Paul Fiani-led fund manager Integrity Investment Management (Integrity IM) and the firm's former portfolio manager Shawn Burns are entangled in a legal battle over the termination of Burn's employment with the firm.
According to documents filed with the Supreme Court of New South Wales, Burns was called into a meeting on 20 June 2011 with Fiani during which Fiani told him certain concerning matters had come to his attention. These areas of concern resulted in Burns' employment being terminated.
The reasons for concern included a series of alleged breaches of his employment contract, including taking home sensitive client information, retaining and storing pornographic material on a company computer and potentially breaching trading rules.
The firm also claimed that Burns had assisted a potential competitor to the business with obtaining its Australian financial services (AFS) licence.
Burns would have provided 'material support to a potential competitor of the company (Challenger Alpha) for its application for an AFS licence, including assisting an individual, Bruce Smith, who was at that time still employment by Alliance Bernstein', the documents state.
Smith was part of a group of investment managers led by former AllianceBernstein director of Australian equities Johan Carlberg, who established Alphinity Investment Management, a boutique firm backed by Challenger Financial Services, in July last year.
Burns, however, has rejected the allegations.
He said that taking material home from time to time was part of the normal course of business.
"In the last six months I have been working on establishing a structure for a possible new fund and business for Integrity," he explained in the court documents.
"Existing clients of the company would be targeted as possible clients for the new fund and Mr Fiani had specifically asked me to address the clients including existing clients that would be targeted."
He also said that the pornographic material on his computer was sent to him by a friend and that the material was not sourced by him.
"I have asked him not to send any more material to me. He did not cease to do so despite my request," the court document state.
According to Burns' lawyers, the help provided to Smith involved minor assistance and was completely unconnected to any competition with Integrity.
"Bruce Smith and I worked together at Zurich Financial Services and are good friends. He told me himself and a few of his colleagues were intending to set up a fund management operation. Seeing I had gone through the exercise previously he was interested in my broad views on structure and what may be done differently," Burns states in the court documents.
"I gave a character reference to Bruce on the ASIC application for a financial services licence. I did this as a friend and did not believe that there was any problem in doing so. No issue with this had been raised with me before Monday 20 June, 2011."
Burns was also a director with Integrity and held an equity stake of 17.85 per cent in the firm through a vehicle called 'Biscuit Tin'.
In May 2011, Burns voted against proposed changes to the shareholders' agreement, which allegedly made the terms less 'financially advantageous' to a departing director or employee.
Burns' lawyers have argued that the changes were a concerted effort by the firm's other shareholders 'to put in place structures and an environment in which they could damage the plaintiff by getting rid of him at a cheaper price than without the amendment', the documents show.
No judgment has yet been made in the case and the next hearing is scheduled for 7 October this year.
