FINANCIAL INDUSTRY REGULATORY AUTHORITY

DISPUTE RESOLUTION
----------------------------------------- x
In the Matter of the Arbitration of a Certain Controversy :
Between: :
: FINRA No.: 09-
UBS SECURITIES LLC, :
Claimant, :
:
- against - : STATEMENT OF CLAIM
:
JEFFERIES & COMPANY, INC., :
BENJAMIN D. LORELLO, and SAGE KELLY, :
:
Respondents. :
----------------------------------------- x

Claimant UBS Securities LLC (with its affiliates, collectively referred to as “UBS” or the

“Firm”), by its attorneys Epstein Becker & Green, P.C, respectfully submits this Statement of

Claim to arbitration before the Financial Industry Regulatory Authority (“FINRA”) Dispute

Resolution, and states as follows with respect to the conduct of Respondents Jefferies &

Company, Inc. (“Jefferies”), Benjamin D. Lorello, and Sage Kelly.

PRELIMINARY STATEMENT

1. This arbitration arises out of Respondents’ unlawful raid of UBS’ lucrative Global

Healthcare Investment Banking Group (the “Healthcare Group”) and beyond, which resulted in

the mass resignation and departure of at least 36 UBS employees between June 17 and June 21,

2009 and a nearly complete lift-out of UBS’ Healthcare Group. Jefferies’ massive, premeditated

raid was made possible through the active conspiratorial assistance of Respondents Benjamin

Lorello and Sage Kelly -- two senior UBS Managing Directors who were entrusted by UBS to

run the Healthcare Group. Since at least March 2009, Lorello and Kelly have betrayed their

fiduciary, common law and contractual obligations to UBS by surreptitiously planning inter se

and with Jefferies to orchestrate this raid and essentially transport the Healthcare Group among

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others to UBS’ competitor Jefferies, where Lorello will become the Global Head of Investment

Banking inclusive of Healthcare which will be headed by Kelly. On June 17, 2009, Lorello and

Kelly abruptly resigned from UBS to join Jefferies. Since then, under the influence and

guidance of Lorello and Kelly, Respondents coordinated the mass resignation of nearly the entire

professional staff of UBS’ Healthcare Group and others in the United States and abroad.

2. Lorello’s and Kelly’s violations of their fiduciary obligations to UBS are

compounded by Respondents misappropriation of UBS’ confidential and proprietary business

information to, among other things, jump-start a competing Healthcare Group for Jefferies. To

this end, Respondents used UBS’ confidential and proprietary information concerning employee

compensation and productivity to quickly and efficiently purloin dozens of critical UBS

investment bankers, analysts, and others in the United States and elsewhere.

3. Respondents’ conduct has inflicted enormous reputational, economic and other

harm on UBS, which cannot be remedied by money damages alone. Respondents should be

enjoined from continuing with such conduct in order to prevent UBS from continuing to suffer

this irreparable harm. The relief sought by Claimant includes a constructive trust -- a trust

imposed by operation of law on Jefferies requiring it to hold the misappropriated business for the

beneficial ownership of UBS -- and ultimately to account and to pay UBS for the damages it has

and will incur, to the extent quantifiable.

4. UBS also seeks limited injunctive relief requiring Respondents Lorello and Kelly

to honor their continuing obligations to UBS, which includes their compliance with applicable

notice periods before they can commence employment with Jefferies, their duty to refrain from

using or disclosing UBS’s confidential and proprietary information, and their contractual

commitment to refrain, for a period of ninety (90) days after their notice of resignation, from

NY:3529962v2 2
directly or indirectly soliciting, influencing, inducing, employing or engaging, any employee or

client of UBS. With regard to Jefferies, UBS seeks corresponding limited injunctive relief

enjoining Jefferies from directly or indirectly inducing any UBS employee or former employee

to breach his or her fiduciary obligations, using UBS’ confidential or proprietary business

information, soliciting even additional employees of UBS’ Global Healthcare Group or others

and soliciting or servicing UBS Healthcare Group or other clients that were not already Jefferies

clients.

THE PARTIES

I. Claimant - UBS

5. Claimant UBS is a limited liability company organized under the laws of the State

of Delaware. UBS has its principal office at 677 Washington Boulevard, Stamford, Connecticut

06901, and operates an office at 299 Park Avenue, New York, New York 10171.

6. UBS is a direct and indirect subsidiary of UBS AG. UBS is a broker-dealer and

investment bank, and a registered member of FINRA.

II. Respondents

7. Respondent Jefferies is a corporation organized under the laws of the State of

Delaware. Jefferies has its principal office at 520 Madison Avenue, New York, New York

10022.

8. Jefferies is a broker-dealer and investment bank, and a registered member of

FINRA.

9. Respondent Benjamin Lorello is a Managing Director, Head of UBS’ Healthcare

Group, and Vice Chairman of UBS’ Investment Banking Department (“IBD”). Lorello also

served on the IBD Americas Executive Committee, which the IBD’s senior most group in the

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Americas. He resides in New York, New York, and since March 1999 has regularly worked for

UBS in New York County.

10. Lorello is currently registered with UBS, and is thus an associated person of

FINRA. Lorello has submitted his resignation to UBS and upon information and belief, is

directly or indirectly rendering services for the benefit of Jefferies.

11. Respondent Sage Kelly is a Managing Director of UBS, resides in Sag Harbor,

New York, and since March 1999 has regularly worked for UBS in New York County.

12. Kelly is currently registered with UBS, and is thus an associated person of

FINRA. Kelly has submitted his resignation to UBS and upon information and belief, is directly

or indirectly rendering services for the benefit of Jefferies.

