LSV Responds to Lawsuit by Former Execs With Cease-and-Desist Letter

LSV Asset Management sent a cease-and-desist letter to four former executives who recently sued the firm and who claimed the firm cheated them out of more than $100 million by forcing them to sell their equity at a deep discount.

In the letter, LSV disputed the complaint’s claims that the company “engaged in a fraudulent scheme,” saying the statements are false and an attempt to pressure the firm and its employees “and to influence factfinders who may be called upon to render judgment in the lawsuit.”

The former executives alleged in their initial complaint that LSV, along with current and other former executives, pressured the four to acquire shares in the company as a “sign of loyalty.” They claim they paid more than $25 million for equity in the firm, which they say was largely financed by bank debt and purportedly entitled them to millions of dollars in annual distributions. The complaint further alleges that LSV told the plaintiffs repeatedly throughout their employment that they would own the purchased shares outright when the bank debt was paid off.

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The plaintiffs in the lawsuit are Han Qu, Bhaskaran Swaminathan, Peter Young and Simon Zhang, as well as Qu’s wife, Peng Tu. Young was formerly director of client portfolio services, Swaminathan had been director of research, Zhang was a senior quantitative analyst, and Qu worked for the firm as a senior quantitative analyst and was one of LSV’s founding employees. According to the complaint, the four worked at the firm for a total of more than 90 years. The complaint was filed in the Circuit Court of Cook County, Illinois.

In response, the company sent letters to the former executives demanding they “immediately cease and desist from making any further false or misleading statements about LSV or any of its employees.” The letters, signed by Keith Bruch, a partner in LSV and its director of client portfolio services, went on to say that the firm will hold the plaintiffs personally liable for any defamatory false statements.

“LSV reserves all rights, including the right to pursue any and all remedies against you personally and individually for any damages caused by any breaches of contract, false statements or other violations of law by you,” the letters stated.

The former executives fired back with a scathing letter accusing the asset manager of trying to intimidate them.

“The letter you sent—and the manner in which you sent it—constitutes LSV’s most recent attempt to bully us,” the plaintiffs stated in their letter. “We are not going to be swayed by your thinly veiled attempt at intimidation.”

In their letter, the former executives said LSV stripped them of their shares, refused to make future distributions and withheld more than $25 million of their money. “Now, adding insult to injury, you are threatening us with a defamation lawsuit. LSV’s conduct is deplorable.”

The letter also refuted the idea that the initial complaint constituted false and misleading statements.

“We filed a lawsuit alleging that LSV engaged in a fraudulent scheme to force the sale of our equity,” the latter stated. “This cannot be the basis of a defamation claim.”

Tim Spreitzer, an executive vice president at consultancy Brian Communications, responded on behalf of LSV with an emailed statement: “LSV believes the civil complaint filed by the former employees is filled with inaccuracies and without merit. LSV used a legal process server to send the former employees cease-and-desist letters to ensure they received the letters and for no other reason.”