(Bloomberg) -- Sterne Agee Group's former chief executive officer faces a U.S. probe into whether he misused company assets such as airplanes, boats, hunting clubs and condominiums, a person with knowledge of the matter said.
The Treasury and Justice departments are examining James Holbrook Jr., who was chairman and CEO until his ouster last month, and his son, William Holbrook, who served as chief operating officer, according to the person, who asked not to be named because the investigation hasn’t been publicly announced. Leaders of the firm in Birmingham, Alabama, sent a memo to staff June 20, telling them an inquiry would be disclosed soon in the former CEO’s industry employment record, the person said.
“It’s a lot to do about nothing, and the allegations are grossly overstated,” Bruce Gordon, an attorney representing the Holbrooks, said in a phone interview. “We’re confident the truth will prevail and my clients will be vindicated.”
Sterne Agee, which traces its roots to a securities firm founded in 1901 by former Birmingham Mayor George B. Ward, also opened its own investigation into the Holbrooks’ activities, according to the person. Shareholders in the company are set to vote July 3 on whether to remove James and William Holbrook from the board of directors, the person said.
“Under the circumstances, the firm believes it is best for the company that James and William Holbrook resign from their positions on the Sterne Agee Group board of directors,” Carole Miller, an attorney for the company, said in an e-mailed statement. “Absent such resignations, the firm plans to hold a shareholder vote to replace the Holbrooks as directors.”
Sterne Agee is cooperating with the inquiry and hasn’t been asked to provide anything other than documents, she said.
Spokesmen for the Justice and Treasury departments declined to comment. James Holbrook was no longer registered as a broker working with Sterne Agee as of this month, according to employment records on the Financial Industry Regulatory Authority’s website.
Sterne Agee, one of the South’s fastest-growing brokerages, has expanded to 1,700 employees from 1,000 four years ago. It overhauled its leadership after ousting James Holbrook, who founded and ran First Birmingham Securities Corp. before it was consolidated with Sterne Agee in 1990.
The new chairman, Eric Needleman, led the firm’s fixed- income unit and will remain in New York. He joined Sterne Agee in January 2009 after heading high-yield sales, trading and research at KBC Financial Products and started his career at Lehman Brothers Holdings Inc. Joe Nunziata, who was appointed CEO and president last month, leads FBC Mortgage LLC, which was bought by Sterne Agee.
Sterne Agee’s headquarters will remain in Birmingham.
- Finra Pulls Bonus-Disclosure Rule for Reworking After Complaints
- FINRA Fines Merrill Lynch $8 Million for Fund Overcharges
- Hit With Regulatory Action? Fight, Don't Settle
All On Wall Street articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.