RELEVANT FACTS

Background

13. In 1999, UBS substantially expanded its existing Healthcare Group by hiring Ben

Lorello and a number of other investment bankers, including Sage Kelly. Over the past ten

years, UBS has invested a substantial amount of time, money and resources to grow the

Healthcare Group. As a direct result of UBS’ efforts, its Healthcare Group established itself as a

significant presence within the investment banking healthcare arena. The Healthcare Group’s

global investment banking healthcare platform is located in New York, San Francisco, London,

Hong Kong, India, Australia and Brazil. The Group covers all aspects of professional services to

the for-profit Healthcare industry including coverage of the following sectors: life sciences,

medical technology and devices, biotechnology, healthcare services and large cap and specialty

pharma.

14. At all times during his employment with UBS, Lorello has been the senior

member and leader of UBS’ Healthcare Group. As the leader of UBS’ Healthcare Group for the

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past ten years, Lorello had the ability to induce other UBS Healthcare Group employees to

follow him to a competing bank if Lorello chose to leave UBS.

15. UBS’ Healthcare Group was a lucrative and important part of UBS’ investment

banking platform. It is consistently ranked among the top three firms in M&A, equity and debt

league tables. Since 2005, UBS’ Healthcare Group closed more than $567 billion in transactions

for its clients. Over that period, UBS’ Healthcare Group has had in excess of $1 billion in

revenues.

Relevant Terms of Lorello’s Employment

16. Lorello has been employed with UBS and its predecessors since March 1999. He

also was highly compensated by UBS, with his total annual compensation averaging in the

millions of dollars. He was also Vice-Chairman of the Investment Banking Department and a

member of the IBD Americas Executive Committee, with access to the most sensitive

information for UBS’ entire investment banking business.

17. By a letter dated May 18, 2009, UBS offered to substantially increase Mr.

Lorello’s salary. As a condition to Mr. Lorello’s receipt and acceptance of that salary increase,

Lorello was required to provide UBS with 60 days prior written notice of his intent to terminate

his employment with UBS. The May 18, 2009 Lorello Letter also provides:

If the Firm does not require you to work during the Notice Period,
you agree that you will not provide services for any Competitive
Enterprise including, without limitation, engaging in, directly or
indirectly, or managing of supervising personnel engaged in, any
activity (i) which is similar or substantially related to any activity
in which you were engaged, in whole or in part, at the Firm; (ii) for
which you had direct or indirect managerial or supervisory
responsibility at the Firm; or (iii) which calls for the application of
the same or similar specialized knowledge or skills as those used
by you in your activities with the Firm.

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 ‘Competitive Enterprise’ means a business enterprise that (i)
engages in any activity, or (ii) owns or controls a significant
interest in any entity, that, in either case, competes with any
activity in which the Firm or UBS AG is engaged in any place in
the world. The activities covered by the previous sentence include,
without limitation, financial services such as investment banking,
public or private finance, lending, financial advisory services,
private investing (for anyone other than you or members of your
family), merchant banking, asset or hedge fund management,
insurance or reinsurance underwriting or brokerage, property
management, or securities, futures, commodities, energy,
derivatives or currency brokerage, sales, lending, custody,
clearance, settlement or trading.

18. Mr. Lorello accepted the salary increase described in the May 18, 2009 letter. As

a result, Mr. Lorello became bound by the 60 day notice provision set forth in that letter.

19. On June 17, 2009, Mr. Lorello abruptly notified UBS that he was terminating his

employment with UBS. Under the terms of the May 18, 2009 letter, the 60 day notice provision

was triggered on his resignation date and runs until August 16, 2009. During this period, Mr.

Lorello remains a UBS employee and is prohibited from commencing employment with Jefferies

or any other entity, or from taking any action that is not in UBS’ best interest.

20. Following the expiration of Mr. Lorello’s 60 day notice period, Lorello remains

subject to very limited post-employment obligations to UBS. Those restrictions are set forth in

Mr. Lorello’s May 24, 2007 Employment Agreement with UBS (the “Lorello Employment

Agreement”).1

21. Pursuant to the Lorello Employment Agreement, Lorello is subject to the

following Non-Solicitation provision:

You agree that during your employment, and if you voluntarily

terminate your employment, for a period immediately thereafter

1
That agreement, like Kelly’s, provides for a 30 day notice period if they resign after March 1, 2009. UBS contends
that the May 18, 2009 letter extends the period to 60 days even though the injunctive relief UBS will initially seek
will be tied to the 30 day period.

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 which, when added to the Notice Period, shall be equal to ninety
(90) days, you will not, directly or indirectly, for yourself or for
any third party, of which you are or anticipate becoming an
employee, owner, partner, investor, member, agent, director,
consultant, independent contractor or otherwise associated in any
way whatsoever:

* * *

(ii) solicit, influence, induce, recruit, cause or entice any

employee, Covered client,[2] consultant, independent
contractor or vender of UBS to terminate such person’s or
entity’s business or employment relationship with UBS;

(iii) to interfere with the relationship between UBS and any

employee, Covered client, consultant, independent
contractor or vender of UBS; or

(iv) employ or otherwise engage as an employee, independent

contractor or consultant for a Competitive Enterprise any
employee of IBS or any person who was employed by UBS
at any point during the six months prior to the termination
of your employment with the Firm, unless UBS shall have
previously terminated such person’s or entity’s relationship
with UBS.

22. The Lorello Employment Agreement also includes the following section on the

Protection of Confidential Information:

You agree that, in connection with your employment with the

Firm, you will acquire and/or be exposed to trade secrets and other
confidential information related to the business and operations of
UBS (defined below) and/or its clients that are not readily
available to the public (collectively, “Confidential Information””)
and that such Confidential Information is the property of UBS.
Confidential Information shall include, without limitation,
information relating to intellectual property, financial information,
personnel, projections, strategic planning, client information, any
other work product or the business of the Firm. You further
acknowledge and agree that the Firm takes reasonable steps to

2
“Covered clients” are defined in the Lorello Employment Agreement as “any of the clients for whom UBS
performed work, or any of the prospective clients from whom UBS actively solicited work during the six months
prior to the termination of your employment, with which such clients or prospective clients you had contact with
during your employment with the Firm.”

