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Drama at Jefferies continues as firm calls out competitors

Sage Kelly, the now former head of Jefferies’ healthcare division whose in the midst of an embarrassing public divorce, has left the investment bank with plenty of cleaning up to do. The firm is the talk of Wall Street, and for all the wrong reasons. As he is prone to do, CEO Richard Handler is going on the offensive, backing the integrity of the firm will casting doubt on that of the media and some of Jefferies’ competitors.

As a reminder, the saga began when Kelly’s wife, in a child custody case attached to their bitter divorce, detailed in court papers the drug binges and philandering that her husband took part in alongside clients and other Jefferies employees. They have all vehemently denied the claims, other than Kelly acknowledging using “recreational drugs on occasion at certain social events in the past.”

With Kelly on voluntary leave, Handler is left to clean up the mess. In a memo issued to employees on Friday and posted to the company’s website, Handler again backed Kelly, calling the situation “terrible sad,” and saying “our hearts go out to him and his family.”

But then he went to protecting the shield, noting that the media and, somewhat surprisingly, major competitors, have “piled on,” using categorically-denied claims to muster up controversy.

The memo said that one reporter confirmed that the CEO of a top-five Wall Street bank personally emailed him details of the lawsuit, and that other industry execs at competing firms have been encouraging reporters to do more muckraking.

“When Jefferies competes, we do it in the financial markets by trying our best to help our clients succeed, not by spreading baseless rumors and lies in order to damage our peers,” the memo read. “We are aware that there is an ongoing campaign that includes calling former employees to get ‘dirt’ to string together fabricated themes of ‘bad people’ and a ‘broken culture.’”

Jefferies could be referencing a New York Post follow-up, which featured a former employee of the healthcare group referring to the unit as a “boy’s club.” He also said that he had personally seen Sage “pass out and lose his bladder control numerous times,” and that Sage once made an analyst pick up a $28,000 strip club tab.

After talking to the group, Handler isn’t buying any of it. He said that every managing director within the healthcare division, including himself and executive committee chairman Brian Friedman, voluntarily took and passed drug tests, even if they weren’t mentioned in any of the court documents.

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Quote of the Day: “We are not devoid of issues or problems at Jefferies, and we believe even one example of bad behavior or the smallest of fines, lawsuits, or penalties is one too many.  However, we would gladly put our track record of compliance and regulatory focus up against the record of any one of our major competitors.” – CEO Richard Handler’s memo to employees

AUTHORBeecher Tuttle US Editor

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