FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
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`NYSCEF DOC. NO
`. 438
`NYSCEF DOC. NO. 438
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`653340/2016
`INDEX NO. 653340/2016
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`INDEX NO~
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`3F:
`RfiCfiIVfiD VYSC
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`RECEIVED NYSCEF: 09/25/2017
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`FINRA ARBITRATION Submission Agreement
`
`In the Matter of the Arbitration Between
`
`W
`
`Gianluca Passaretta
`
`3W
`
`UBS Securities LLC
`
`
`14-00740
`
`1. The undersigned parties (“parties”) hereby submit the present matter in controversy, as set
`forth in the attached statement of claim, answers, and all related cross claims. counterclaims
`and/or third—party claims which may be asserted, to arbitration in accordance with the FINRA By—
`Laws, Rules, and Code of Arbitration Procedure.
`
`2. The parties hereby state that they or their representative(s) have read the procedures and
`rules of FINRA relating to arbitration, and the parties agree to be bound by these procedures and
`rules.
`
`3. The parties agree that in the event a hearing is necessary, such hearing shall be held at a time
`and place as may be designated by the Director of Arbitration or the arbitrator(s). The parties
`further agree and understand that the arbitration will be conducted in accordance with the FINRA
`Code of Arbitration Procedure.
`
`4. The parties agree to abide by and perform any award(s) rendered pursuant to this Submission
`Agreement. The parties further agree that a judgment and any interest due thereon, may be
`entered upon such award(s) and, for these purposes, the parties hereby voluntarily consent to
`submit to the jurisdiction of any court of competent jurisdiction which may properly enter such
`judgment.
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`NYSC 3F DOC. NO. 438
`NYSCEF DOC. NO. 438
`
`IND
`EX NO.
`653340/2016
`INDEX NO. 653340/2016
`
` VYSC
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` 4|IV-i .D
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`3F:
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`RECEIVED NYSCEF: 09/25/2017
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`5. The parties hereto have signed and acknowledged the foregoing Submission Agreement.
`
`
`Date
`
`Va:
`
`'/
`UBS Securities
`State Capacity i other than individual (e.g., executor, trustee. corporate officer)
`
`/,
`
`
`
`LC43A: SUBMISSION AGREEMENT
`idr: 02/09/2009
`
`RECIPIENTS:
`
`Anne Schmidt, UBS Securities LLC
`UBS Securities LLC, Legal Dept.- 14th Floor, 1285 Avenue of Americas, New York, NY
`10019
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`NYSCI
`3F DOC. NO. 438
`NYSCEF DOC. NO. 438
`I.
`
`INDEX NO. 653340/2016
`INDEX NO. 653340/2016
`
`
`
`
`
`
`«IVaD uYSCEF: 09/25/2017
`RECEIVED NYSCEF: 09/25/2017
`
`LIDDLE & ROBINSON, L.L. P.
`
`BUD THIRD AVENUE
`
`NEW YORK, N.Y. ”31322
`
`
`(212) EB7~BSOD
`FACSIMILEZ (212) 687-IECIS
`wwwltddleroblnsoncom
`
`MIRIAM M. ROBINSON (warmers)
`
`E—MAIL: bbortnick@lidd1erobinson.com
`
`BLAINE Hr EURTNICK
`DAVID I, GREENBERGER
`MICHAEL E. ERENERT
`JAMES WI HALTER
`JAMES R. HUBBARD
`JEFFREY L. LIDDLE
`DAVID M MAREK
`CHRISTINE A. PALMIERI
`ANDREA MI PAPARELLA
`MARC Ar SUSSWEIN
`
`BY HAND
`
`Linda D. Fienberg, Esq.
`President and Director of Arbitration
`
`FINRA Dispute Resolution, Inc.
`One Liberty Plaza
`165 Broadway, 27th Floor
`New York, New York 10006
`
`March 5, 2014
`
`SHERRY M. SHORE
`MATTHEW J. MCDONALCI
`GEOFFREY R BOWSER
`JENNIFER RODRIGUEZ
`iJ.Ri RDTHSTEIN
`ROBERT L. ADLER
`KRISTA E. BOLLES‘
`CAITLIN D. BROWN'
`CARA B. CHUMSKI“
`
`‘AWAiIINIa AUMIH'JILIN
`"AICIMITTECI
`IN ILLINOIS ONLY
`
`Re:
`
`Gianluca l’assaretta V. UBS Securities LLC
`
`\\5\.. bb—‘WQ
`
`Dear Ms. Fienberg:
`
`We represent the Claimant, Gianluca Passaretta, and file the following Statement of
`Claim on his behalf, pursuant to Rule 13302 of the FINRA Code of Arbitration Procedure for
`Industry Disputes, against UBS Securities LLC (“UBS”), Mr. l’assaretta’s former employer.