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 maintain the confidentiality of such Confidential Information. In
this regard, you agree that, during and forever after your
employment with the Firm, except as may be required by law, you
will refrain from using or disclosing to any other person or entity
outside of UBS (other than as expressly authorized by UBS for the
purpose of its business) any Confidential Information or any
information received in confidence by UBS from any third party.
Upon termination of your employment with the Firm, whether or
not requested, or sooner if requested by the Firm, you agree to
return to the Firm any and all Confidential Information, whether
originals or copies, in whatever medium or form, belonging to
UBS, including, without limitation, the Firm.

You will give immediate written notice to the Firm of any

disclosure of the Firm’s Confidential Information required by a
court, governmental agency, or regulatory authority in order to
allow the Firm the opportunity to respond to such a request. Your
obligations under this section, among others, will survive the
termination of your employment.

Relevant Terms of Kelly’s Employment

23. Mr. Kelly has been employed with UBS and its predecessors since March 1999.

He also was highly compensated by UBS, with his total annual compensation averaging in the

millions of dollars.

24. As with Mr. Lorello, UBS offered Mr. Kelly a substantial salary increase by letter

dated May 18, 2009. That letter made clear that Mr. Kelly’s salary increase was conditioned

upon Mr. Kelly’s agreement to provide UBS with 60 days prior written notice of his intent to

terminate his employment. The letter also contained additional provisions that were substantially

similar to those set forth in Mr. Lorello’s May 18, 2009 letter. Mr. Kelly accepted the salary

increase described in the May 18, 2009 letter and therefore became obligated to provide UBS

with at least 60 days prior written notice of his resignation.

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 25. Kelly notified UBS of his intention to resign on June 17, 2009 -- the same day as

Mr. Lorello. Accordingly, under the terms of the May 18, 2009 letter, his notice period does not

expire until August 16, 2009 and Mr. Kelly remains a UBS employee until that date.3

26. Further, pursuant to an April 25, 2007 letter agreement between UBS and Mr.

Kelly, Mr. Kelly is subject to the following Non-Solicitation provision:

You agree that during your employment, and thereafter for a

period immediately thereafter which, when added to the applicable
Notice Period, shall be equal to ninety (90) days, you will not,
directly or indirectly, for yourself or for any third party, of which
you are or anticipate becoming an employee, owner, partner,
investor, member, agent, director, consultant, independent
contractor or otherwise associated in any way whatsoever:

* * *

(ii) solicit, influence, induce, recruit, cause or entice any

employee, Covered client,[4] consultant, independent
contractor or vender of UBS to terminate such person’s or
entity’s business or employment relationship with UBS;

(iii) to interfere with the relationship between UBS and any

employee, Covered client, consultant, independent
contractor or vender of UBS; or

(iv) employ or otherwise engage as an employee, independent

contractor or consultant for a Competitive Enterprise any
employee of IBS or any person who was employed by UBS
at any point during the six months prior to the termination
of your employment with the Firm, unless UBS shall have
previously terminated such person’s or entity’s relationship
with UBS.

27. The April 24, 2007 Kelly Letter also includes the following section on the

Protection of Confidential Information:

3
See footnote 1, supra.
4
“Covered clients” are defined in the Kelly Employment Agreement as “any of the clients for whom UBS
performed work, or any of the prospective clients from whom UBS actively solicited work during the six months
prior to the termination of your employment, with which such clients or prospective clients you had contact with
during your employment with the Firm.”

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 You agree that, in connection with your employment with the
Firm, you will acquire and/or be exposed to trade secrets and other
confidential information related to the business and operations of
UBS (defined below) and/or its clients that are not readily
available to the public (collectively, “Confidential Information””)
and that such Confidential Information is the property of UBS.
Confidential Information shall include, without limitation,
information relating to intellectual property, financial information,
personnel, projections, strategic planning, client information, any
other work product or the business of the Firm. You further
acknowledge and agree that the Firm takes reasonable steps to
maintain the confidentiality of such Confidential Information. In
this regard, you agree that, during and forever after your
employment with the Firm, except as may be required by law, you
will refrain from using or disclosing to any other person or entity
outside of UBS (other than in the performance of your duties
hereunder and other than as expressly authorized by UBS for the
purpose of its business) any Confidential Information or any
information received in confidence by UBS from any third party.
Upon termination of your employment with the Firm, whether or
not requested, or sooner if requested by the Firm, you agree to
return to the Firm any and all Confidential Information, whether
originals or copies, in whatever medium or form, belonging to
UBS, including, without limitation, the Firm; provided that you
may retain documentation relating to your compensation and
benefits.

You will give immediate written notice to the Firm of any

disclosure of the Firm’s Confidential Information required by a
court, governmental agency, or regulatory authority in order to
allow the Firm the opportunity to respond to such a request. Your
obligations under this section, among others, will survive the
termination of your employment.

The Planning of Respondents’ Raid on UBS

28. Over the past year, during a period of economic challenge at UBS and in the

financial services industry in general, Lorello and Kelly became disillusioned with their senior

management at UBS. Lorello’s dissatisfaction with UBS peaked in January 2009 when UBS

announced it was not able to pay significant bonuses to its employees, including those in the

Healthcare Group. As early as January 2009, Lorello and Kelly actively began exploring other

opportunities for themselves which would of necessity include the other critical UBS employees

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in UBS’ Healthcare Group despite the fact that Lorello was the UBS Vice Chairman –

Investment Banking Department and Managing Director (like Kelly) with fiduciary obligations

to act in UBS’ best interests.

