Sterne Agee V Mohs

{10765-001 CMP A0373117}
IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: Chapter 7

ROBERT W. MOHS, Case No. 13 B 46366

Debtor. Hon. J ack B. Schmetterer

STERNE AGEE & LEACH, INC.,

Plaintiff,

v.

ROBERT W. MOHS,

Defendant.
Adv. Pro. No. 13 AP _____

ADVERSARY COMPLAINT

Sterne Agee & Leach, Inc. (Sterne Agee) hereby complains against defendant Robert W.
Mohs (Mohs) pursuant to 11 U.S.C. 523(a)(2)(A) and (B) and seeks a judgment determining
that the debt owed to Sterne Agee is a nondischargeable debt.
Introduction
1. Sterne Agee recruited Mohs in 2012 to become an investment broker at the firm.
During the recruitment, Mohs intentionally misrepresented his performance at his previous
employer to induce Sterne Agee to hire him and obtain more lucrative compensation. In December
2012, Sterne Agee hired Mohs to become a broker and, as part of his compensation, provided
Mohs a loan in the amount of $432,000. Sterne Agee relied on the materially false and fraudulently
inflated figures provided by Mohs in deciding to make the loan.

Case 14-00288 Doc 1 Filed 04/30/14 Entered 04/30/14 11:56:26 Desc Main
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2. One month after he received the loan, Mohs deposited half of the proceeds into a
trust. Five months later he resigned from Sterne Agee, and six months later he filed bankruptcy.
He has never repaid the loan. The fraud and intentional misrepresentations committed by Mohs
render the loan nondischargeable pursuant to 11 U.S.C. 523(a)(2)(A) and (B).
Parties and Jurisdiction
3. Sterne Agee is a regional, full service, investment banking and brokerage firm
headquartered in Birmingham, Alabama. Sterne Agee is a creditor of Mohs by virtue of the Note
and Employment Agreement (as those terms are defined herein).
4. Upon information and belief, Mohs is an individual residing at 3270 North Lake
Shore Drive, Unit 14A, Chicago, IL 60657, in Cook County.
5. On December 2, 2013, Mohs filed a chapter 7 bankruptcy petition commencing the
above-captioned bankruptcy case (the Petition Date).
6. The claims in this adversary proceeding arise under the Bankruptcy Code.
Accordingly, the Court has jurisdiction pursuant to 28 U.S.C. 1334.
7. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(I).
8. Venue of this adversary proceeding in this district is proper pursuant to 28 U.S.C.
1408 and 1409.
Background
A. Recruitment of Mohs
9. In 2012, Sterne Agee recruited Mohs to join its firm as an investment broker while
he was working as an investment broker at Raymond J ames & Associates (Raymond J ames).

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10. During the recruitment, Mohs gave Sterne Agee a statement that purported to
provide certain critical financial information about his recent performance as an investment broker
at Raymond J ames (the Payout Statement).
11. Specifically, the Payout Statement stated that Mohs production at Raymond J ames
during Raymond J ames 2011 fiscal year, i.e. October 2010 through September 2011, had been
over $720,000, and that he had assets under management in excess of $71,000,000 as of September
30, 2011. A true and correct copy of the Payout Statement that Mohs provided to Sterne Agee is
attached hereto as Exhibit A.
12. In reliance on the representations made by Mohs through the Payout Statement,
Sterne Agee decided to offer Mohs a position as an investment broker. Sterne Agee prepared an
Employment Agreement (as defined below) to memorialize the representations being relied upon
by Sterne Agee and the terms of the parties employment agreement. To induce Sterne Agee to
hire him, Mohs represented in the Employment Agreement that, as of May 31, 2012, his gross
commissions for the trailing twelve months at Raymond J ames were at least $720,000.
13. As Mohs well knew, not only did this level of commissions make Mohs an
attractive candidate for hire, this type of trailing 12 months commission would provide Sterne
Agee a basis to formulate and negotiate the appropriate level of advance compensation for Mohs,
if any.
14. In fact, Mohs had intentionally falsified the Payout Statement to overstate his
trailing 12 production at Raymond J ames in 2011 while working at Raymond J ames. The actual
amount of his production was not $722,701.47, but was instead $122,701.47$600,000 less than
what Mohs represented to Sterne Agee in the Payout Statement.

{10765-001 CMP A0373117 } 4

15. In addition, through the Employment Agreement, Mohs intentionally
misrepresented the amount of commissions he had generated in the 12 months preceding May 31,
2012. The actual amount of commissions he had generated over this period was approximately
$136,727.77, or approximately 19% of the amount represented by Mohs in the Employment
Agreement.
B. The Employment Agreement and Loan
16. On December 3, 2012, Mohs executed the Employment Agreement, pursuant to
which he became employed at Sterne Agee. A true and correct copy of the Employment
Agreement is attached hereto as Exhibit B.
17. As part of his compensation, Sterne Agee lent Mohs $432,000 (the Loan)
pursuant to a Cash Promissory Note (the Note), which was executed by Mohs on or about
December 4, 2012. A true and correct copy of the Note is attached hereto as Exhibit C.
18. Under the terms of the Employment Agreement, Sterne Agee agreed that it would
forgive portions of the outstanding balance of the Loan in specified installments spanning over a
period of 84 months, i.e. 7 years.
19. Specifically, the Employment Agreement provided that the loan shall be
forgivable in eighty-three (83) equal monthly installments of . . . $5,142.85 . . . and one (1) final
installment of . . . $5,143.45.
20. The Employment Agreement terminated upon, among other events, voluntary
resignation from Sterne Agee by Mohs. In the event of termination, the unforgiven principal
balance of the Loan became immediately due and payable. Interest accrued on the outstanding
balance at 18% per annum beginning ten days after the date of termination.