`
`PRELIMINARY STATEMENT
`
`UBS wrongfully terminated Mr. Passaretta’s employment based on unsupported
`and incorrect allegations of inappropriate behavior. UBS then filed a false and defamatory Form
`U5 Uniform Termination Notice For Securities Industry Registration, which impaired Mr.
`Passaretta’s ability to find other comparable employment in the securities industry.
`
`Mr. Passarctta’s claims arise from (I) UBS’S illegal forfeiture of Mr. Passarctta’s
`deferred compensation, in an approximate amount not less than $1,173,l l0;1 (2) UBS’s failure to
`pay Mr. Passaretta earned incentive compensation for his work in 2013; and (3) damage U88
`
`1 See footnote 4 mfra for a breakdown of Mr. Passaretta’s forfeited deferred compensation.
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`
`NYSCEF DOC. NO. 438
`NYSCEF DOC. NO. 438
`
`INDEX NO. 653340/2016
`INDEX NO~ 653340/2016
`
`
`
`
`
`
`RaCaIVaD VYSCEF: 09/25/2017
`RECEIVED NYSCEF: 09/25/2017
`
`LIDDLE & ROBINSON, L.L.P.
`
`Linda I). Fienberg, Esq.
`
`—2-
`
`March 5, 2014
`
`l’assaretta’s career and reputation in connection with the termination of his
`caused to Mr.
`employment. Accordingly, Mr. Passarctta seeks an award of his damages, plus attorneys’ fees,
`interest and costs, and any such other and further relief as this Panel deems appropriate. Mr.
`Passaretta also seeks expungement of the defamatory language contained on his Form U5
`regarding the reason for IIBS’s termination of his employment.
`
`FACTUAL BACKGROUND
`
`UBS Hires Mr. Passarctta
`
`Mr. Passaretta, who is an Italian national, has worked in the securities industry
`since 1995. For approximately eight years, from 1995 to 2003, Mr. Passaretta worked at BNl’
`Paribas, where he was a Senior Latin America FX and Interest Trader. From 2003 to 2008, for
`just over five years, Mr. Passaretta served as Head of Latin America Interest Rate Derivatives
`Trading at Barclays Capital Inc. Subsequently, Mr. Passaretta was employed as Head of Latin
`America Trading at Calyon Securities (USA) Inc. Mr. l’assaretta holds his Series 1.7 (Limited
`Registered Representative (International)), 24 (General Securities Principal), and 63 (State Law
`Uniform Securities Agent) licenses with FTNRA.
`
`In or around October 2009, UBS hired Mr. Passaretta as Head of Latin America
`Derivatives Trading within its Fixed Income, Currencies and Commodities (F ICC) Area, based
`in Stamford, Connecticut. Upon joining UBS, Mr. Passaretta reported initially to James
`Lanzilotti, then Head of Emerging Markets Foreign Exchange and Interest Rate Trading. Mr.
`Passaretta was responsible For trading derivative products across the Latin America region,
`including swaps, options and inflation products.
`
`Mr. Passaretta’s Strong Performance On Behalf Of UBS
`
`Throughout his employment at UBS, Mr. Passaretta was recognized for his
`outstanding performance.
`In or around March 2012, Mr. Passaretta replaced Mr. Lanzilotti as
`Head of Emerging Markets Foreign Exchange and Interest Rate (Rates) Trading.
`In 2012, the
`trading operation Mr. Passaretta supervised was attributed with generating approximately $220
`million in annual profit—and—loss (“I’&L”) for UBS, which covered approximately 18 traders
`reporting to Mr. Passaretta across the US, Mexico and Brazil. Mr. Passaretta was also
`responsible for significant production in his individual capacity, overseeing a trading book that
`generated approximately $12 million in 2010, $32 million in 2011, and $65 million in 2012.
`
`In or around November 2012, UBS implemented a restructuring within the
`overarching FICC business unit in which Mr. Passaretta worked, largely dismantling the trading
`operation for which Mr. l’assaretta was responsible. As a result, Mr. Passaretta was left with
`only two Rates traders in Mexico and two Rates traders in Brazil. During the spring of 2013,
`Mr. Passaretta’s senior managers charged him with responsibility for running a consolidated
`Latin American Trading business comprised of Rates and Credit areas. To that end, Mr.