29. In January 2009, when Mr. Lorello informed the Healthcare Group that there

would be no bonuses, he stated that they should continue “doing what they are doing” and that he

would act on their behalf to ensure that their job and economic concerns would be addressed in

the future. Mr. Lorello’s message to the Healthcare Group was “I will take care of you in the

end; don’t worry.” Mr. Lorello’s statements to the Healthcare Group employees clearly meant

that he would be exploring other business opportunities outside of UBS on behalf of the UBS

employees within the Healthcare Group and elsewhere.

30. Upon information and belief, Lorello explained to several UBS Senior Managing

Directors close to him that he was implementing an “A, B, C” strategy with regard to his efforts

to transport UBS’ Healthcare Group and others to another firm. Under this approach, Mr.

Lorello indicated that he would investigate opportunities to relocate UBS’ Healthcare Group to:

(a) bulge bracket firms; (b) midcap and fully integrated boutique firms; and (c) possibly his own

investment banking firm.

31. Upon information and belief, beginning in early 2009, Mr. Lorello, together with

Mr. Kelly, began pursuing his “A, B, C” strategy by exploring opportunities to move the UBS

employees he worked with to bulge bracket firms such as Deutsche Bank and Barclays, midcap

firms such as Jefferies and others. By mid-March 2009, Lorello and Kelly had zeroed in on

Jefferies as the opportunity that they were going to try to consummate.

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 32. On or about March 16, 2009, Lorello and Kelly met with Jefferies Chairman

Brian Friedman and its Co-Head of Investment Banking, Christopher Kanoff and perhaps others

to discuss and hatch their plan.

33. In or around April 2009, Lorello’s negotiations with Jefferies stalled because

Jefferies was not giving Lorello adequate assurances regarding his ability to maintain complete

control over the Healthcare Group and guarantee Lorello’s and Kelly’s position within the

Jefferies structure. Lorello’s concerns included the fact that Jefferies could bring in someone

new over him as Investment Banking Head who could then determine his (and Kelly’s) fate and

that of the Healthcare Group.

34. By April 2009 it appeared that Lorello might not be moving UBS’ Healthcare

Group to Jefferies, Lorello told UBS colleagues at that time not to worry and he stated that he

would not leave his colleagues behind when he made the move. Thus, as of April 2009, Lorello

still planned to move the Healthcare Group virtually in toto and others to another firm, even if

that firm was not Jefferies.

35. Thereafter, Jefferies in fact extended to Lorello the security that he had sought,

including Jefferies’ commitment that Mr. Lorello would be become the head of the Investment

Bank at Jefferies and Kelly his direct report as head of Healthcare in exchange for them

transporting a critical mass of UBS’ Healthcare Group and others to Jefferies.

36. In connection with Lorello’s inducement, enticement and recruitment of UBS’

Healthcare Group employees (and others) to follow him to Jefferies, according to Lorello, he

also planned to use his position as a high level UBS executive to recruit all the other “good

people” at UBS, not only within UBS’ Healthcare Group, but also in UBS’ Global Equity

Capital Markets and Leveraged Finance groups who supported the Healthcare Group in the

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various mergers and acquisitions and other advisory transactions in which they were involved.

Lorello also indicated to his colleagues at UBS that he and Jefferies were planning to target other

industry sectors at UBS including Technology, Consumer and Retail.

37. Conspiring with Lorello, Kelly also used his position as a Managing Director and

a high level UBS executive to help Jefferies plan its raid on UBS. Among other things, upon

information and belief, Kelly disclosed to Jefferies highly confidential information about UBS

employees so that they could be targeted for hiring purposes. That information included, among

other things, who were the most productive employees, what their compensation levels had been,

what would be required to move them over, and who he and Lorello would need to keep and

work with as part of a new team at Jefferies. Respondents’ plan was to have Jefferies’ personnel

use the information furnished by Kelly to recruit the productive and valuable UBS investment

bankers from the top level of managing directors on down to analysts and administrative

assistants. Upon information and belief, in exchange for Kelly’s assistance, Jefferies agreed to

name Kelly as the Head of Jefferies’ Healthcare Group.

38. Lorello’s actions in targeting UBS employees and disclosing UBS’ confidential

information to Jefferies may also be based at least in part upon personal revenge concerning

circumstances that occurred to him at UBS in the end of 2006 and early 2007. In his view his

own position was in jeopardy as the three heads of the Investment Bank Department at the time

were looking to terminate him. He was able to maintain his job but he vowed to get back at the

individuals who had jeopardized his position of authority at UBS.

Respondents’ Raid on UBS

39. After months of planning and scheming by the Respondents, the raid on UBS

began last week. Respondents have since raided UBS’ Healthcare Group and other groups in a

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carefully orchestrated effort to transport the UBS’ employees, property, confidential information,

clients and business from UBS to Jefferies.

40. The unlawful raid began on June 17, 2009, when Lorello and Kelly abruptly

tendered their resignations to UBS. They will become employed at Jefferies, with Lorello to

assume the position of Global Head of Investment Banking at Jefferies and Kelly to serve as the

head of the Healthcare Group reporting to Lorello.

41. By letters dated June 18, 2009, UBS reminded Lorello and Kelly that the

termination of their employment with UBS was subject to 60 day notice provisions and that they

remained employed by UBS until August 16, 2009. For injunctive purposes, UBS is merely

seeking to enforce the 30 day notice in their earlier employment agreements. The letters also

reminded Lorello and Kelly of their various continuing obligations to UBS both during and after

those 60 day notice periods, including with respect to confidential information, and

communications with UBS and Jefferies clients and employees. Copies of these letters are

attached as Exhibits 1 and 2.

