Marco Consulting sues former president, Morgan Stanley

Just more than a week after Ian W. Jones announced he was leaving Marco Consulting Group, the Chicago-based consulting firm filed a lawsuit against its former president and his new employer, Morgan Stanley, to prevent what it termed a “raid on MCG's clients.”

Marco Consulting Group filed suit April 25 in U.S. District Court in Chicago “seeking injunctive relief and money damages.” Both sides entered into an “agreed order” on April 27 preventing Mr. Jones and Morgan Stanley from having any contact for the next 14 days with Marco Consulting clients that Mr. Jones had been serving before he left the company April 14, according to a news release from the investment consulting firm.

On April 20, Morgan Stanley Smith Barney, Morgan Stanley's wealth management unit, announced that Mr. Jones had joined the group's investment consulting arm, Graystone Consulting, as a senior vice president and institutional consulting director, focused on the Taft-Hartley marketplace.

In a telephone interview on April 27, Jack Marco, chairman of Marco Consulting, said his firm immediately sought a restraining order after getting a call on April 25 from National Retirement Fund, a New York-based client whom Mr. Jones had been serving, asking Mr. Marco to come to a meeting at which Mr. Jones would also be present, to discuss the more than $1 billion union plan's consulting relationships going forward.

Mr. Marco said Mr. Jones' contract with Marco Consulting contained a non-compete clause preventing the former senior consultant from contacting, soliciting or offering his services to the clients he served while at Marco Consulting for a period of two years after leaving the firm. Mr. Marco said he subsequently confirmed that Mr. Jones had contacted other former clients as well.

Reached by telephone, Mr. Jones declined to comment. Morgan Stanley spokeswoman Christy Pollak also declined to comment.

Mr. Marco said he attended the meeting April 27 with trustees of the National Retirement Fund, together with Michael Joyce, a senior Boston-based consultant whom Marco Consulting named as Mr. Jones' replacement on that fund. Mr. Jones did not attend the meeting, in accordance with the agreed order.

Mr. Marco said a court hearing has been scheduled toward the end of the two-week period agreed to between the two sides.

In an earlier interview, Mr. Marco said Mr. Jones' departure on April 15 had been a “big surprise.” He said Mr. Jones' title of president carried no functional responsibilities, and no one will replace him in that position.

Mr. Jones' 10% stake in the firm — the third biggest after Mr. Marco's 52% and Vice Chairman Thomas Mitchell's 26% — immediately reverted back to the company, effectively raising the shares of other stockholders, Mr. Marco said.

Mr. Jones' departure will delay Mr. Marco's plans to transition his remaining consulting relationships to other senior consultants at the firm by the end of 2011, Mr. Marco said. In recent weeks, Mr. Marco had said that transition would allow him to focus instead on running the business.

Some of the relationships overseen by Mr. Jones, who was based in Buffalo, N.Y., will be assumed by consultants in the firm's Boston office, but Mr. Marco said he'll be “taking back ones I used to have,” together with another consultant, and that arrangement is likely to continue beyond this year.

Mr. Jones' departure follows the recent decision by another senior consultant, Miguel Zarate, to move on, although Mr. Marco noted that Mr. Zarate is staying on for another few months to ensure a smooth transition.

Asked whether the departures of two senior consultants in the span of a month reflected deeper issues that could threaten Marco Consulting's stability, Mr. Marco said he had spoken with all of the firm's employees since April 15 and “everybody is very committed” to the firm.

An e-mail obtained by Pensions & Investments that Mr. Jones distributed April 15 to inform contacts of his decision said, “I will be establishing a Graystone Consulting office in Buffalo, N.Y., with my brother, Peter,” who was president of ULLICO Investment Advisors in Washington. “We are very excited about our new business venture,” he added.

The Graystone Consulting announcement said Peter Jones will likewise join the firm as a senior vice president and institutional consulting director.

Peter Jones left ULLICO — part of a broader group established in 1927 to serve the needs of unions and their members — in January. ULLICO spokesman Bill Thornton said Joseph R. Linehan, vice president, investments, was named acting president, while retaining his previous responsibilities.