A parade of Wall Street bigwigs is set to testify in the eagerly awaited case starting Friday over Perella Weinberg Partners’ decision a decade ago to fire a star executive who the elite investment bank says planned to launch a rival firm.
PWP founders Joe Perella and Peter Weinberg, along with master rainmaker Robert Steele, will tell a New York court that they uncovered a secret plan by Michael Kramer, the bank’s founding head of restructuring, to launch a new, competing business with three of his closest colleagues .
PWP fired Kramer and his alleged co-conspirators via voicemail in February 2015 after it said it learned of the conspiracy, which it claimed was an express violation of their employment contracts. It is claimed that their departures cost the bank tens of millions of dollars in lost revenue, ill-gotten bonuses and expensive replacements.
Kramer countered that PWP’s leadership had long held a grudge against him and were bent on driving him and others out of the company in an effort to seize $60 million in salary and equity, which Kramer would now like to return.
The extent of bad blood between PWP and Kramer has so far prevented a settlement in a case closely watched by financial institutions to understand the state of non-compete clauses in employment contracts, which have faced criticism in recent years for improperly restricting deals.
“If anything, non-competes are more prominent than ever,” said Jeffrey Eilender, a partner at Schlam, Stone & Dolan who is not involved in the case. “Companies that are relationship-based or sales-based are very aggressive in their enforcement.”
In a preliminary ruling, the judge overseeing the case ruled in 2023 that non-compete covenants are still allowed in New York.
Among the key topics of the court proceedings will be an examination of PWP’s treatment of Kramer’s clients in the days following his dismissal.
Among the witnesses supporting Kramer’s account will be the CEO of Monsanto, a chemical group that has long worked with him, who will testify that PWP management was more interested in retaliating against Kramer than serving Monsanto’s needs after he left.
Kramer’s lawyers will also question PWP’s former communications chief over what they said was a covert media campaign to discredit the outgoing executives after they were fired.
Kramer separately denied allegations that he improperly solicited Monsanto and another of his PWP clients in the months after his 2015 termination.
PWP says Kramer and his restructuring colleagues, most of whom he worked with for years at multiple companies, had been plotting for months to leave and start a rival company.
Among the documents found in Discovery was a branding consultant’s book, as well as business plans and spreadsheets detailing compensation and capital requirements for the hypothetical company.
One email between Kramer and two of his allies, Derron Slonecker and Joshua Scherer, considered naming the firm KSS, which Scherer wrote reminded him of private equity group KKR.
PWP later learned that after a dinner Kramer had with Weinberg in early 2015, at which Kramer reportedly announced his resignation, some of Kramer’s restructuring colleagues met for “celebratory drinks.”
Perella, 83, is a pioneer in mergers and acquisitions, while Weinberg, 67, comes from a family that has run Goldman Sachs for generations. Steel, 73, was a longtime Goldman banker as well as New York City’s deputy mayor, and regularly advises the likes of BlackRock founder Larry Fink.
Still, the key witness at trial could be Kevin Cofsky, who ten years ago was a junior PWP executive in his thirties and worked with Kramer early in his career.
Cofsky attended a fateful Sunday meeting in January 2015 at Kramer’s home in Connecticut where about 10 members of the then-PWP restructuring group had gathered.
Cofsky told PWP management weeks later that the purpose of the meeting was to advance the creation of a competing company.
Kramer said in his court filings that Cofsky embellished his story after being offered a $500,000 bonus and the opportunity to lead a restructuring group for PWP after Kramer was ousted.
PWP described the dispute as a “textbook case of solicitation”. However, Kramer’s court filings state that each of the eight restructuring bankers from PWP who later joined his new firm, Ducera Partners, in 2015 will testify under oath that Kramer never asked them to come up with a new venture or give him join the new company while they were employed at PWP.
Kramer insisted he was the target of a vendetta in which Weinberg tried to put him “back in his cage,” a phrase found in an internal PWP email.
“PWP marginalized the restructuring group that Kramer led and built from the ground up, underpaying them, giving them poor year-end ratings, and making it clear that their prospects for advancement at PWP were slim or non-existent,” Kramer wrote in court documents, adding that his team was “unceremoniously dismissed before any of them had even decided for sure if they wanted to go.”
PWP was founded in 2006 with much fanfare given the pedigree of its founders. Kramer was quickly hired to launch the restructuring practice following his previous stints at Houlihan Lokey and Greenhill & Co.
Kramer’s status as a PWP partner, he says, prevented him from being summarily terminated.
Kramer’s Ducera Partners has become one of the top restructuring advisory firms since 2015, approaching $150 million in revenue last year with fewer than 50 employees, according to a person familiar with its operations.
The firm is increasingly pushing toward traditional M&A coverage, last year hiring longtime Goldman Sachs heavyweight John Vaske, who was Weinberg’s colleague.
PWP rebuilt its restructuring group after Kramer’s departure and the company listed its shares in 2021. The stock price has doubled in the past year, and the market capitalization is now roughly $2 billion.
Cofsky, the only PWP banker present at the meeting at Kramer’s home in early 2015 who did not later join Ducera, remains with PWP.
The trial should last three weeks.