`Passaretta prepared a business plan for senior management and hired three Credit traders. By
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`
`NYSCEF DOC. NO. 438
`NYSCEF DOC. NO. 438
`
`INDEX NO. 653340/2016
`INDEX NO~ 653340/2016
`
`
`
`
`
`RaCaIVaD VYSCEF: 09/25/2017
`RECEIVED NYSCEF: 09/25/2017
`
`LIDDLE & ROBINSON. L_L.P.
`
`Linda I). Iiienberg, Esq.
`
`-3~
`
`March 5, 201,4
`
`April 2013, Mr. I’assaretta‘s Latin America Rates and Credit ’l‘rading operation was underway,
`but operating on an ad hoc basis under a highly restricted risk limit framework.
`
`The Brazil [R Swag
`
`On the afternoon oi May22013-, a Brazil-based Rates trader who
`reported to Mr. Passaretta sought Mr Passaretta s permission to transact a derivatives trade
`against
`the Brazil
`interest rate, known as an interest rate swap transaction (the'Bra/i1 IR
`Swap ). [he proposed Brazil IR Swap involved two competing transactions against the Brazil
`interest rate that, when netted together, would effectively limit U BS’s market risk exposure with
`respect to the Brazil interest rate to a minimal level, and make a profit for LIBS; Mr. I’assaretta’s
`group had executed similar transactions with regular frequency during the preceding timeframe
`and it was anticipated that the Brazil IR Swap would be approved.
`
`Mr. - proposed Brazil IR Swap could not be executed however until UBS
`Market Risk approved the notional value of the underlying swap transactionswhich approval
`Mr. Passaretta promptly sought. Mr.
`I’assaretta immediately raised the market,
`timing and
`liquidity details bearing on the proposed Brazil IR Swap trade, and associated risk factors, with
`the most senior and relevant.
`trading manager and risk officers in his line of command.
`Specifically, Mr. Passaretta explained the transaction in person to the Market Risk representative
`responsible for his business area, Natalia Ovchinnikova, who in turn, video—conferenced in her
`superior, Mark Sanbom, Chief Risk Officer,
`to discuss the transaction collectively with Mr.
`Passarctta.
`In addition, Mr. Passaretta presented the proposed Brazil IR Swap in person to his
`indirect senior manager, Chris Murphy, Global [lead of Rates and Credit, who was normally
`based in London but was visiting the New York City office that day.
`
`All of the individuals to whom Mr. Passaretta presented the proposed Brazil IR
`Swap agreed that the trade entailed minimal interest rate sensitivity, and thus minimal risk to
`UB8. As a corollary, all understood that the underlying notional values of the swap transactions
`comprising the trade did not reflect a key measure for gauging the trade’s economic exposure.
`Mr. Murphy indicated his support for the Brazil IR Swap by liaising directly with Market Risk to
`help procure approval For its execution. As a result of these communications, Mr. Passaretta was
`
`
`
`2 An interest rate swap transaction concerns “an agreement between two parties (known as counterparties) where
`one stream of future interest payments is exchanged for another based on a specified principal amount Interest rate
`swaps otten exchange a fixed payment tor a floating payment that is linked to an interest rate (most otten the
`l IBOR). A company will typically use interest rate swaps to limit or manaoe exposure to fluctuationsin interest
`rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.
`
`‘ tert’Stt‘Atcs
`<litttp'
`léitf.l:¥i.:l£)3j,9.8$0QEQiéfiQWL‘iQ!
`
`ln an interest rate swap transaction, the notional principal amount refers to “the predetermined dollar amounts on
`3
`which the exchanged interest payments are based. Notional principal never changes hands in the transaction, which
`is why it is considered notional. or theoretical. Neither party pays or receives the notional principal amount at any
`time: only interest rate payments change hands."
`*Ilittnzzk’tt aw. inrestoimiia.con1/16rim/11mmionalprirwinalarnoinitaspe
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`NYSCI
`3F DOC. NO. 438
`NYSCEF DOC. NO. 438
`
`653340/2016
`INDEX NO. 653340/2016
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`INDEX NO~
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`RnCfiIVfiD \IYSCEF:
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`RECEIVED NYSCEF: 09/25/2017
`
`LIDDLE 5: ROBINSON. L.L.F’.
`
`linda D. Fienbcrg, lisq.
`
`~4-
`
`March 5. 2014
`
`led to understand that, in the worst case scenario, the preposed Brazil IR Swap trade would be
`approved for execution on a reduced level.
