Tarr v. Credit Suisse Asset Management, Inc.

Decision Date11 April 1997
Docket NumberNo. 95 CV 1857(FB).,95 CV 1857(FB).
Citation958 F.Supp. 785
PartiesKenneth J. TARR, Plaintiff, v. CREDIT SUISSE ASSET MANAGEMENT, INC., Swiss American Corporation, Swiss American Securities, Inc., Credit Suisse, Hans Peter Sorg, Jorge Schwarzenbach, Frank Meister, George Helwig and John Does I through V, Persons and/or entities who cooperated and/or participated in the wrongs alleged herein, but are as yet unidentified, Defendants.
CourtU.S. District Court — Eastern District of New York

Elliot Louis Pell, P.A., New York City, Law Offices of William J. Lanigan, Somerville, NJ, for Plaintiff.

Winthrop, Stimson, Putnam & Roberts by Susan J. Kohlman, Francis Carling, Michael A. Kalish, Armen H. Merjian, New York City, for Defendants.


BLOCK, District Judge:

The Court previously referred to Magistrate Judge Robert Levy for a report and recommendation ("R & R") defendants' motion to dismiss for failure to state a claim which sought dismissal of the complaint with the exception of its Title VII claim against defendant Credit Suisse Asset Management ("CSAM"). Defendants have submitted objections ("Objections") to the R & R issued by Magistrate Judge Levy on March 21, 1997.

The Court has considered plaintiff's objections and conducted a de novo review of the R & R. Fed.R.Civ.P. 72(b); see also United States v. Premises Known as 281 Syosset Woodbury Road, 862 F.Supp. 847, 851 (E.D.N.Y.1994) (magistrate judge's ruling on dispositive matters subject to de novo review). The Court adopts the extremely thorough, thoughtful, and well-reasoned R & R, with the exception that plaintiff may proceed in its Title VII claim against defendant Credit Suisse as well as defendant CSAM.



LEVY, United States Magistrate Judge.

By order dated December 10, 1996, the Honorable Frederic Block, United States District Judge, referred the above-captioned matter to me to file a Report and Recommendation on all outstanding motions. Defendants Credit Suisse Asset Management, Inc. ("CSAM"), Swiss American Corporation ("SAC"), Swiss American Securities, Inc. ("SASI"), Credit Suisse ("CS"), Frank Meister ("Meister"), George Helwig ("Helwig"), Hans Peter Sorg ("Sorg") and Jorge Schwarzenbach ("Schwarzenbach") move to dismiss plaintiff's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.1 For the reasons stated below, I respectfully recommend that defendants' motions be granted.


Plaintiff Kenneth J. Tarr commenced this action in May 1995. The facts alleged in plaintiff's 242-paragraph complaint are as follows:

Plaintiff is a former president and director of defendant CSAM, a New York corporation engaged in the business of money management for high net worth individuals and an "affiliate" of defendant CS.2 On October 1, 1993, CSAM terminated plaintiffs employment. Plaintiff alleges a variety of claims in connection with his employment and termination, including claims for employment discrimination under Title VII, violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), conspiracy to violate RICO, breach of contract, prima facie tort, and intentional infliction of emotional distress.

Plaintiff alleges that, prior to his employment, all of the defendants entered into a fraudulent scheme "to increase the number and size of tax avoidance accounts of American taxpayers, i.e., bank accounts and investment accounts in Switzerland and other offshore locations owned by individuals who wish to avoid the tax consequences associated with the funds deposited in those accounts." According to plaintiff, the scheme included "the hiring of an American citizen with superior credentials ... to provide defendant CSAM with instant credibility," as well as "the exercise of coercion and the imposition of punitive measures ... on employees who refused to allow [CSAM] to act in a manner contrary to United States law" and "the use of a scapegoat if defendant CSAM's business practices came under scrutiny."

