POST-EMPLOYMENT PROMOTIONS FOR BAIRD DEFENDANTS

[[Update and Editor's Note -- November 10th, 2006

This was the second item about the Robert W. Baird & Co. v. Red Granite Advisors, LLC. dispute to have been posted on this website. It created a bit of a stir in the investment community, and then came to the attention of the Wall Street Journal, which ran a story about the contretemps on page C1 of today's newspaper. Milwaukeeworld will have an item about that story posted on this site later today. -- Michael Horne]]

Gentlemen Become Officers
Want to Get Ahead?
Nearly Half of Baird Staff are VPs

By Michael Horne

“After never mentioning once in its original complaint that defendants were officers of Baird, in the Amended Complaint Baird does so within the first seven words of the first paragraph, and then goes on to repeat that allegation more than a dozen times.”

-- from Memorandum In Support of Defendants’ Amended Motion to Dismiss and for Sanctions; Robert W. Baird & Co. v. Red Granite Advisors, LLC, July 12^th 2006

In the “Verified Complaint” filed by Robert W. Baird & Co. on May 8^th, 2006, defendants Joel D. Vrabel, David W. Bowman and Robinson Bosworth III were described as having been “employed by Baird Investment Management” [BIM] as “senior portfolio managers.”
However, by the time Baird attorneys filed their “First Amended Verified Complaint,” dated June 27^th, the three had received a post-employment promotion and were described as “officers of Baird and senior portfolio managers. … As senior officers and employees of Baird, the Individual Defendants owed Baird a fiduciary duty of loyalty.”
Red Granite attorneys seized on this change, saying in the memorandum quoted above that between the time the original and amended complaints were filed, “Baird conveniently ‘discovered’ and now contends that defendants were actually technically officers of Baird, despite never having informed them of this while defendants were employed there. …
“Baird’s original allegations on the subject were consistent with the truth, which is that none of them were Baird officers at the time of their departure. Defendants had no reason to suspect that Baird would change its story after they pointed out in their motion that they did not qualify as fiduciaries under Wisconsin law.”

However, the defendants did hold rather exalted titles. Bowman and Vrabel were each styled as Senior Vice President and Senior Portfolio Manager for BIM. Bosworth was a Managing Director and Portfolio Manager.
So, when is a Senior Vice President not an officer? When the company in question is a large financial institution.
As the defense memorandum points out in a footnote, “ Baird is a registered broker-dealer and investment advisory firm regulated by the Securities and Exchange Commission, NASD, various exchanges and state securities laws. In none of its filings were defendants listed as ‘officers’ of Baird at the time of their departure. … Baird (like most large financial institutions) has literally hundreds of ‘vice presidents’ who are not actually legal officers of the company. It is a sales and status title only. This is supported by Baird’s form ADV, which as of March 30, 2006, identified its true officers as well as all of its directors. None of the defendants were included in the listing.”
According to a Reply Memorandum dated August 4th, as the officer issue continued to be debated, and Baird's motion for a Temporary Restraining Order and Preliminary Injunction was denied, Baird first made "the incredible assertion that 1,086 of its 2,230 employees (48.6%) are corporate officers and fiduciaries. ... As discovery continues in this case, it will be interesting to see how many of these 'officers' have any idea that Baird has apparently elected them to this capacity or whether Baird has ever had a meeting of its 'officers'." [Emphasis original -- Ed.]
In fact, the list of actual officers and directors of Baird fron the ADV includes the names of only twelve men -- and one woman.

They are Paul Edward Purcell, Glen Fredrick Hackmann, Leonard Marion Rush, Jeffry Frank Freiburger, Russell Paul Schwei, Patrick Steven Lawton, William Walter Mahler, Michael John Schroeder, , Robert John Venable, Paul John Carbone, Todd Steven Nichol, Steven Gregory Booth and Mary Ellen Stanek.

{Editor's Note: I have been unable to link to the ADV files of the SEC with success. But if you click at this link
you should get rather close.}