42. Beginning on the same day that Lorello and Kelly resigned, Wednesday, June 17,

2009, and continuing through the date of this Statement of Claim, at least 34 other members of

UBS’ Healthcare Group and Equity Capital Markets Group -- on the banking and research sides

– resigned from UBS to take positions, on information and belief, with Jefferies’ investment

banking group. The names and positions held at UBS of these other people are as follows:

1) Jon Santemma, Managing Director;

2) Réal Leclerc, Managing Director;

3) Michael Gerardi, Managing Director;

4) Michael Robinson, Managing Director;

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 5) Kevin Sheridan, Managing Director;

6) Robert Steininger, Managing Director;

7) Michael Leder, Managing Director;

8) Jesse Mark, Managing Director;

9) Mark Connelly, Managing Director;

10) Gil Bar-Nahum, Executive Director;

11) Christian Hilliard, Executive Director;

12) Keith Lockwood, Executive Director;

13) Dustin Tyner, Executive Director;

14) Tommy Erdei, Executive Director;

15) Jeffrey Klein, Executive Director;

16) Joseph Barnes, Director;

17) Michael Ragan, Director;

18) Robert Verdier, Director;

19) Terry Lantz, Director;

20) Andy Clayton, Director;

21) Ryan Bondroff, Associate Director;

22) Peter Francis, Associate Director;

23) Todd Heglund, Associate Director;

24) James Kim, Associate Director;

25) Matthew Kim, Associate Director;

26) Elisabeth Leiderman, Associate Director;

27) Eleanor Neild, Associate Director;

NY:3529962v2 15
 28) Laura Cervantes, Non-officer;

29) Mark Filenbaum, Non-officer;

30) Terence Tan, Non-officer;

31) Peggy Fay, Non-officer;

32) Joanne Flanagan, Non-officer;

33) Amelia Hart, Non-officer; and

34) Sarah Pettorrson, Non-officer.

The employees are referred to hereinafter as the “UBS Resigned Employees.”

43. Many of the UBS Resigned Employees are also subject to provisions requiring

them to give notice to UBS of the termination of their employment. For example, one Managing

Director and 2 Executive Directors are subject to 90-day notice periods; six Managing Directors

are subject to 60 day notice periods; and the Executive Directors, Directors and Associates have

notice provisions from 14 to 60 days.

44. Upon information and belief, and consistent with predator activity in such raiding

cases, Jefferies is paying Lorello, Kelly and these other former UBS employees millions of

dollars in financial guarantees and make-whole bonuses, is indemnifying them from any action

brought by UBS and is providing them with the same outside counsel, in order to induce them to

leave UBS to come to Jefferies and take with them what has been UBS’ Healthcare Group’s

business and other business.

45. Upon information and belief, Respondents’ raid of UBS is far from over. In fact,

the evidence shows that Respondents intend to continue using their ill-gotten knowledge of

UBS’ confidential business information by expanding their recruitment efforts far beyond the

Healthcare Group in the United States and London, to include healthcare and other investment

NY:3529962v2 16
bankers and several other industry sector professionals throughout the world including Europe

and Asia.

Misappropriation of Confidential Information

46. In preparing to resign from UBS, Lorello and Kelly, directly or indirectly, have

misappropriated highly confidential proprietary information from UBS and have already used

such information to solicit UBS’ employees and clients.

47. Starting in at least mid-March and continuing until their departure from UBS,

many of the UBS Resigned Employees sent from UBS to their personal email accounts client

and other contact lists, pitch books, and other confidential and proprietary UBS information. In

fact, two days before he resigned, Terence Tan requested and obtained a memory stick which he

used before his resignation. Terence Tan, as Lorello’s analyst, had access to some of the

Healthcare Group’s most sensitive business information, including the pipeline of deals, revenue

information, client and contact lists, client coverage, client billing and other highly sensitive

business information that would be of great value to a UBS competitor if such information fell

into its hands.

48. At UBS and most investment banking houses, raising capital (e.g. through stock

offerings) and mergers and acquisitions are conducted in a highly secretive manner, even within

the investment banking department. At UBS, the mergers and acquisitions business is structured

such that there are several departments. The Healthcare Group is one such department. The

confidentiality of the business requires that each banker know his own deals, but not those of

other groups or subgroups, and each banker receives and maintains extremely sensitive client

financial and other information which UBS is under a duty to maintain as confidential. The fact

that the resigned employees have had much of this information emailed to their homes or taken

NY:3529962v2 17
by the use of memory sticks can serve no legitimate purpose except to aid in their efforts to

continue that business while at Jefferies.

Respondents’ Pursuit of UBS Clients

49. The actions of Respondents constitute an unlawful raid on UBS’ Healthcare

Group and on its investment banking business more generally. The professionals (including

Lorello and Kelly), who have resigned from the Healthcare Group have been involved in the

generation, managing and processing of virtually all of the revenue in the Healthcare Group.

The Group is now left with only 3 Managing Directors and 4 Executive Directors, in limited

sectors of the Healthcare practice. Absent injunctive relief, UBS will be irreparably harmed if it

is not allowed to maintain and rebuild its remaining workforce, re-assign current employees and

hire replacements free of interference by Respondents.

50. On information and belief, Respondents and the other investment bankers who

have left the Healthcare Group have wasted no time in contacting UBS’ clients – including

clients for whom deals are currently pending at UBS – in order to alert those clients of their

move from UBS to Jefferies. In fact, the resignations were timed to coincide with Jefferies’

Annual Healthcare Conference, a gathering of industry contacts and clients sponsored by

Jefferies and held on June 17-18, 2009 in New York. Upon information and belief, a number of

the UBS Resigned Employees attended that conference. Additionally, for example, UBS is

aware that Michael Gerardi, a resigned Managing Director, has been in contact with various UBS

clients and telling them of the resignations of himself and others from UBS and their impending

move to Jefferies, which he has characterized as a better platform for himself and the clients.