`
`IR Swap to Market Risk, Mr.
`After he had finished presenting the Brazil
`Passaretta returned to his desk.
`It was then, while approval for the Brazil IR Swap was pending.
`that Mr. Passaretta discovered that Mr. - assisted by junior staff under his trading direction,
`had proceeded with executing the Brazil IR Swap trade, without pro—approval by Market Risk or
`Mr. Passaretta.
`Immediately. Mr. Passaretta informed Mr. - that the relevant areas of the firm
`were still working to confirm approval for the trade, and discussed with him the logistics and
`timing for potentially unwinding the Brazil IR Swap.
`
`Shortly after, Mr. Passaretta learned. for the first time, through UBS Market Risk
`representative Douglas Ellison,
`that the Brazil IR. Swap would require approval by-
`who was based in Zurich, because its underlying swap transactions
`totaled more than- in notional value. This came as a shock to Mr. Passaretta. Mr.
`Passaretta thus realized that the tirm’s internal procedural constraints were unlikely to allow for
`such approval within a meaningful timeframc, and certainly not before the trading day close.
`Consequently. Mr. Passaretta commenced with Mr. - in attempting to unwind the Brazil IR
`Swap,
`to the greatest extent possible before the market closed that day. By the end of that
`trading day, the Brazil IR Swap was successfully unwound from a notional value 0f$18 billion
`to $9 billion.
`
`After the close of trading, Mr. I’assaretta informed Mr. Murphy of the outcome of
`the Brazil IR Swap, including the fact of Mr. - unauthorized execution of the Brazil IR Swap
`- without internal pie—approval and without Mr. I’assaretta’s knowledge — and the final result of
`having successfully unwound the trade from a notional value of $l8 billion to $9 billion. Mr.
`Murphy, who understandably became upset, immediately called Mr. - to reprimand him for
`having executed the Brazil IR Swap without pre—approval. Subsequently, after that conversation
`with Mr, - Mr. Murphy called Mr. I’assaretta into his office. and said - is toast.”
`Mr. Murphy then asked Mr. Passaretta, “did you know about this?” (meaning did Mr. Passaretta
`approve Mr. - execution of the Brazil IR Swap). to which Mr. Passaretta replied, “no.” Mr.
`Murphy was subsequently responsible for conferring with Market Risk on the resulting trade
`circumstances.
`
`Later that afternoon, Mr. Passaretta conferred further with Ms. Ovchinnikova on
`the resulting Brazil IR Swap trade circumstances. Ms. Ovchinnikova did not indicate that any
`additional action was needed by Mr. Passarctta, even when Mr. Passaretta indicated that the trade
`could be unwound further. 0n the following day, Mr. Passaretta conferred with Mr. Sanbom on
`Mr. - unauthorized conduct and the resulting Brazil IR Swap trade circumstances. Mr.
`Passaretta revisited with Mr. Sanborn the subject of how stunned everyone involved had been to
`learn of the seemingly new, and previously buried,— notional value threshold, and the
`arduous internal approval policy concerning notional value risk limitations. ”they discussed that
`Mr. - had anticipated that the Brazil IR Swap would be approved because similar trades had
`gone through previously without issue and the nature of the Brazil IR Swap was of minimal risk
`consideration.
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`
`NYSCEF DOC. NO. 438
`NYSCEF DOC. NO. 438
`
`INDEX NO. 653340/2016
`INDEX NO~ 653340/2016
`
`
`
`
`
`RaCaIVaD VYSCEF: 09/25/2017
`RECEIVED NYSCEF: 09/25/2017
`
`
`
`LIDDLE & RDBlNSON, LiL.F’.
`
`Linda D. l’ienberg, Esq.
`
`~5-
`
`March 5, 2014
`
`Several days later, U BS Legal commenced an internal review of the Brazil IR
`Swap trade. While the review was ongoing, Mr. Passaretta was excluded from a salary increase
`which UBS implemented in his area during that time.
`
`On June 25, 2013, UBS informed Mr. Passaretta of its decision to terminate his
`employment effective on or about July 9, 2013, based on his conduct in connection with the
`Brazil IR Swap trade. During that timet‘rame, UBS indicated to Mr. Passaretta that the reasoning
`behind his termination was related to his conduct in connection with its internal policies. Upon
`information and belief, no similar action was taken against Mr. - despite his having actually
`executed the underlying trade at issue, without anyone‘s permission.
