So far, 2006 has been a good year. A good year, some would say, for Heather McCartney who lost a husband but will gain millions of pounds. A good year for photogenic Ségolène Royal, a contender for the French presidency, who has become the media’s darling. And a good year for most investment banks.
But for Nomura, one might talk of an annus horribilis. “Why do they still bother with an international presence?” a source sniped.
I thought Source was being mean-spirited until I looked at the league tables for 2006 (through to September 30). According to Dealogic, Nomura is not ranked in the top 20 underwriters for international bonds. Nor is it a top-20 adviser in the global, announced M&A league table. But it does feature at number nine as an equity capital market bookrunner, reflecting the pick-up in the Japanese IPO market.
“They should close the place down,” Source said. I demurred: “Nomura’s time may come again. Think of the glory days when Guy Hands and Simon Fry strutted their stuff.” Source shrugged his shoulders and stalked off.
Some 1,700 individuals work for Nomura in Europe. What are they doing? An employee talks airily about derivatives, lending businesses such as principal or real estate finance and investment banking. Nomura isn’t in the corporate bond market and it has a limited presence in emerging markets. But for a firm with a low profile, Nomura’s press profile might be too high.
This summer there was an unseemly exodus. Najib Canaan, the Lebanese-born head of fixed income in the Americas, departed. Najib had been part of the international management team for more than five years. Urbane Stefano Ghersi, head of international capital markets, left, as did Eddie Thomas, head of euro-yen trading and Andrew Eno, a senior yen salesperson. Joachim Willnow, whom Nomura recruited from Merrill in 2004 to run its equity derivative business, disappeared with six colleagues.
And the seepage continues. In September, Neil Basu, head of the CDO business, and Gary Wilder, head of asset finance, exited. A senior manager insists: “We have refocused but we have not pulled out of any businesses. Indeed, we increased our commitment when we hired a leveraged finance team from WestLB.”
Various explanations are propounded for the blood-letting. “It’s a Japanese war by proxy,” one commentator claims. “It’s Yugo Ishida [president and chief executive of the London operation] versus Zenji Nakamura [head of global fixed income based in Tokyo].” Another view is that Nomura’s international expansion had been too rapid. Costs were too high and Barry Nix, Nomura’s co-head of global markets in Europe, was on a containment mission. Nomura International made a pre-tax loss of £150 million ($282 million) for the year ending March 31 2006.
In finance, it’s a truism that people come and people go – especially after bonuses are paid. Nomura pays bonuses in April. But my eyes widened when a mole mouthed the word lawsuit.
Ghersi, Piero Burragato, (head of Italian debt sales), Simon Hussey (head of German debt sales), and Luis Marti-Sanchez (co-head of structured solutions), are suing Nomura. James Orbell, a syndicate official, also sued but settled out of court recently.
These cases centre on allegations that annual bonuses were less than they should have been. Two of the plaintiffs (Burragato and Hussey) have filed claims under the Public Interest Disclosure Act 1988, legislation intended to protect whistle-blowers. Buragatto’s bonus in 2005 was just under £1 million. By 2006, this had evaporated to £53,000. On opening the bonus letter, a reasonable reaction might have been: “There’s a nought missing!”
Simon Hussey sued his previous employer, UBS, in 2005 for £5 million in unpaid bonuses. “You’re always trashed if you sue in the City,” ripostes a plaintiff. Luis-Sanchez is suing Nomura for breach of contract and claims £8 million.
Next week, the Court of Appeal will hear a case involving Andrea Madarassy, who sued Nomura for sex discrimination in 2003. And of course, Nomura made juridical history when it lost the Clark versus Nomura case in 2000. This verdict established that there is no unfettered discretion when it comes to deciding annual bonuses.
The burgeoning of recent lawsuits might be a case of “the gravy train rolls into town” or there might be grains of truth tucked away in the fat documents. A Nomura spokesperson says: “Each of these cases is without merit. We investigated the whistle-blowing issues raised and have concluded that they are all without foundation. We are satisfied that, in each case, bonus awards were fair and reasonable.”
Hussey’s trial is likely to be heard first, in early December. The initial decision will be a milestone in this litigation cesspool. It will probably affect not only the other plaintiffs’ lives but also the career of Barry Nix, who was the boss of all four men. Nix, a wizard footballer in his youth, was European head of fixed-income sales at Bear Stearns before joining Nomura.
Meanwhile, there has to be collateral public relations damage for Nomura. I understand that the firm has hired a PR lovely to help them with one of the lawsuits. She is Melanie Riley, who also acted for the Natwest Three (bankers accused of fraud in connection with the Enron bankruptcy). Devoted readers will know that I am sceptical about the exuberant public relations campaign conducted by the three amigos before their extradition to the US.
