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Byline: Frances A. McMorris
A federal appeals court in New York has ordered the former employee of a private equity firm to forfeit all his compensation, including salary and investment opportunities, because of a pattern of disloyal acts.
The decision by a three-judge panel reversed a U.S. district court decision that awarded $4.4 million to Rohit Phansalkar, a former partner at Andersen Weinroth & Co. The PE firm had sued Phansalkar, an investment banker, for failing to disclose certain fees and stock options he had received as a director on company boards doing business with Andersen Weinroth.
Originally, the lower court limited the compensation Phansalkar had to forfeit to the benefits he received on transactions on which he was judged to be disloyal. But the appeals court reversed.
The ruling bears special significance for investment firms that generally compensate employees through investment opportunities, said Daniel P. Levitt, who represented Andersen Weinroth. The ruling will affect similar cases brought in federal courts in New York, Vermont and Connecticut, the geographic scope of the appeals court's jurisdiction.