Chung Wu, the former UBS PaineWebber broker who was fired after sending e-mails in August 2001 suggesting clients sell Enron stock, has sued PaineWebber.
Chung, now working at A.G. Edwards, asserts in his claim that PaineWebber wrongfully fired him. He is seeking nearly $2.7 million in damages.
The Houston-based broker, as reported in Registered Rep. in May, sent e-mails to several dozen clients suggesting they take money out of Enron. After being alerted to this e-mail through an Enron executive, Chung’s branch manager fired him, and then took steps to appease Enron executives and reverse Chung’s statements to his clients.
Brokers at the firm got in touch with clients, retracting Chung’s recommendation to sell—after PaineWebber officials assured two Enron execs that Enron would be notified before the retraction was sent, according to the claim.
Chung’s clients "were beginning to be contacted by PaineWebber representatives who informed [them] that Chung was completely wrong and he did not give them good advice about diversifying," according to the claim, filed by attorney Joseph Hroch of Spencer & Associates. E-mails on Cong. Henry Waxman’s Web site indicate that the firm reiterated to Chung’s clients that PaineWebber had a "strong buy" rating on the stock at the time. Hroch is currently handling a class action case against PaineWebber, filed by Chung’s clients who continued to hold Enron as a result of the firm’s retraction.
"He needlessly lost a lot of kudos in his clients’ eyes," Hroch says.
Chung’s plight has been held up as an example of the too-close relationship between investment banks and their corporate banking clients, causing them to make decisions that benefited the banks at the detriment of others, including their own employees. ,p> The case garnered the attention of Congress as well. After Chung was fired, Waxman asked the firm whether anyone who tells a client to sell stock is fired. PaineWebber responded that the mass e-mail constituted a "sell" rating, which brokers aren’t supposed to issue, and implied something nefarious was at work because Chung sent the e-mails late at night. PaineWebber did not return a call seeking comment.
Hroch says he’s still waiting for PaineWebber’s response to the claim.