Plaintiff claims that before CSAM recruited him, he was employed for fourteen years by The Bessemer Trust Companies ("Bessemer"), where he handled client portfolios worth 1.6 billion dollars. In the spring of 1991, while plaintiff was working for Bessemer in Florida, an executive recruiter approached him on behalf of CSAM. Plaintiff later participated in meetings with various individuals, including defendants Schwarzenbach, Helwig and Sorg and a Vice President of Korn/Ferry International named Howard Freedman3, who allegedly misrepresented to plaintiff that CSAM "had state of the art computer systems, excellent staff, and a developed, integrated organization," overstated CSAM's assets under management, and deliberately failed to disclose to plaintiff that CSAM was "a skeletal, start-up company," that it "had a poor financial situation and a lack of systems" and that its "money management infrastructure only existed in rudimentary form." The complaint states that defendants Sorg, Schwarzenbach and Helwig knew that these representations were false and made them, individually and on behalf of defendants CSAM and CS, with the intent that plaintiff rely upon them.

By letter dated July 9, 1991, Schwarzenbach and Helwig allegedly sent plaintiff a written offer of employment containing various terms and conditions, including plaintiff's proposed salary. According to plaintiff, that letter constituted a use of the United States mails in furtherance of defendants' fraudulent scheme and thus "constituted mail fraud in violation of 18 U.S.C. § 1341." Plaintiff further contends that, sometime after July 9, 1991, Freedman and defendant Schwarzenbach "represented to plaintiff that defendants, CS and CSAM, were making a long-term (at least five-year) commitment to plaintiff."

Based on the representations made to him, plaintiff accepted CSAM's offer of employment in mid-July 1991, resigned his position at Bessemer, and joined the company on August 19, 1991 as its President, Chief Investment Officer and a member of the Board of Directors. The complaint states that, at all relevant times, plaintiff "performed his responsibilities as President of defendant CSAM in an exemplary manner" and was responsible "for creating and building a successful investment management company" despite his discovery, shortly after commencing employment, that (1) CSAM "had only ninety-eight million dollars ($98,000,000.00) under management, sixty-four million dollars ($64,000,000.00) of which was Credit Suisse (Zurich) money," and (2) CSAM had no policies or procedures regarding money management, no trading or account administration, and no trading department.

In addition, plaintiff soon learned that various employees of defendants CSAM, CS, and SASI were arranging for United States residents and citizens to establish "tax avoidance" accounts in Switzerland, were soliciting resident aliens to create such accounts, and were allowing Swiss employees to maintain such accounts. Plaintiff also discovered that employees of defendant CS were engaging in an interstate direct mail and telephone campaign to solicit the banking business of high net worth American residents for the purpose of creating tax avoidance accounts. According to the complaint, that campaign constituted mail and wire fraud in violation of 18 US.C. § 1341. Plaintiff claims that, upon learning of some of these activities, he telephoned defendant Schwarzenbach and informed him that tax avoidance accounts were unlawful in the United States and explained that, as President of CSAM, he would not tolerate the solicitation, establishment or maintenance of such accounts by members of his staff or employees of CS.

In addition to the alleged conspiracy to "increase the number and size of tax avoidance accounts of American taxpayers," plaintiff claims to have uncovered a scheme to violate United States immigration law. In 1990 and 1991, CSAM hired three employees who were foreign nationals to work in its offices in the United States. According to plaintiff, those three employees did not possess "skills that were not readily obtainable in the United States" and thus did not meet the requirements for obtaining permanent resident status, or "green cards." Plaintiff claims that the three employees pressured him to obtain green cards for them and that defendant Schwarzenbach instructed him to "tell the immigration authorities whatever was necessary to obtain the green cards" for two of those employees. Nonetheless, plaintiff refused to comply with the demands and did not submit documentation to support the permanent resident applications of those three employees. The complaint states "[u]pon information and belief" that plaintiff's successor as President of CSAM later submitted the necessary documentation to support the resident alien application of one of those employees.

Plaintiff also claims to have discovered an illegal scheme on the part of defendant CS to charge defendant CSAM for the airline tickets of Swiss employees working in the United States. Plaintiff alleges that, in the Fall of 1992, he learned that CS had charged CSAM for the airline tickets of an employee named Thomas Heierli and his family, who had returned home to Switzerland for vacation. Plaintiff claims that he sent a memorandum to CS requesting information concerning charges for "international transfers" and, when he received no reply, he telephoned CS's Chief Financial Officer, who allegedly advised him not to "rock the boat."

Next, plaintiff claims to have discovered a violation of United States securities law on the part of a CSAM employee. He alleges that, soon after he began his employment with CSAM, he informed all CSAM employees that "principal transactions with defendant CS and its affiliates without client pre-approval are prohibited by United States securities law" and that CSAM "should only engage in...

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