St. Louis-based Stifel, Nicolaus & Co. Inc is suing a newly formed Indianapolis firm, Sapient Capital LLC, following what Stifel describes as Sapient’s “orchestrated raid” of Stifel’s 96th Street office.
Big money is at play: According to Stifel’s legal complaint, the 96th Street office, which was also known as the KCP Group, had approximately $10 billion in client assets under management as of mid-February.
That, Stifel says in its complaint, is when the office’s managing directors—Jamie Knall, Thomas Pence and Jeffrey Cohen— along with Chief Operating Officer Andrew LeBlanc, abruptly quit, luring nearly all of the office’s 30-plus employees to follow them to Sapient, a rival financial firm that Knall, Pence and Cohen had established several months ago.
Since that time, Stifel alleges, Sapient has been falsely representing that the KCP Group is the new owner of Stifel’s business; and has been attempting to transition Stifel’s clients—and their $10 billion in assets—to the new firm.
In a written statement to IBJ, Sapient characterized the situation differently, saying “The KCP Group ended its 17-year relationship with Stifel and relaunched as Sapient Capital, an independent Registered Investment Advisor.”
Stifel still has a significant local presence even after the mass exodus at the 96th Street office. Stifel’s website lists more than 30 financial advisers at its Keystone Crossing office, and another three advisers at a Zionsville office. The firm also has eight other offices throughout the state.
Stifel offers wealth management and investment banking services to individuals, institutions, corporations and municipalities. It was established in 1890 and has more than 400 offices in the U.S. and Europe. The firm’s 2021 net revenue was $4.7 billion.
Stifel filed its complaint Tuesday in U.S. District Court for the Eastern District of Missouri against Sapient Capital LLC and Sapient Capital Founders LLC.
Knall, Pence, Cohen and LeBlanc are not named as defendants, though Stifel notes in its complaint that the four, along with two other former Stifel employees, are parties to a pending arbitration before the Financial Industry Regulatory Authority, or FINRA. Pence is the brother of former Vice President Mike Pence.
In a written statement to IBJ, Sapient said it ended its relationship with Stifel because, “after careful deliberation and extensive due diligence, we believed that The KCP Group’s clients would be best served by a fiduciary independent advisory firm.”
Sapient said it is “focusing all our energy on being the best advisers we can be for our customers and making the highest quality investments and services available to them. Those customers are 100% free to choose the adviser they want. We made this move for those customers, and we are extremely confident in what we are offering them in this new platform.”
Sapient declined to comment further on either the pending litigation or the FINRA arbitration. The firm has not yet filed a legal answer to Stifel’s complaint, and the case docket does not yet identify who is serving as Sapient’s legal counsel in the case.
Reached by phone, Stifel declined to comment publicly on the dispute.
But Stifel’s complaint paints a dramatic picture of what it says has happened since Feb. 17, when the mass resignations happened at the 96th Street office.
According to the complaint, on that morning Cohen, Pence and Knall resigned from Stifel via email, and 11 minutes later LeBlanc emailed resignation letters for himself and 27 other employees. LeBlanc indicated that other resignation letters would be submitted separately.
Immediately after receiving the email, a Stifel employee at a nearby office drove to the 96th Street office. “He found the office empty, with a stack of the resignation letters left behind,” Stifel’s complaint says.
Sapient’s office at 310 E. 96th St., according to Stifel’s complaint, is less than half a mile away from Stifel’s office at 600 E. 96th St.
According to the Indiana Secretary of State’s office, Sapient was incorporated in October. Stifel, which identifies Cohen, Pence and Knall as the majority owners of Sapient, said it had no knowledge of the three’s plans to open a rival firm.
The Financial Industry Regulatory Authority, or FINRA, requires brokers to notify their employers of their outside business activities, but Cohen, Pence and Knall did not do this, Stifel alleges.
As of Thursday morning, Sapient’s website did not contain much information other than some general descriptions of the financial services it offers. There was no mention of the firm’s history or of who principals or employees are. The “About Us” page indicates that the firm has locations in Indianapolis, Los Angeles and Miami, though no addresses or phone numbers are listed for those locations.
But in a LinkedIn posting last week, Sapient wrote, “The KCP Group is now Sapient Capital! Our team is honored and excited to continue working with our clients to help grow and safeguard their wealth.” That message, along with other posts, was removed from Sapient’s LinkedIn page Thursday morning.
Stifel also alleges in its complaint that, as of Feb. 20, Sapient’s website said the firm had about $10 billion in assets under management. In smaller print below that figure, Sapient noted that this was an estimated figure and that Sapient, a newly-formed financial adviser, was “in the process of transitioning clients.” Stifel’s complaint includes an image of this detail.
However, Stifel’s complaint says, a form that Sapient filed on Feb. 21 with the U.S. Securities and Exchange Commission directly contradicts those assertions. In that filing, Sapient reported that it had zero accounts and zero assets under management at the time.
Stifel’s complaint notes that Sapient’s website has since removed the $10 billion figure, along with information characterizing Sapient as having 40 clients with more than $50 million in assets.
Stifel’s complaint accuses Sapient of false advertising, common law injurious falsehood, tortious interference with LeBlanc’s employment contract, tortious interference with business relationships, unjust enrichment, breach of fiduciary duty aided and abetted by the defendants, fraudulent misrepresentation/concealment and common law unfair competition.
Stifel is asking the court for actual and punitive damages in unspecified amounts; and an order that Sapient “correct the false and misleading claims” in its advertising.