51. Clients will follow Lorello and Kelly to Jefferies if they are permitted to contact

them, because the capabilities of the Healthcare Group at UBS have been drastically reduced.

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Irreparable Harm

52. As a direct result of Respondents’ unlawful actions, UBS has suffered and will

continue to suffer incalculable harm which cannot be remedied by money damages alone. The

difficulty in ascertaining and calculating the harm constitutes irreparable harm as does the

purloining of UBS confidential and proprietary data and information.

53. UBS has built a highly valuable and lucrative global Healthcare Group over many

years, which cannot be rebuilt overnight. An injunction is essential in order for UBS to stabilize

its Healthcare Group and repair what damage has been inflicted by Respondents.

54. Given the egregious conduct in breach of their duties, Jefferies, Lorello and Kelly

must be enjoined from any further hiring from UBS’ Investment Banking division for at least

ninety (90) days, to maintain the status quo and to prevent further loss to UBS.

Customer Relationships and Information

55. One form of irreparable harm that UBS will continue to suffer in the absence of

equitable relief is the damage to its valuable customer relationships. The investment banking

industry is a highly competitive and specialized industry that is based almost entirely on an

investment bank’s ability to provide highly specialized services that are tailored specifically to

the particular needs of its clients. Not only specialized knowledge but also individual

employees’ relationships with UBS clients are of paramount importance. An important tool to

cultivate meaningful relationships between UBS employees and UBS’s customers is through

professional and social networking and other activities, all of which were underwritten by UBS.

56. Lorello, Kelly and the other departing employees have developed special and

unique relationships with a number of UBS’s important clients and potential clients. These

relationships were developed while they were employees of UBS; and, indeed, UBS enabled

NY:3529962v2 19
them to establish and enhance these relationships in exchange for the significant compensation

which they received. UBS reasonably expected Lorello and Kelly and the other departing

employees would maintain and cultivate these relationships, and moreover, reasonably expected

they would comport themselves in accordance with their fiduciary and other duties.

57. Furthermore, the financial and other proprietary information UBS obtains from its

clients is used by UBS solely to enable it to provide those clients with the services for which it

was retained, and UBS is expected by its clients to keep this information confidential. In fact,

contracts between UBS and its clients routinely contain confidentiality provisions designed to

prevent the disclosure of sensitive information. If Respondents are permitted to utilize that

confidential information to try and gain a competitive advantage over UBS, UBS could suffer a

loss of client confidence which would have a further incalculable impact on UBS’s business.

58. The UBS Resigned Employees also have sent to their homes proprietary and

confidential client information, the use by or disclosure to Jefferies or others could subject UBS

to considerable damage, the consequences of which are not fully known at this time and fulfill

the irreparable harm standard.

59. Upon information and belief, by pursuing those customer relationships on behalf

of Jefferies, Respondents’ actions will be causing UBS to suffer enormous harm. The bankers

who were paid by UBS to develop those customer relationships have been specifically targeted

by Respondents and have now left UBS to work for Jefferies. Just as Respondents planned, the

former UBS employees will be aggressively pursuing those UBS clients on behalf of Jefferies,

using the client relationships they developed, at UBS’ expense, to solicit that business. No

accurate dollar figure can be placed on the value of those long term client relationships in future.

NY:3529962v2 20
In the absence of injunctive relief, UBS faces permanent and irreparable harm to those valuable

relationships.

The Loss of UBS’ Confidential Information

60. Equitable relief also is essential to prevent any further disclosures of UBS’

confidential information, the loss of which could never be fully compensated by monetary

damages. Because of the highly unique nature of this industry, the disclosure to Jefferies and

others of UBS’s confidential business information will result in Jefferies’ ability to use such

information to directly solicit UBS’s existing and prospective customers and submit proposals

for engagement that are specifically tailored to those clients, all based on confidential

information compiled by UBS. In addition to the incalculable losses associated with the

confidential information itself, it is impossible to precisely calculate how much future business

and revenue UBS will lose as a result of the Respondents’ misappropriation of UBS’

information.

61. Indeed, much more than just money is involved in respondents’ use of UBS’s

confidential information – UBS’s very competitive status is at stake. This competitive status, in

such a highly competitive and unique industry, particularly given the financial state of global

banking, cannot be repaired, restored or adequately compensated by money.

UBS’ Goodwill and Industry Reputation

62. In addition, UBS faces a loss of its goodwill and reputation in the industry in

general, particularly important during that time of diminished client confidence, unless

Respondents are enjoined from continuing their unlawful conduct. If a competitor such as

Jefferies were permitted to utilize UBS’s confidential and proprietary information concerning,

among other things, its valuation methodologies and strategies, its pricing structures and its

NY:3529962v2 21
internal capabilities, and to put that to use against UBS before it can stabilize and re-build its

business, the impact on UBS’s reputation and goodwill would be devastating.

63. UBS has no adequate remedy at law.

FIRST CAUSE OF ACTION

(Breach of Contract Against Lorello and Kelly)

64. UBS repeats and realleges the allegations in Paragraphs 1 through 63 of the

Statement of Claim as if set forth fully herein.

65. UBS was a party to certain agreements with Lorello. UBS performed its

obligations under those agreements.

66. UBS was a party to certain agreements with Kelly. UBS performed its

obligations under those agreements.

67. Lorello and Kelly breached their agreements with UBS, by, inter alia, becoming

employed by and/or providing services for Jefferies while employed with UBS and/or during

their notice periods, by providing confidential and proprietary information concerning UBS

employees so they could be summarily and simultaneously picked off by Jefferies, by directly or

indirectly soliciting or otherwise encouraging or inducing the Resigned UBS Employees and

other UBS employees to resign from UBS and work at Jefferies, and by directly or indirectly

soliciting or otherwise conducting business with UBS’s clients on behalf of Jefferies.

