UPDATE 4-UBS healthcare bankers move en masse to Jefferies
* 36 UBS employees resign, including Lorello, Kelly
* UBS gets injunction against bankers, Jefferies
* UBS to name new head of healthcare soon (Adds background)
NEW YORK, June 26 (Reuters) - Jefferies Group Inc (JEF.N) has hired away three dozen UBS AG (UBSN.VX) employees, including nearly all its healthcare investment bankers, in what the Swiss bank called a "massive, premeditated raid."
The exodus deals another body blow to the Swiss bank, which said the move "has inflicted enormous reputational, economic and other harm." Healthcare was the only M&A sector globally to see year over year growth in the first half and is expected to continue to stay abuzz with deal activity. [ID:nLP502660]
These employees in the bank's healthcare group and equity capital markets left in a "mass resignation" between June 17 and June 21, UBS (UBS.N) said in an arbitration claim filed with the Financial Industry Regulatory Authority, dated June 22.
UBS accused two senior healthcare bankers -- group head Benjamin Lorello and Managing Director Sage Kelly -- of "surreptitiously planning" the move with Jefferies.
Lorello and Kelly could not be reached at their UBS offices. A Jefferies spokesman was not available for comment.
Lorello is also known for advising HealthSouth Corp (HLS.N) under its former boss Richard Scrushy. Scrushy was ordered to pay $2.9 billion last week in a civil case after a judge found him responsible for an accounting fraud that nearly brought down the hospital chain.
The mass exit is the latest in a series of departures of investment bankers from UBS, which has been hit hard by the financial crisis and had to cut bonuses, although the Swiss bank has also hired a few bankers over the past few months.
It is also the latest in a string of negative headlines in the past year for the world's largest wealth manager that have prompted big client withdrawals.
UBS was bailed out by the Swiss government, which is still invested in the bank, and it faces legal problems in the United States over a tax case. It expects to post a second-quarter loss and plans to raise $3.5 billion of new capital. [ID:nLQ421864]
Since 2005, the healthcare group closed more than $567 billion in transactions, bringing in over $1 billion in revenues. UBS is seeking damages and other relief.
Only three managing directors and four executive directors are left in UBS' healthcare group, it said.
DISILLUSIONED
Acknowledging its economic problems, UBS said Lorello and Kelly became "disillusioned with their senior management" and Lorello's dissatisfaction "peaked in January 2009" when the bank said it would not pay significant bonuses.
In May, the bank raised the salaries of some investment bankers to guard against poaching by competitors. Both Lorello and Kelly accepted salary increases conditioned on their giving UBS a 60 day notice of resignation, the bank said in the claim.
UBS accused Lorello and Kelly of "active conspiratorial assistance" to Jefferies and alleged many of the employees who left sent client lists, pitch books and other confidential information to their personal email addresses.
An analyst for Lorello "requested and obtained a memory stick which he used before his resignation," the bank alleged.
"The fact that the resigned employees have had much of this information emailed to their homes or taken by the use of memory sticks can serve no legitimate purpose except to aid in their efforts to continue that business while at Jefferies," it said.
Lorello and Kelly "abruptly resigned" from UBS to join Jefferies on June 17, the bank said in the claim.
Lorello, who was also vice chairman of UBS Investment Banking Department, will become the global head of investment banking at Jefferies, while Kelly will head healthcare banking there, UBS said in the claim. Lorello and Kelly joined UBS in 1999.
RESTRAINING ORDER
UBS got a temporary restraining order against Jefferies and the two bankers -- Lorello and Kelly -- to enforce its employment contract, according to a New York court order.
The order, among other things, prevents the bankers from starting work at Jefferies during their 30-day notice period. It also restrains Jefferies from hiring or soliciting for a job any other UBS investment bank employee until July 20.
"UBS obtained this injunction to ensure that Jefferies adheres to legal obligations and standard industry practices and departing UBS employees are held to their applicable notice periods and other legal and contractual obligations," spokeswoman Kelly Smith said in an emailed statement on Friday.
The bank plans to name a new head of healthcare banking shortly, she said.
Such mass departures have led to legal battles in the past.
In March, Merrill Lynch & Co, now part of Bank of America Corp (BAC.N), sued Deutsche Bank AG (DBKGn.DE) over the hiring of Merrill treasurer Eric Heaton and 11 bankers.
Last year, UBS won an injunction against start-up Vestra Wealth, which had poached 75 of UBS's wealth management staff in Britain. (Reporting by Paritosh Bansal in New York and Victoria Howley in London; editing by Gary Hill and Andre Grenon) (For more M&A news and our DealZone blog, go to www.reuters.com/deals)
