Rhode Island advisor backs off initial suit after getting most documents

May 27, 2010 — 4:27 AM UTC by Brooke Southall

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David Brochu has dropped his lawsuit against Focus Financial, but the two sides have been embroiled in a dispute over $500,000 that has been placed under temporary restraining order.

Brochu dropped his lawsuit after he received “98%” of the documents he had been seeking, according to a long letter he sent to clients. The letter was obtained by RIABiz.

Brochu’s battle with his rollup began when Brochu’s company, StrategicPoint Investment Advisors, sued Focus Financial Partners LLC in Delaware’s Court of Chancery on Nov. 17 under its holding company, Progressive Financial Strategies LLC.

Brochu brought the suit because Focus allegedly prevented him from gaining access to books and records that he sought to determine his ownership stake. Brochu said he feared that the equity ownership that his firm holds in the roll-up was diluted 40% to 60% when it raised an additional $50 million of venture capital from Polaris Ventures and Summit Partners, both of Boston, back in November.

StrategicPoint manages about $500 million from Providence, R.I.

It’s not clear what the remaining $500,000 dispute stems from. The restraining order issued by the Superior Court of the state of Rhode Island keeps Brochu from “further alienating, spending or otherwise disposing of the sum of $500,000 which was wire-transferred from the plaintiffs to the bank account of Progressive Financial Strategies.”

Focus Financial , Strategic Point Holdings LLC and Strategic Point Investment Advisors LLC are named as plaintiffs in the restraining order, but it’s not clear how the $500,000 ended up with Brochu and Progressive Financial.

Changed the office codes

One sign of how ugly the dispute grew is that Focus, according to Brochu, locked him out of his firm. “They changed the office codes. Took away my electronic access. Locked my office and refused to allow me to collect my things. I was banned from the company I had started twenty one years ago simply because Focus wanted it,” Brochu wrote in a letter he sent to his clients.

In that letter, he appeals to them to put put pressure on Focus Financial to reinstate him – at least for an orderly transition. Here is an excerpt of that letter:

“If you demand that the office be unlocked to me, that Focus reinstate me, they will be forced to do so. I pledge to assist in any way I can, without compensation of any kind, my transition out of the firm. If Focus wants me to leave I will do so, but please let me work with you to smooth the process and insure that nothing goes wrong with the management of your money. Demand my reinstatement so that we might end our relationship with dignity and respect for your needs not the needs of a roll up firm in New York who seems to care nothing for what is happening to you in this process.”

It is not clear whether Brochu plans to take further action against Focus Financial after his declaratory judgement filing, though his letter includes this statement:

Focus: Brochu is alone in his complaints

“Focus did not and does not have the right to lock me out. The matter has still not been decided and I am confident in my reading of the contracts. Confident enough to wait.”

Focus Financial declined to comment for this article but it has responded to requests in the past by saying that Brochu’s complaints are isolated to him and that it has made efforts to satisfy him. The New York-based rollup has 16 partner firms.

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John Petty said:

May 28, 2010 — 11:23 AM UTC

Focus has a lot of headaches these days, wonder how they will bury the Geller Group debacle after the DOL is done with them.


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