`
`Less than one week later, on or around July I, 2013, upon information and belief,
`UBS issued a revised Market Risk Control policy which specifically exempted Emerging
`Markets single currency interest rate swaps from requiring pre—approval from Market Risk with
`respect to their notional value, subject to the new metrics of the revised policy which focused on
`interest rate sensitivity,
`
`On or around July 25, 2013, UBS filed a Form I35 Uniform Termination Notice
`For Securities Industry Registration with I’INRA in connection with its termination of Mr”
`Passaretta’s employment, stating his End Date of employment as June 25, 2013. Among other
`things,
`on
`the Form US, UBS made
`several
`inaccurate
`statements,
`including its
`mischaracterization of Mr. Passaretta’s Reason for Termination as Permitted to Resign, followed
`by the "l‘ermination Explanation:
`
`EMPLOYEE WAS PERMIVI‘ED ’I‘O RESICiN AF'I‘ER 'I‘Iili
`FIRM DETI‘BRMINI‘ZD
`HIS
`PERFORMANCE
`AS
`A
`SUPERVISOR DID NOT M‘l’iE'I~ THE FIRM’S EXPEC’I‘A’I‘IONS
`
`Mr. Passaretta, however, did not resign his employment with UBS.
`
`In addition, on the Form US, U BS answered “yes” to Disclosure Question 7F(3),
`which asks “Did the individual voluntarily resign from your firm, or was the individual
`discharged or permitted to resign from your firm, after allegations were made that accused the
`individual of failure to supervise in connection with investment—related statutes, regulations,
`rules or industry standards ot‘conduct‘?” On the related Termination Disclosure Reporting Page,
`UBS explained its “yes” answer by alleging that:
`
`FIRM INVESTIGA'I‘ED FAILURE, TO COMPLY WITH AN
`INTERNAL TRADE PRE~APPROVAL POLICY.
`
`The violation of which LIBS accused Mr, I’assaretta, however, was with respect to an internal
`policy, which is different than the “investment-related statutes, regulations, rules or industry
`standards of conduct” that
`the Form US asks about. Therefore, UBS was not justified in
`answering “yes” to Disclosure Question 717(3) on the Form U5.
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`NYSCI
`3F DOC. NO. 438
`NYSCEF DOC. NO. 438
`
`653340/2016
`INDEX NO. 653340/2016
`
`INDEX NO~
`
`
`
`
`RnCfiIVfiD \iYSCEF:
`09/25/2017
`RECEIVED NYSCEF: 09/25/2017
`
`LlDDLE & ROBINSON, L.L.P,
`
`Linda 1). Fienberg, Esq.
`
`«6—
`
`March 5, 2014
`
`i’assaretta applied for several jobs.
`Following his termination from UBS, Mr.
`Despite numerous interviews, Mr. Passarctta was denied meaningful employment opportunities
`as a result of the assertions set forth in the aforementioned FlNRA tiling. Consequently, Mr.
`l’assaretta was forced to accept employment in a lesser position than the position he held at the
`time he left UBS.
`
`The Conflicting Basis for Mr. Passaretta’s Termination
`
`The reasons given for UBS’s termination oer, Passaretta are conflicting because
`UBS fundamentally agreed with the economics of the Brazil 1R Swap.
`Indeed, UBS senior
`management, in conjunction with Market Risk, sought extensively to help facilitate authorization
`of the Brazil
`IR Swap initially,
`Subsequently, upon learning of its execution and Mr.
`Passaretta’s resulting unwind efforts, UBS (i) ultimately rejected Mr, Passaretta’s offer to
`unwind the trade beyond a $9 billion notional value, and (ii) modified its internal policies to
`accommodate similar trades without issue in the future. Upon information and belief, UBS
`earned a profit of approximately $375,000 as a result of the Brazil 1R Swap.
`
`(1138’s accusation on Mr. Passaretta’s liorm U5, whereby it alleged
`Moreover,
`Mr. Passaretta’s failure to supervise. contradicted the acknowledgement by Market Risk that ML
`- and not; Mr. Passaretta, was responsible for having executed the underlying Brazil 1R Swap
`at issue without internal pro—approval. Namely, Mr. - executed the Brazil 1R Swap without
`waiting to receive confirmation from Mr Passaretta that Market Risk had approved the trade.
`
`U 138 sought to portray Mr. Passaretta’s termination in a negative light for the
`purpose of its deferred compensation plans, in order to treat Mr. Passaretta’s outstanding earned
`but deferred compensation as “tor'feited.” During his employment, UBS paid a significant
`portion of Mr. Passaretta’s compensation in deferred form, of which Mr. Passaretta lost
`approximately 31,1711 10 as a result of U BS’s actions.4 Notably, discovery and the testimony
`elicited during the hearing may demonstrate that UBS had identified individuals in Mr.
