in an adversarial relationship with an employer.” Mr. Kelleher, who joined Wedbush in 2007, had requested $4.2 million in bonus compensation that he was due, but he is satisfied with the arbitration award, Mr. Knudsen said. Mr. Kelleher resigned days after the arbitration case finished up and he isn't employed now, the lawyer said. Wedbush plans to appeal the ruling, its attorney, John Stetson, said. He declined to comment on the case. Wedbush had been paying Mr. Kelleher's salary but not the incentive compensation that he was due, Mr. Knudsen said. The arbitration panel also blamed “a corporate management structure” that required Edward W. Wedbush, the majority shareholder in the firm, to approve bonus pay to senior employees. That approval “was routinely withheld,” the Finra panel wrote. Another Wedbush employee testified that he also went for two years without receiving the incentive-based compensation due him, Mr. Knudsen said. Mr. Wedbush was originally named in the suit. Mr. Kelleher dropped the case against him during the hearing, however, after Mr. Wedbush requested to testify in person, which would have delayed the hearing. E-mail Liz Skinner at lskinner@investmentnews.com.