Will Citi block a $1.4M award to the broker who called it a ‘boys club’?

A former Citigroup financial advisor’s major FINRA arbitration award last month held the megabank liable for discrimination, harassment and a hostile work environment. Her collection of the award and Wall Street’s pledge to stop being a “boys club,” remain in flux, though.

Erin Ann Daly won damages and attorney fees totaling more than $1.4 million from Citigroup Global Markets and other Citi entities — and a finding that she was “illegally discharged” by the megabank. She had been fighting Citi in court and arbitration for six years after she first accused the firm of “‘boys’ club’ policies and practices which underlie a culture of gender discrimination.” But to obtain her award, Daly must now seek confirmation in court, where Citi may seek to overturn the unanimous decision or simply prolong it in appeals.

Citi has not signaled that it will do either of those things, but it has also not ruled them out.

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The case is another of the mixed messages abounding in an industry in which fewer than a quarter of planners are women. That’s despite advancements such as the hiring of Citi CEO Jane Fraser and a new law that President Biden signed in March prohibiting required arbitration of sexual assault and harassment cases. The legislation drew support from both major parties. 

The size of the award and the language taking Citi to task for its firing stood out to Susan Antilla, whose 2018 Intercept investigation found that only two women won awards of at least $1 million for claims of harassment and a hostile work environment in arbitration over the prior 30 years.

“Lives are ruined, and these people don't get back into the industry. I think it was really important that the arbitrators did that. I think it's unprecedented,” said Antilla, the author of a book called “Tales from the Boom-Boom Room.” The book chronicles a gender-based discrimination case against Smith Barney pursued by female brokers in the ’90s whose lawyers say they ultimately received a settlement of $150 million.

“I wonder how often these women actually get the amount that the arbitrators award them,” said Antilla. She has spoken with some winners of arbitration cases who have settled for fractions of their awards rather than continuing their legal ordeals. “The threat is that the brokerage firm is going to drag it through the courts forever,” Antilla said. “They've got as much legal firepower as they would possibly need, and what mere mortal can fight that?”

For now, it’s not clear which court might hear any arguments about the decision or when Daly might file to seek confirmation — or whether Citi will try to block the award. Appeals could last several years, as in the case of a former UBS compliance official who finally received his defamation award in April after technically winning the arbitration case in December 2019. 

Representatives for the firm and Daly’s lawyer, Michelle Daly, declined to discuss the case beyond sending statements.

“The arbitration panel correctly found that Citi acted in violation of several laws,” Daly said. “However, we believe Citi will continue to deny and delay justice to deter other whistleblowers.”

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Citi denies Daly’s allegations that the company derailed her promising career by removing her from its stock allocation system, turning her into a “glorified secretary” and later retaliating against her reports of management insider trading by firing her. Of three men her lawsuit respectively accused of discriminating against her and violating trading rules, one is still at Citi and the other two are still in the industry, according to FINRA BrokerCheck. In contrast, Daly hasn’t been registered with any firm since her December 2014 termination from Citi. 

The three men didn’t respond to emails seeking comment, and the company declined to discuss any of the individuals. 

“Long before Ms. Daly made her allegations in 2016, Citi was fully committed to equal employment opportunities, fair employment practices and nondiscrimination. Citi remains very committed to these principles as reflected in its 2021 Talent and Diversity Report,” spokeswoman Danielle Romero-Apsilos said in a statement. “Citi remains disappointed in the award and is considering its options. Should Citi decide to challenge the award, it will ultimately honor any final decision of the courts.”

What’s also not known is the precise impact that the new law, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, will have on provisions of Wall Street’s employment contracts requiring arbitration of disputes with the firm and waiving the right to file lawsuits in court. The clauses “force survivors into a secret chamber that overwhelmingly favors employers,” said Gretchen Carlson and Julie Roginsky, co-founders of advocacy group Lift Our Voices. Carlson and Roginsky drove bipartisan support for the law in Congress after their own cases against former Fox News Chairman Roger Ailes a few years earlier. 

“Historically marginalized groups must battle a culture of silence and secrecy while being denied their day in court. Companies often use forced arbitration to escape accountability for toxic behavior,” Carlson and Roginsky said in a statement. “We are committed to eradicating forced arbitration and nondisclosure agreements for all types of workplace toxicity, including racial, gender and all other forms of discrimination.” 

Judges overseeing cases filed under the new law will likely need to sort out “companies splitting hairs” by arguing that the law pertains only to allegations of sexual assault and harassment and any other claims must be removed to arbitration, Antilla said. Daly’s case started in the courts with the lawsuit she filed in 2016, but a federal judge who cited the terms of her employment agreement granted Citi’s motion to compel arbitration two years later. 

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Besides needing to pursue the confirmation of the decision in court, Daly must forward the new language to FINRA’s Credentialing, Registration, Education and Disclosure Department for review before it replaces Citi’s allegation that it fired her for “tardiness and insubordination” and because she “forwarded confidential information about a planned offering.” Firms file Form U5 notices with the regulator for any terminations of registered brokers.

If approved, her Form U5 would now state: “In a decision on Ms. Daly’s gender discrimination and defamation claims, an arbitration panel has found that she was illegally discharged.”

The case’s allegations and continuing industry practices such as arbitration of discrimination complaints form something of a puzzle when compared to actions like the hiring of Fraser, paying travel costs for employees’ reproductive healthcare and agreeing to a racial equity audit. On the other hand, Citi hasn’t disclosed the demographics of its brokers and Romero-Apsilos said in an email that, other than for claims of sexual assault or harassment and certain other exceptions, U.S. employees are required to take their cases to arbitration.

The megabank views arbitration as “a fair, neutral, cost-effective and efficient way to resolve disputes” offering “the same substantive legal rights as litigation” in courts with potential to recover damages, Romero-Apsilos said.

Antilla sees a “dichotomy” between the positive actions taken by firms like Citi and their behavior when a broker or another employee speaks up about harmful workplace actions, she said. Reporting the problem is often “the beginning of the end of your career” with companies deploying groups of lawyers willing to “fight to the end,” Antilla said.

“This looks like great justice to me on the surface,” she said of Daly’s case. “But then, when you think about it, Citi could make her life miserable.”