`l’assaretta’s business area for termination during the preceding timeframe, and jumped at the
`opportunity to effectuate Mr. Passaretta’s termination in a manner so that it could retain Mr.
`Passaretta’s outstanding deferred compensation.
`
`
`
`1 Specifically, as of the time of his termination, Mr, Passaretta had earned deferred compensation that remained
`outstanding in an estimated amount totaiing $1173, l 10, comprised of41,277 shares and $53,333 in cash earned for
`the years 2009 through 2011, plus a deferred compensation grant valued at $390,000 for his work in 2012, as
`follows: (i) for his work in 2000, $53,333 in deferred cash compensation under the U88 Deferred Cosh Plan, and
`$144,605 in deferred stock compensation under the 2010 1188 Equity Ownership Plan (BOP); (ii) for his work in
`2010, $136,896 in deferred stock compensation under the 201 l UBS HOP Performance 113 plan; (iii) for his work in
`201 l, $448,276 under the 2012 Special Plan Award Program; and (iv) for his work in 2012, $390,000 in deferred
`compensation under the applicable 2013 plans.
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`
`NYSCEF DOC. NO. 438
`NYSCEF DOC. NO. 438
`
`INDEX NO. 653340/2016
`INDEX NO~ 653340/2016
`
`
`
`
`
`
`RaCaIVaD VYSCEF: 09/25/2017
`RECEIVED NYSCEF: 09/25/2017
`
`LIDDLE a ROBINSON, L.L.P
`
`Linda D. Fienberg, Esq.
`
`-7—
`
`March 5, 2014
`
`LEGAL CLAIMS
`
`1.
`
`Deferred Compensation and Bonus Compensation
`
`At no time during his employment at UBS did Mr. Passaretta engage in any
`misconduct that would justify the forfeiture of his deferred compensation or any of his earned
`compensation. Accordingly, Mr. Passaretta is entitled to the deferred compensation and bonus
`compensation he was denied when UBS abruptly terminated his employment and forfeited his
`deferred compensation he earned for 2009, 2010, 2011, and 2012, and paid him zero bonus for
`the work he performed in 2013.
`
`Mr. Passaretta thus seeks these amounts, plus interest, based on principles of
`breach of contract, quantum meruit and unjust enrichment. Mr. Passaretta also requests an award
`of double damages, as well as his attorney’s fees and costs under the Connecticut Wage Payment
`Law, on the grounds that U 138’s
`failure to pay Mr. Passaretta his earned but withheld
`compensation was in bad faith, unreasonable and arbitrary.
`
`II.
`
`Defamation
`
`Under Connecticut law, UBS is liable to Mr. l’assaretta for defamation based on
`what UBS wrote on the Form U5.
`
`UBS recognized that Mr. Passaretta’s termination was in connection with an
`internal investigation concerning a failure by another acknowledged individual to comply with
`an internal trade pre—approval policy, and there is no indication that Mr. Passaretta violated any
`regulatory rules or laws. UBS has nonetheless acted in a manner intended to tarnish Mr.
`Passaretta’ s reputation.
`
`UBS defamed Mr. Passaretta on his Form U5 and related forms, effectively
`impairing Mr. Passaretta’s ability to procure subsequent employment. As set forth above,
`despite numerous interviews, Mr. l’assaretta was denied meaningful employment opportunities
`as a result of the assertions set forth in the aforementioned FINRA filing. Consequently, Mr.
`Passaretta was forced to accept employment in a lesser position than the position he held at the
`time he left UBS.
`
`thus resulted in damages to Mr. Passaretta’s reputation. As
`UBS’s conduct
`remediesfor this defamation, Mr. Passaretta seeks compensatory and punitive damages,
`in
`amounts to be determined at the hearing of this matter.
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`
`NYSCEF DOC. NO. 438
`NYSCEF DOC. NO. 438
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`INDEX NO. 653340/2016
`INDEX NO~ 653340/2016
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`
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`
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`RaCaIVaD VYSCEF: 09/25/2017
`RECEIVED NYSCEF: 09/25/2017
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`LlDDLE & ROBINSON, L..L.P.
`
`Linda D. Fienberg, Esq.