{10765-001 CMP A0373117 } 5

21. Sterne Agee provided the Loan based on the falsified Payout Statement and
representations made by Mohs in the Employment Agreement, as well as Mohs oral
misrepresentations about his success, the size of his book of business, and his intent to continue
doing this level of business at Sterne Agee.
22. In J anuary 2013, Mohs deposited $200,000 of the proceeds from the Loan into the
Robert W. Mohs Trust. Upon information and belief, the entire sum of $200,000 remains in the
Robert W. Mohs Trust as of the date of the filing of this Complaint.
C. Resignation from Sterne Agee
23. Once employed with Sterne Agee, it became clear that Mohs had misrepresented
the level of commissions he could generate, as well as the size of his book that he would seek to
transfer once employed at Sterne Agee.
24. For the period December 2012 through J une 7, 2013 (the date of his resignation),
Mohs generated only $36,918.19 in gross commissions while employed with Sterne Agee.
25. As of the date of resignation, he had transferred customer assets totaling only
$5,052,941 to Sterne Agee, an amount that was far less than the $75,000,000 that he claimed was
under his management.
26. On J une 7, 2013, only six months after the $432,000 loan payment was made to
Mohs (and long before the seven year term of employment required for forgiveness of the loan),
Mohs voluntarily resigned from Sterne Agee, terminating the Employment Agreement.
27. On the date of resignation, the unforgiven principal balance of the Loan was
$401,142.90. Sterne Agee made demand upon Mohs to pay the unforgiven principal balance due
and owing pursuant to the Loan. To date, Mohs has not responded to these demands.

{10765-001 CMP A0373117 } 6

28. The current outstanding balance of the Loan is $401,142.90, plus interest accruing
at 18% per annum from J une 17, 2013.
Count I 11 U.S.C. 523(a)(2)(A)
29. Sterne Agee restates paragraph numbers 1 through 28 as if specifically alleged
herein.
30. Mohs intentionally made false representations and committed actual fraud with
respect to the amount of commissions he had generated while working at Raymond J ames and his
book of business.
31. Mohs made such misrepresentations and committed such fraud to deceive Sterne
Agee and induce Sterne Agee to hire him and enter into the Employment Agreement and make the
Loan to Mohs.
32. Sterne Agee reasonably relied on Mohs representations about the commissions he
had generated while working at Raymond J ames and his book of business when Sterne Agee
decided to enter into the Employment Agreement and make the Loan to Mohs.
33. Sterne Agee has been damaged in the amount of $401,142.90, plus interest accruing
34. Accordingly, Sterne Agee requests that the Court determine the Loan to be
nondischargeable pursuant to 11 U.S.C. 523(a)(2)(A).
Count II 11 U.S.C. 523(a)(2)(B)
35. Sterne Agee restates paragraph numbers 1 through 28 as if specifically alleged
herein.
36. In the alternative, Mohs contends that the Loan is nondischargeable under 11
U.S.C. 523(a)(2)(B).

{10765-001 CMP A0373117 } 7

37. Mohs used the Payout Statement, which he knew to be materially false and which
related to his financial condition, to deceive Sterne Agee and induce Sterne Agee to enter into the
Loan.
38. The Payout Statement was materially false, because it overstated the commissions
Mohs had generated at Raymond J ames by almost 600%.
39. The amount of commissions on the Payout Statement related to Mohs financial
condition.
40. Sterne Agee reasonably relied on Mohs representations about the commissions he
had generated while working at Raymond J ames when Sterne Agee decided to enter into the Loan.
41. Sterne Agee has been damaged in the amount of $401,142.90, plus interest accruing
42. Accordingly, Sterne Agee requests that the Court determine the Loan to be
nondischargeable pursuant to 11 U.S.C. 523(a)(2)(B).
Conclusion
43. For these reasons, Sterne Agee respectfully requests that the Court enter a
judgment: (i) declaring that the Loan is nondischargeable pursuant to 11 U.S.C. 523(a)(2)(A)
(Count I); (ii) declaring that the Loan is nondischargeable pursuant to 11 U.S.C. 523(a)(2)(B)
(Count II); and (iii) granting such other just and appropriate relief.


{10765-001 CMP A0373117 } 8

Respectfully submitted,

DATED: April 30, 2014 STERNE AGEE & LEACH, INC.

By: /s/ Richard A. Saldinger
One of its attorneys

Robert W. Glantz (#6201207)
Richard A. Saldinger (#6209930)
David R. Doyle (#6303215)
Shaw Fishman Glantz & Towbin LLC
321 N. Clark Street, Suite 800
Chicago, Illinois 60654
(312) 541-0151

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{10765-001 CMP A0373117}

IN THE UNITED STATES BANKRUPTCY COURT

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