KeyBank takes action to rebuild: Gaspo, Citizens Bank face legal trouble after 'pilfering' of KeyBank lending staff

CNY Business Journal (1996+), Aug 20, 2004 by Rombel, Adam

SYRACUSE - Citizens Bank is building a new commercialbanking business in Central New York with the help of eight employees it hired away from KeyBank's Syracuse-based middle-market, commercial-lending group. The move has landed Citizens in legal hot water.

In early June, Citizens Bank - a unit of $80-billion-asset, Providence, R.I.-based Citizens Financial Group, Inc.- hired James Gaspo, a veteran of KeyBank and, of the Central New York commercialbanking scene to be executive in charge of Citizen's commercial-banking activities for all of New York as it builds a market presence in the state virtually from scratch. Gaspo, 41, had served as KeyBank's Central New York district president from 2001 until January of this year, when he moved to Indianapolis to take a position as Key's Midwest regional corporate-banking executive.

As part of his new job with Citizens Bank, Gaspo has opened a Syracuse commercial-banking office. To staff the new office, KeyBank contends that Gaspo and Citizens "engaged in employee piracy by pilfering all but one of KeyBank's employees within the middlemarket, commercial-lending group in Syracuse, " the bank said in a legal action it filed against Citizens and Gaspo in New York State Supreme Court in Onondaga County. "By doing so, Gaspo breached various written agreements with Key, which prohibited him from soliciting or enticing employees of Key to become employed by Citizens Bank," the bank says in the court document, dated July 7, 2004.

Gaspo and Citizens hired Richard Shirtz, head of KeyBank's Syracuse middle-market unit; Charles Vita, a relationship manager; and six support staff: Patrick Szalach, Elizabeth Cartina, Margaret A. Gordon, Robert L. Vertucci, Daniel Halligan, and Susan DeRushia, according to KeyBank, which alleges that these staff departures "eviscerated" its commercial lending group in Syracuse.

KeyBank requested and received a temporary restraining order against Gaspo and Citizens Financial from State Supreme Court Justice William R. Roy on July 7.

The order, among other things, bars Gaspo and Citizens from trying to recruit any more KeyBank employees to Citizens, calling upon or doing business with KeyBank customers or prospects with whom Gaspo had become acquainted while at Key, and destroying or using KeyBank trade secrets or proprietary information such as facts about the bank's prospective customers and lending practices. The restraining order also requires Citizens to return confidential business information and trade secrets to Key.

Citizens and Key reached a settlement agreement in the case in the second week of August. Both banks declined to detail the settlement terms, including possible monetary damages that Citizens could be required to pay Key and how long Gaspo and Citizens could be restrained from recruiting KeyBank employees and calling upon its customers and prospects.

"The matter is settled. We are under court order not to comment on the substance or terms of the written agreement," says Sylvia Bronner, first vice president at Citizens Bank.

Shelly Van Dusen, KeyBank's vice president of public affairs in Syracuse, says the bank, as a matter of policy, doesn't comment on legal proceedings.

KeyBank has been represented by attorneys Mitchell J. Katz and Julian B. Modesti of Syracuse-based Menter, Rudin & Trivelpiece, P.C. in this case. Citizens Bank and Gaspo have been represented by attorney Dennis Hennigan of the Syracuse law firm of Costello, Cooney & Fearon, PLLC.

A recruiting pitch spurned

KeyBank's legal action against Citizens and Gaspo relied heavily on an affidavit by Michele B. Estep, a senior generalist in Key's human-resources group in Albany. Estep says that Gaspo, over a period of several weeks from May 12 to June 22, tried to recruit her to Citizens as a human resources/recruiting staffer. But she declined, saying it would be a step back in her career.

Estep says the two talked in a series of phone calls. It is Estep's recollection of these calls and of Gaspo's words, specifically, that form the main arguments in KeyBank's case contending that Gaspo engaged in "employee piracy" that he knew to be against the terms of his KeyBank contract.

Estep alleges that Gaspo on more than one occasion told her that he knew he could not solicit employees from Key because his contract prohibited that. "Mr. Gaspo stated that he expected to be sued, but that he was ready for it," the KeyBank court filing says.

Gaspo signed a "Compliance Certification and Signature Acceptance of Trade Secrets Agreement" on Sept. 5, 2001. Under this agreement, Key says that Gaspo agreed. not to recruit or hire any KeyCorp employees for a period of one year after the end of his employment without the written consent of the $86-billion-asset, Cleveland-based, bank-holding company.

Gaspo's stock-option agreements with KeyBank also contained terms barring him from recruiting the bank's employees and customers for one year after leaving. The agreements also contained provisions for Key to be entitled to monetary damages if Gaspo were to be found in violation of them.