`
`-‘§—
`
`March 5, 2014
`
`III. Mr. Passaretta Seeks An Order Expunging His Form U—S
`
`l’assaretta seeks to have his Form U5 amended for UBS’s own, alleged
`Mr.
`regulatory missteps, and those of an individual who acted independently of Mr. Passaretta, by
`tainting his regulatory license and record. Mr. Passarctta asks that
`the Panel order
`the
`expungement of Mr. Passaretta’s current Form US to erase the defamatory statements which UBS
`made about him on his Form U 5.
`
`Arbitrators are authorized to order the expungement of language on a Form U5. As
`in
`the
`FINRA
`Dispute
`Resolution
`Arbitrator’s
`Guide
`forth
`set
`
`(http: //www. finracrg/Web/groups/arbitrationnied_iationt_,gaaibrncd”c arbtors/documents/arbmed/p
`00942{L dl‘):
`
`Defamation Claims in Intra—Industry Disputes
`
`Under existing CRD policy, FINRA will expunge information from the
`CRD system~mwithout
`the need
`for
`judicial
`interventioniiiiiiif
`the
`expungement directives contained in intra—industry awards that
`involve
`associated persons and firms are based on the defamatory nature of the
`information ordered expunged and do not involve any customer dispute
`information. Arbitrators must clearly state in the award that they are
`ordering expungement relief based on the defamatory nature of the
`information in the CRD system. (Emphasis added.)
`
`This is also stated in the Notices to Members 99-54 and 9909) (issued by the
`NASD, which is now FINRA). Notice 99—54 explicitly recognizes, however, that the Panel may
`expunge a Form US even if it does not find in favor of the claimant on a defamation claim.
`Notice 99—54 thus states that: “Arbitrators, however, are not reguired to state explicitly in
`the award that they have found that all of the elements reguired to satisfy a claim in
`defamation under governing law have been met.” (Emphasis added.)
`
`It should be noted that, since this is not a “customer dispute” and the information
`sought to be expunged is not “customer dispute information,” the Arbitration Panel does M
`need to make any of the factual findings required by FINRA Rules 2080 and 13805 for
`expungements of customer dispute information.
`
`Many arbitration awards have ordered expungements of Form U5 language. See,
`e.g., Glennorz 11'. Dean Witter Reynolds, Ina, NASD Case No. 91—02594 at 6—7 (1993) (directing
`Dean Witter to correct a false statement on a Form U 5 and awarding actual and punitive damages
`and attorneys' fees for a total award of more than $1.75 million), qf’d, 1994 WL 757709 (MD.
`Tenn. Dec. 15, 1994), afl’a’ 83 F.3d 132 (6th Cir. 1996); Paul D. Svtgos v. Merrill Lynch Pierce
`Fenner & Smith, Inc, NASD Case No. 93—04-516 (Oct. 6, 2000) (directing Merrill Lynch to
`amend Form US to reflect correct reason for termination of employment and awarding actual and
`punitive damages, attorneys’ fees and costs for a total award of more than $2.14 million).
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`NYSCI
`3F DOC. NO. 438
`NYSCEF DOC. NO. 438
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`653340/2016
`INDEX NO. 653340/2016
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`INDEX NO~
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`RnCfiIVfiD \IYSCEF:
`09/25/2017
`RECEIVED NYSCEF: 09/25/2017
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`LIDDLE 5.: ROBINSON, L.L1F’.
`
`Linda D. Fienberg, Esq.
`
`—9—
`
`March 5, 2014
`
`IV.
`
`Tortious Interference With Pros ective Economic Advanta e
`
`
`
`
`
`
`UBS tortiously interfered with Mr. Passaretta’s existing and prospective
`employment prospects at other firms by publishing a defamatory and otherwise inaccurate Form
`US.
`
`As a remedy for this tortious interference, Mr. Passaretta seeks compensatory and
`punitive damages.
`
`V.
`
`Wrongful Termination of Employment
`
`Mr. Passaretta signed a Form U4 Uniform Application For Securities Industry
`Registration Or Transfer. By signing a Form U4, Mr. Passaretta agreed to submit any dispute or
`claim he might have against UBS to arbitration pursuant to the rules of FlNRA. As a result of
`this arbitration requirement, UBS could only terminate Mr. Passaretta’s employment for “just
`cause.”
