WESTERLY – Washington Trust Bancorp Inc. has been paid $2.1 million to settle its federal lawsuit against four wealth advisers who quit in September 2022 and many of their clients followed them, Chairman and CEO Edward O. Handy III acknowledged in a conference call with analysts on April 22.
Washington Trust wealth management entity Washington Trust Advisors Inc. had sued the former employees – Susan K. Arnold of Westwood, Mass.; Ronald D. Halterman of Boston; Brett C. Lonergan of Providence; and Nicholas T. Rossi of East Providence – in Massachusetts federal court, accusing them of theft of trade secrets, breach of contract and fiduciary duties, and unfair trade practices.
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The financial institution said the four submitted resignations all on the same day, Friday, Sept. 23, 2022, then attempted to contact their clients over the weekend and solicited them to move their accounts.
Private Advisor Group LLC, of Morristown, N.J., and Northward Financial Group, of Needham, Mass., were also named as defendants in the lawsuit.
In their resignation letters, the departing advisers said they were joining Northward Financial, a newly formed subsidiary of Private Advisor Group.
Arnold had worked for Washington Trust in Wellesley, Mass., since 2005, when it had purchased Weston Financial Group Inc. Halterman was hired in 2008, while Lonergan started in 2015 and Rossi in 2018. Washington Trust said it managed more than $1.1 billion in assets for high net worth clients. About 60% of those assets went with the advisers when they departed, according to Ronald S. Ohsberg, Washington Trust Bancorp chief financial officer and senior executive vice president.
The lawsuit said that soon after the resignations were submitted on a Friday afternoon, Arnold, Halterman, Lonergan and Rossi started reaching out to clients in a “coordinated solicitation campaign over the weekend.” Arnold had even prepared forms for her clients to ease the process of transferring the accounts to Northward Financial, the lawsuit alleged.
Washington Trust argued that those actions violated the terms of their employment agreement on noncompetition and nonsolicitation, and trade secret restrictions.
The following Monday, Washington Trust said, it received calls from confused clients who had been contacted by the advisers.
But in affidavits filed in response to the lawsuits, the four advisers said they did nothing wrong, deleting any client information they had from their computers and phones, using only publicly available information to contact clients and only to announce they had resigned.
They also argued that they didn’t try to persuade clients to leave Washington Trust or tell them how they could continue their business relationship with the advisers unless the client was adamant that they wanted to continue.
The four advisers also expressed disagreement and displeasure over how the Weston group – which was rebranded Washington Trust Advisors – was being managed by Washington Trust executives over the years, particularly by Kathleen A. Ryan, chief wealth management officer of Washington Trust Wealth Management and president of Washington Trust Advisors Inc.
“I [could not] continue to work in a wealth management division run by leaders who have no experience in wealth management, and it really shows,” Arnold said in her affidavit. “They have destroyed what was a strong financial planning firm with a Massachusetts presence.”
The lawsuit was settled in December, but the terms were not disclosed at the time. The $2.1 million settlement was noted in financial statements filed with the Securities and Exchange Commission for the first quarter of 2024.
Ohsberg said there were more terms of the settlement, but he declined to say more in part because of a nondisclosure agreement. He also declined to say how much revenue has been lost as a result of the decline in assets under management.
When asked about it during a conference call with analysts on April 22, Handy called the monetary settlement “the final resolution of it.”
