(Bloomberg) — A UBS Group AG client, who alleges his wealth adviser had an affair with his wife and tried to help her take control of family funds, can sue the broker but not the Swiss firm, a New York judge ruled.
Richard Kallman claims UBS failed to supervise Ira Walker as the managing director allegedly schemed with Kallman’s wife to move the family’s trust fund to the firm and then disburse hundreds and thousands of dollars from it. Kallman has said Walker inserted himself into the couple’s divorce, demanding millions of dollars on the wife’s behalf.
Kallman has been seeking $10 million in damages from UBS and Walker, who has publicly disputed the allegations.
In a ruling on Thursday, Judge Lyle Frank said many of the lawsuit’s claims must be decided in arbitration, per terms Kallman accepted as a trustee when he and his wife, Kineret, moved the fund to UBS. However, a claim that Walker and Kineret intentionally inflicted emotional distress on Kallman can proceed toward trial, according to the ruling.
UBS declined to comment on the ruling. Walker and Kineret Kallman didn’t immediately respond to messages seeking comment. The broker has called the case “factually baseless” in industry records, and when reached by Bloomberg earlier this year said the accusations are false.
The drama, chronicled by Bloomberg in March, spotlights an issue that has long bedeviled US financial firms: messy fallout when brokers or investment advisers have personal relationships with clients. Despite high-profile legal brawls waged by wealthy families against firms including Morgan Stanley and JPMorgan Chase & Co., the industry’s main regulators have no rule explicitly setting boundaries for ties outside the office.
“We are gratified that this case will be tried in an open courtroom and look forward to proving the allegations contained in our complaint,” Alan Futerfas, a lawyer for Kallman, said in a statement.
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