`
`As the Seventh Circuit stated in Shearson Hayden Stone, Inc. v. Liang, 653 F.2d
`310, 312-13 (7th Cir. 1981), “[i]t has been held repeatedly that an agreement to arbitrate disputes
`about employee discharges implies a requirement that discharges be only for ‘just cause.” See
`also PaineWebber v. Agron, 49 F.3d 347, 352 (8th Cir. 1995) (stating that “some standard of
`discernible cause is inherently required in this context where an arbitration panel is called on to
`interpret
`the employment relationship”); Truck Drivers,
`()il Drivers, Filling Station and
`Platform Workers’ Union Local 705 v. Schneider Tank Lines, Inc, 958 F.2d 171, 175 (7th Cir.
`1992) (holding that the existence of an arbitration provision implies ajust cause standard); Smith
`v. Kerrville Bus Co, 709 F.2d 914, 918 (5th Cir. 1983) (observing that “inherent in the body of
`arbitral common law. . .is a marked awareness of the harshness of discharge, and an adherence to
`the principle that...arbitration, and other provisions that reflect the contracting parties” tacit
`acceptance of the employees’ right to some measure ofjob security, pretermit discharge without
`good cause); DeLuca v. Bear Stearns & Co, 175 F.Supp. 2d 102, 109 (D. Mass. 2001) (noting
`that “at least three circuits have held that an agreement to arbitrate employee termination may
`vitiate an employee’s at—will status”); Varga v. Countrywide Securities Corp, JAMS No.
`1425001975 (JAMS panel on May 26, 2009 awarded $4.58 million, of which $1.89 million plus
`interest constituted damages on wrongful termination claim under Agron (award confirmed by
`the United States District Court for the Central District of California, CV 09—4134 (PAP) on
`August 19, 2009)); Shaw v. Salomon Smith Barney, Inc, NYSE Docket No. 2007-016780
`(NYSE panel on February 16, 2009 awarded Claimant $1,200,000 as damages on defamation
`and wrongful termination claims under Agron); Marais v. Barelays De Zoeie Wedd, Inc. and
`Barclays Capital, NASD Case No. 00—02520 (NASD panel on September 25, 2002 awarded
`Claimant $4,200,000, including damages for wrongful termination under Agron); Sawielle v.
`Waddell (1’: Reed, Ina, el al, NASD Case No. 97—03642 (NASD panel on August 7, 2001
`awarded claimant $27,574,499, including damages for wrongful termination under Agron); Kaies
`v. Deutsehe Bank, NYSE Docket No. 1998-007498 (NYSE panel on July 13, 2001 awarded
`3 150,000 as damages for claims of defamation and wrongful termination under Agron); Svigos v.
`Merrill Lynch, Pierce, Fenner & Smith, NASD Case No. 93-04516 (NASD panel on October 6,
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NEW YORK COUNTY CLERK 09E2017 11:53 AM
`
`NYSCEF DOC. NO. 438
`,NYSCEF DOC. NO. 438
`
`INDEX NO. 653340/2016
`
`INDEX NO~ 653340/2016
`
`
`
`
`
`
`RECEIVED NYSCEF: 09/25/2017
`RaCaIVaD VYSCEF: 09/25/2017
`
`LIDDLE & ROBINSON, L.L.P.
`
`Linda D. Fienberg, Esq.
`
`-l0-
`
`March 5, 2014
`
`2000 awarded $2,264,479, of which $515,000 constituted damages on wrongful
`
`termination
`
`claim under Agran).
`
`l’assaretta’s employment without “just cause.” Mr.
`Here, UBS terminated Mr.
`Passaretta is therefore entitled to the compensation (including base salary, bonuses, and
`additional benefits) he would have earned at UBS had his employment not been terminated, plus
`interest.
`
`VI.
`
`Violation of CUTPA
`
`Under the Connecticut Unfair Trade Practices Act (”CUTPA"), UBS may be held
`liable for having engaged in tortious conduct
`that gave rise to Mr. Passaretta’s loss of
`compensation and inability to obtain comparable subsequent employment, and resulting
`damages.
`-
`
`CONCLUSION
`
`l’assaretta seeks an award of compensatory and
`For the foregoing reasons, Mr.
`punitive damages,
`interest, attorneys’
`fees and costs, an order expunging his Form U5 and
`related forms of defamatory information, and any such other and further relief as the Panel
`deems just, proper and appropriate.
`
`Respectfully submitted,
`
`LIDDLE & ROBINSON, LLP.
`
`/,/’;7//
`
`—.-v_’7i,,:r ”M7
`
`
`,2
`
`By.
`
`Elaine H. Bortnick
`
`Sherry M. Shore
`
`

`

`FILED: NEW YORK COUNTY CLERK 09/25/2017 11:53 AM
`FILED: NE