'Piracy' case settled for $60,000

CNY Business Journal (1996+), Sep 10, 2004 by Rombel, Adam

SYRACUSE - Citizens Financial Group, Inc. and James Gaspo have agreed to pay KeyBank up to nearly $60,000 to settle a legal action Keybrought after Citizens hired away eight employees from KeyBank's Syracuse-based, middle-market, commercial-lending group this past June.

The settlement - finalized on Aug. 17 before Judge Norman W. Seiter, Jr. of the New York State Supreme Court in Onondaga County restrains Citizens Financial, the defendant, from calling upon or doing business with a list of 66 customers of KeyBank, the plaintiff, until Nov. 1, 2004. Gaspo, a co-defendant in the case, personally is restrained from soliciting these clients until June 1, 2005. One of the customers is the Onondaga County government. The list containing the names of the other 65 clients was sealed by the court.

The settlement of this case, which was first reported by The Central New York Business Journal on Aug. 20, also restrains Citizens from hiring or recruiting any current Northern and Western New Yorkdistrict employees of KeyBank or its affiliates making more than $25,000 a year, until after Jan. 31, 2005. The districts encompass 49 counties, or the bulk of upstate New York.

The highlights of the Citizens Financial/KeyBank settlement include:

* Gaspo was required to pay KeyBank $29,970, representing the amount he gained from the sale of stock options granted to him in 2001 and 2002. In its legal action against Citizens and Gaspo, KeyBank contended that the bank's equity-compensation plan required Gaspo to return any profits realized from the exercise of stock options if he engaged in "any harmful activity" - which included recruiting KeyBank's employees and pursuing its customers - within six months after termination of employment with KeyBank. The settlement required Gaspo to pay back the money within 15 days of the court order. In an Aug. 10 court hearing addressing the settlement, Gaspo said, "I'll have it tomorrow."

* Citizens and Gaspo agreed to pay for KeyBank's attorney fees related to the case, up to $30,000. The payment also was due in 15 days.

* Citizens and Gaspo are not barred from soliciting or doing business with KeyBank Customers that were also clients of Charter One Bank before Aug. 17, the date of the signing of the court order (Citizens Financial has acquired Charter One and has based its New York operations in Albany). One of those customers is the Onondaga County government, which has purchased CDs from Charter One in the past. Onondaga County is also a KeyBank commercial-lending customer.

KeyBank's attorney, Mitchell J. Katz of Syracuse-based Menter, Rudin & Trivelpiece, P.C., succeeded in convincing the court that Onondaga County should also be on the list of KeyBank customers that Citizens Financial and Gaspo are restrained from soliciting commercial business.

* The defendant group represented and warranted to the court that it was not in possession of KeyBank's confidential business information, trade secrets, or proprietary information, such as commercial-lending practices and business practices.

* The defendants were required to instruct, in writing, every former KeyBank employee who is now with Citizens to abide by their written employment and compensation agreements with Key.

* The judge ordered the plaintiffs and defendants not to disclose the details of the settlement to anyone, including the radio, television, and print media. Each party is allowed only to say that the case has been settled.

KeyBank was represented by Katz and Julian B. Modesti of Syracuse-based Menter, Rudin & Trivelpiece, P.C. on this case. Citizens Bank and Gaspo were represen resented by a attorney Dennis Hennigan of the Syracuse law firm of Costello, Cooney & Fearon, PLLC.

The genesis of this court case was Citizens Bank's hiring of Gaspo - a veteran of KeyBank and of the Central New York commercialbanking scene - to be executive in charge of Citizen's commercialbanking activities for all of New York as it builds a market presence in the state virtually from scratch. Gaspo, age 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 opened a Syracuse commercial-banking office. To staff the new office, KeyBank contended 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, dated July 7, it filed against Citizens and Gaspo in State Supreme Court.

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.