68. Lorello and Kelly’s acts have injured and continue to injure UBS.

69. As a result of the foregoing, UBS is entitled to compensatory damages, including

liquidated damages, prejudgment interest, attorneys’ fees and costs in an amount to be

determined at arbitration.

NY:3529962v2 22
 SECOND CAUSE OF ACTION
(Breach of Fiduciary Duty and Duty of Loyalty Against Lorello and Kelly)

70. UBS repeats and realleges the allegations in Paragraphs 1 through 69 of the

Statement of Claim as if set forth fully herein.

71. At all relevant times, Lorello and Kelly owed fiduciary duties and duties of

loyalty to UBS, which required them to use their best efforts on behalf of UBS, to act in UBS’s

best interests, and to refrain from activities that would damage UBS’s interests.

72. Nonetheless, while still employed by UBS, in disregard of their fiduciary

obligations and duties of loyalty to UBS, Lorello and Kelly wrongfully and unlawfully assisted

Jefferies in its solicitation and employment of the Resigned UBS Employees. This conduct,

undertaken for the benefit of Jefferies, Lorello and Kelly, harmed UBS.

73. UBS had a reasonable expectation by virtue of their contracts or otherwise that

the Resigned UBS Employees, who are now or soon will be employees of Jefferies, would

continue to remain in UBS’ employ and to produce revenue for UBS through, among other

things, the client relationships that they developed at UBS and through the use of UBS’ resources

and the strong teams that UBS had created over the years. UBS had a reasonable expectation

that it would continue to enjoy business from the clients serviced by these brokers and others at

the levels heretofore achieved by them.

74. In breach of his fiduciary and loyalty duties to UBS, while employees and officers

of UBS, Lorello and Kelly knowingly and intentionally induced the Resigned UBS Employees to

leave UBS and to become employed by Jefferies.

75. Lorello and Kelly used wrongful and deceitful means to conceal their actions

from UBS and to induce the Resigned UBS Employees to leave UBS’ employment. But for their

NY:3529962v2 23
wrongful conduct, UBS would continue to employ all or most of the Resigned UBS Employees

and to enjoy the revenue from the clients that they serviced.

76. Lorello and Kelly’s acts were willful, wanton and malicious and intended to

injure, have injured and continue to injure UBS.

77. As a result of the foregoing, Lorello and Kelly must account for and forfeit profits

earned as a result of their misconduct, and return their salary, commissions, and other

compensation and benefits they received from UBS during the period of their disloyalty, in an

amount to be determined at arbitration. Further, because of the egregious nature of Lorello and

Kelly’s misconduct, UBS is entitled to compensatory and punitive damages, prejudgment

interest, attorneys’ fees and costs in an amount to be determined at arbitration.

THIRD CAUSE OF ACTION

(Aiding and Abetting Breach of Fiduciary Duty
and Duty of Loyalty Against all Respondents)

78. UBS repeats and realleges the allegations in Paragraphs 1 through 77 of the

Statement of Claim as if set forth fully herein.

79. An integral part of Jefferies’ scheme to steal UBS’ Healthcare Group investment

banking business was to use UBS insiders and confidential information to recruit UBS

employees to Jefferies. To that end, Jefferies used Lorello, Kelly and others to gain confidential

and proprietary information about UBS and for assistance in soliciting and recruiting the UBS

employees to work for Jefferies.

80. Jefferies took such actions knowing that Lorello, Kelly and others owed duties of

loyalty and fiduciary to UBS to act in the utmost good faith and loyalty in the performance of

their duties.

NY:3529962v2 24
 81. Jefferies, by utilizing Lorello and Kelly to obtain confidential information about

UBS and to recruit UBS employees to Jefferies, among other conduct, substantially participated

in Lorello and Kelly’s breaches of their fiduciary duties and duties of loyalty to UBS.

82. Jefferies knowingly and intentionally aided and abetted Lorello and Kelly when

they directly or indirectly induced the UBS Resigned Employees to leave UBS and to become

employed by Jefferies.

83. Jefferies knowingly and intentionally aided and abetted Lorello and Kelly when

they used wrongful and deceitful means to conceal their actions from UBS and to induce the

UBS Resigned Employees to leave UBS’s employment. But for the wrongful conduct of the

Jefferies, UBS would continue to employ the UBS Resigned Employees and to enjoy the revenue

from the clients that they serviced.

84. Jefferies, by its actions described herein, aided and abetted and induced these

employees in breaching their fiduciary and loyalty duties to UBS.

85. Lorello similarly aided and abetted in Kelly’s breach of his fiduciary duties and

duties of loyalty to UBS.

86. Kelly similarly aided and abetted in Lorello’s breach of his fiduciary duties and

duties of loyalty to UBS.

87. Respondents’ acts have injured and continue to injure UBS.

88. As a result of the foregoing actions by Respondents, UBS is entitled to

compensatory and punitive damages, prejudgment interest, attorneys’ fees and costs in an

amount to be determined at arbitration.

NY:3529962v2 25
 FOURTH CAUSE OF ACTION
(Unfair Competition Against All Respondents)

89. UBS repeats and realleges the allegations in Paragraphs 1 through 88 of the

Statement of Claim as if set forth fully herein.

90. Rather than build its own business by investing the time and capital necessary to

do so, Jefferies, Lorello and Kelly decided to steal UBS’ business and thereby have engaged in

unfair competition and continue to compete unfairly with UBS. They have reaped where they

have not sown.

