Merrill admits to big losses at hearing

Leading wealth management organisation Merrill Lynch has admitted to substantial Euro­pean losses, employing inexperien­ced regional management and particular problems in running its Spanish private client operation, as part of its defence presented to an unfair dismissal hearing in London.

Merrill Lynch is currently facing a £7.5m (E11m) claim from former vice- president Stephanie Villalba, for unfair dismissal, sexual discrimin­ation and unequal pay. Ms Villalba was market executive responsible for Merrill’s European private client operation.

During a hearing at London’s employment tribunal in Croydon, Raymundo Yu, head of Merrill’s non-US Global Private Client business, said that in 2002, the European division reported a pre-tax loss of $47m.

“It was losing almost $1m a week. Although 2002 was an extremely difficult year for Merrill Lynch’s entire business, Europe’s pre-tax loss stood up as being a regional loss leader,” Mr Yu said in his statement. He added that even though he didn’t expect Europe to make a profit, he didn’t expect it to make such a massive loss “which was completely out of sync with all the other regions.”

However Ms Villalba claims that judging her performance and her region’s, taking into account pre-tax results was unfair, since they were unrepresentative and inaccurate because they included significant expenses charged to the European region that were incurred by other business units.

“This is the way in which all businesses within Merrill Lynch operate and was the approach adopted across the regions,” Mr Yu said in his statement to the tribunal. Replying to comments from Ms Vill­alba describing her performance as “extraordinary”, Mr Yu said Eur­ope’s performance during that peri­od “was only extraordinary in the sense that it was extraordinarily bad”.

Regarding the bank’s Spanish private client operation, then headed by Manuel San Salvador, Mr Yu described Mr San Salvador as a “relatively inexperienced office manager.” In 2001 the Spanish tax authorities initiated an inspection of Merrill Lynch’s business activities in Spain. “The Merrill Lynch structure was perceived by the tax authorities as being ‘opaque’ and therefore became a source of concern for them,” Mr Yu said.

“I was particularly disappointed that Stephanie was not leading us out of the major problems that we were experien­cing in our Spanish offices,” he add­ed. He said Ms Vill­alba failed to travel to the country often enough, which he found frus­trating, showing “a lack of owner­ship, focus and leadership by her”.

Mr Yu continued: “The issues being experienced in Spain were exactly the sort that demanded strong leadership from the most senior manager in the region. From the perspective of the FAs [financial advisers], they would have known that Manuel San Salvador was not the real decision-maker behind the corporate strategy decisions that were being made in Spain. They would want to hear from a representative from senior management. Stephanie.”

Ms Villalba was dismissed in July 2003 after 17 years working for Merrill Lynch. She claims her dismissal was unfair, describing Merrill Lynch as “institutionally sexist”. The bank has denied these allegations, highlighting the fact that Ms Villalba was replaced by another woman, Kimberly Palmer. The hearing continues.

Villalba: claiming unfair dismissal