For Merrill Lynch and UBS, allegations of widespread racial discrimination put a damper on an otherwise stellar year for the firms. Both wirehouses were named in separate lawsuits seeking class-action status on account of black brokers that allege a pattern of discrimination at the two firms.
For Merrill Lynch, who's chief executive, Stanley O'Neal, is a black man, the allegations are striking. Filed in November in a Chicago federal court by Nashville, Tenn.-based broker George McReynolds, the case alleges the firm failed to hire and promote blacks, underutilized them in the more lucrative positions and tended to push them into administrative jobs. The filing also noted that of Merrill's 14,000 brokers, roughly 2 percent are black. And the suit alleges that more than 25 percent of those brokers leave within five years.
Bob McCann, president of Merrill's private client group, issued this statement in response to the suit: “Merrill Lynch does not tolerate discrimination in any form. On the larger issue of diversity, we understand that our firm and the industry must do a better job of recruiting, developing and retaining diverse employees. We are encouraged by plaintiffs' counsels' desire to discuss this with Merrill Lynch, and we anticipate talking with them in the near future.”
According to published reports, top management is taking the suit seriously. Dan Sontag, Merrill's head of the global private client group, and Phil Sieg, managing director of strategic leadership and business development, met with more than a dozen black brokers on Dec. 14 to discuss ways the firm can improve diversity.
Linda Friedman of Stowell & Friedman is representing McReynolds. She also represented Hydie Sumner, a former Merrill broker who sued the firm for gender discrimination and won last year.
At UBS, the allegations are similar. Three former black employees, alleging a pattern and practice of discrimination, filed the suit in October in the Southern District of New York. Among the allegations: passing up blacks for promotions, segregating blacks in certain offices or assignments and paying them less than whites for the same job. The three named plaintiffs resigned from their jobs after being passed over for raises and promotion, among other things, says the report. The suit also claims that of the 8,615 UBS brokers in 2002, only about 1.2 percent were black.
The firm issued a statement saying it is “strongly committed to diversity…and will defend ourselves vigorously against any allegations to the contrary.” It also noted that it was awarded the 2004 Corporate Appreciation Award by the organization “100 Black Men.”