91. Respondents’ acts of unfair competition include, inter alia, the misappropriation

and exploitation of UBS’ confidential information, the unlawful interference, inducement and

solicitation of UBS’ employees and clients, in violation of applicable agreements and the law,

the aiding and abetting of Lorello, Kelly, and other’s breaches of fiduciary and loyalty duties,

and conversion of UBS’ property.

92. Respondents’ solicitation and hiring (or attempted hiring) of the UBS Resigned

Employees was unjustified and designed to injure and impair UBS’ good will with clients and

employees.

93. Respondents’ acts were targeted at UBS and were intended to injure, have injured

and continue to injure UBS.

94. As a result of the foregoing, UBS is entitled to compensatory and punitive

damages, prejudgment interest, attorneys’ fees and costs in an amount to be determined at

arbitration.

NY:3529962v2 26
 FIFTH CAUSE OF ACTION
(Violation of FINRA Rules Of
Conduct Against All Respondents)

95. UBS repeats and realleges the allegations in Paragraphs 1 through 94 of the

Statement of Claim as if set forth fully herein.

96. The aforementioned conduct of the Respondents is contrary to FINRA Conduct

Rule 2010, which provides that “A member, in the conduct of its business, shall observe high

standards of commercial honor and just and equitable principles of trade.”

97. As a result of the foregoing, UBS is entitled to compensatory and punitive

damages, prejudgment interest, attorneys’ fees and costs in an amount to be determined at

arbitration.

WHEREFORE, Claimant UBS respectfully requests that this Panel issue an award

against Respondents as follows:

1. Declaring that UBS’ agreements with Lorello and Kelly are valid, are in full force

and effect and have been breached by them;

2. Injunctive relief restraining and enjoining Respondents as follows:

1. With regard to Respondents Benjamin D. Lorello and Sage Kelly, directly or

indirectly:

(i) from commencing employment with Jefferies & Company Inc. or any
of its parents, subsidiaries or affiliates (“Jefferies”), or providing any
services to, for or on behalf of Jefferies, at any time prior to the
expiration of the thirty (30) day notice period set forth in their
respective employment agreements with UBS;

(ii) from taking any action during their thirty (30) day notice period that is
contrary to their duty of loyalty to UBS, including directly or
indirectly assisting Jefferies in recruiting UBS employees, soliciting or
servicing UBS clients whom they had contact with or knowledge about
and using or disclosing UBS’ or its clients’ confidential, proprietary or
trade secret information;

NY:3529962v2 27
 (iii) following the expiration of their thirty (30) day notice period, from
using or disclosing UBS’ confidential and proprietary information and
trade secrets, including (without limitation) information regarding
UBS’ business strategies, methodologies and client engagements that
are not publicly known, as well as information regarding UBS
employees’ compensation, productivity and client relationships;

(iv) for a period of ninety (90) days from the date of their resignation from
UBS, inclusive of any notice period, from soliciting, influencing,
inducing, recruiting, causing or enticing any UBS employee, client or
potential client, consultant, independent contractor or vendor to
terminate such person’s or entity’s business or employment
relationship with UBS, or otherwise interfering with the relationship
between UBS and any employee, client, consultant, independent
contractor or vendor of UBS;

(v) for a period of ninety (90) days from the date of their resignation from
UBS, inclusive of any notice period, from employing or otherwise
engaging as an employee, independent contractor or consultant any
UBS employee or any person who was employed by UBS at any point
prior to the termination of Respondents’ employment with UBS;

2. With regard to Respondent Jefferies, directly or indirectly:

(i) from encouraging, assisting or inducing any present or former UBS

employee to violate any continuing obligation such employee owes to
UBS, including such employee’s duty of loyalty and/or fiduciary duty
to UBS, any applicable garden leave provisions, non-solicitation
provisions and confidentiality obligations;

(ii) from using or disclosing UBS’ confidential and proprietary

information and trade secrets, including (without limitation)
information regarding UBS’ business strategies, methodologies and
client engagements that are not publicly known, as well as information
regarding UBS employees’ compensation, productivity and client
relationships;

(iii) from employing or soliciting for employment any employee of UBS

Securities LLC or its parents, subsidiaries and affiliates (“UBS”) who
is working in and/or providing support to UBS’ investment banking
practice and who has not already accepted employment with Jefferies;
and
(iv) from accepting or soliciting business from, or doing business with, any
entity for which Benjamin D. Lorello, Sage Kelly and/or any of their
subordinates at UBS provided investment banking services on behalf
of UBS for any engagement for which Jefferies has not already been
retained; and

NY:3529962v2 28
 3. Ordering Respondents to return to UBS all of its property, including documents

and any electronic devices;

4. Awarding UBS damages against each Respondent, jointly and severally, to which

it is lawfully entitled including compensatory and punitive damages in an amount to be

determined at arbitration;

5. Imposing a constructive trust upon all of the Respondents’ assets and profits, as

equity demands, based on their conduct such that Jefferies and the individual respondents shall

be operating their investment banking business under Lorello, and its healthcare division under

Kelly, for the benefit of UBS;

6. With regard to Lorello and Kelly, a disgorgement and return of all compensation,

expense reimbursements, and benefits paid to them by UBS while they were disloyal and

faithless employees;

7. Awarding UBS its costs and attorneys’ fees reasonably incurred in connection

with this proceeding; and

NY:3529962v2 29
 8. Granting UBS such other and further relief as may be just and proper.

Dated: New York, New York Respectfully submitted,

June 22, 2009

EPSTEIN BECKER & GREEN, P.C.

By:

Ronald M. Green
Peter L. Altieri
Robert D. Goldstein
250 Park Avenue
New York, New York 10177-1211
Telephone: (212) 351-4500
Facsimile: (212) 661-0989
Attorneys for Claimant UBS Securities LLC

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