We all work in or around the financial advice business, which is supposed to be home to some of the freest of the free-wheeling capitalists left in our country.
Pulling themselves up by their own bootstraps, or perhaps slipping into a pair of Manolo Blahniks, financial advisers and their employees are frequently told, and primarily believe, that their hard work, intelligence and determination will lead to success; financial advisers and the people they work with are free to strike out on their own or seek employment at a competitor, gaining better pay and overall compensation in the process.
Labor is supposed to be a free-wheeling and hard-charging market in the wealth management business. Financial advisers and wealth management staff must be free to hop from firm to firm; how else would they know what they’re worth unless they test the free market?
That’s true unless you have recently worked for mutual fund giant American Century Companies and at least one of its local competitors in the Kansas City, Missouri, area. Founded in 1958, the company has 1,400 employees around the globe.
From about March 2014 to at least March 2018, American Century, with $168 billion in retail and institutional assets, violated U.S. antitrust laws, according to a March 5 letter from the Department of Justice obtained by InvestmentNews.
The company, which is not facing criminal prosecution, “conspired to suppress and eliminate competition by entering into and managing a bilateral market allocation agreement with another firm with which it competes for asset and wealth management employees,” according to the letter, which is addressed to Patrick Bannigan, American Century’s chief financial officer.
The letter outlines a non-prosecution agreement between the Justice Department and American Century. These seem to be unusual, especially in the financial advice industry. According to law firm Gibson Dunn, there were nine such non-prosecution agreements last year.
Most notably, Goldman Sachs Group Inc. last year avoided conviction in a deal known as a deferred prosecution agreement for its role in the plundering of Malaysia’s investment fund and was hit with a $2.9 billion penalty.
According to the letter, American Century and the unnamed wealth or asset management firm agreed “not to solicit, recruit, hire or otherwise compete for each other’s employees in the United States.”
The Department of Justice does not point the finger at a specific American Century executive or executives who conspired in the scheme; instead, it describes “certain of its employees, including a senior level executive” as responsible for the conspiracy.
The reason a company would conspire to hinder its employees looking for work is to drive down costs. Has senior management at American Century looked at a pay cut as a reasonable alternative than violating U.S. antitrust laws?
The anger and distrust of American Century’s employees at management probably runs pretty deep right now. What’s the advantage of working at a company that conspires against its own staff? This practice sure doesn’t sound like capitalism; it’s more like high-wage indentured servitude.
American Century has set aside $1.5 million to compensate the victims of the rigged employment practices the company indulged in. It also acknowledges that amount does not limit or cap any future civil liabilities it could face.
When asked about the letter, a Department of Justice spokesperson declined to comment. The spokesperson also declined to name other firms involved.
I left messages this week with an American Century spokesperson and asked the following three questions.
- Who is the unnamed “senior-level executive” mentioned in the agreement? And, by the way, does he or she still work at the company?
- What is the name of the other firm in the conspiracy to limit employees’ work opportunities?
- And has American Century’s CEO, Jonathan Thomas, made a public or private apology to the company’s employees and staff? That would seem to be essential to move forward; management has to take responsibility.
In response, a company spokesperson did not answer my questions but sent an email:
“American Century is committed to fair and honest competition in compliance with all laws and regulations,” according to the email. “The corporate board of directors self-reported the activity to the Department of Justice, and the company has put more effective controls in place and strengthened processes to prevent this from happening again.”
American Century Investments rigged the game at the expense of its employees. True-blue capitalists beware.
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Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.