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Defunct Lebenthal Wealth Unit Faces Debt, Lawsuits

March 7, 2017

As the heir to the once-famed Wall Street firm Lebenthal Holdings seeks to sell what remains of it, the company’s now-defunct wealth management unit faces a $2 million lawsuit and unpaid bills, the Wall Street Journal reports.

Andrew Grillo, a former executive at Smith Barney, had joined Lebenthal Wealth Advisors after its launch in 2013 along with Frank Campanale, former head of Smith Barney’s consulting group, the Journal writes. Grillo left Lebenthal in March and is suing Alexandra Lebenthal, her brother James Lebenthal and the firm, according to the paper. The $2 million suit alleges damage to Grillo’s reputation and career and seeks to recover an investment Grillo had made in Lebenthal Holdings, according to court papers cited by the Journal. Grillo’s attorney tells the paper that the Lebenthals told Grillo they can’t pay him. Alexandra Lebenthal declined comment to the Journal about any potential litigation.

In addition to Grillo’s suit, however, Lebenthal’s wealth unit also owes money, former employees and vendors tell the paper. One creditor is a firm that put together a quarterly digital magazine Lebenthal launched in September 2014 in a bid to recruit female wealth advisors, according to the Journal. Alexandra Lebenthal tells the paper that the owner of the firm has given her time to settle the bill for the magazine, which she closed last summer. But another suit alleges that the wealth unit has also defaulted on a $196,000 lease in Michigan, according to the Journal. Lebenthal declined comment to the paper on the issue.

But she tells the Journal that she and her firm “spent a lot of money” to build the wealth unit, and James Lebenthal tells the paper the unit widely missed its targets. Around the same time that Lebenthal launched her magazine, the wealth unit lured Carrie Gallaway and Andy Stern from Morgan Stanley, where they oversaw around $1 billion in client assets, according to the paper.

Around that time, Alexandra Lebenthal stopped making payments on a $1 million personal loan she had received in 2008 from James Cayne, then Bear Stearns’ chief executive, according to Cayne’s suit cited by the Journal. Alexandra Lebenthal and a lawyer for Cayne both declined to comment on the suit to the paper.

The company closed the wealth management unit in August. The move followed the June departure of Gallaway and Stern, who managed $750 million in client assets, while the unit reportedly never managed more than $950 million in assets.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.