(Bloomberg) — When Richard Kallman’s 26-year marriage failed, he arrived at a meeting to hash out the separation, expecting to see his wife and her lawyer. But instead, the couple’s new wealth manager from UBS Group AG showed up and demanded Kallman fork over $9 million.
Almost two years later, that allegation is among several laid out in New York state court accusing Ira Walker, a managing director at UBS, of wreaking havoc on Kallman, the heir to a family of New York-area bookdealers.
Walker allegedly had an affair with Kallman’s wife, Kineret, and schemed with her to move the family’s trust fund to UBS, where she disbursed hundreds of thousands of dollars without her husband’s knowledge, according to a lawsuit filed in New York Supreme Court seeking $10 million in damages from the Swiss bank and Walker.
Walker has called the case “factually baseless” in industry records, and when reached by Bloomberg said the accusations are “false” and a “fantasy” without elaborating. He referred all questions to UBS, which has stood by him.
“We remain committed to acting in the best interests of our clients supported by a robust supervisory framework,” the company said in a statement, declining to discuss the matter further. The bank and Walker have sought to move the dispute into arbitration. An attorney for Kineret also referred questions to the bank, which had no comment on her behalf.
The drama spotlights an issue that has long bedeviled US financial firms: messy fallout when brokers or investment advisers have personal or intimate relationships with their clients. Despite high-profile legal brawls waged by wealthy families against firms including Morgan Stanley and JPMorgan Chase & Co., the industry’s primary regulators have no rule explicitly setting boundaries for ties outside the office.
It’s a contrast with other fields, including health care and law. For example, the American Bar Association’s model rules of professional conduct — embraced by many state bars — draw a clear line: A lawyer shall not commence sexual relations with a client because of the potential for breaching fiduciary duty.
The Financial Industry Regulatory Authority and Securities and Exchange Commission, which police brokers and advisers, require that they pitch investments that are in their clients’ “best interest.” Firms are supposed to closely monitor that process. But private interactions can quickly enter legal gray areas, in part because regulators generally leave it to companies to set their own codes of conduct.
Emails and other documents in the Kallman case show Walker became entwined in his clients’ divorce. Kallman alleges that after they separated, Kineret moved into Walker’s beachside home in Sea Girt, New Jersey.
Kallman said the breakup and his financial adviser’s actions caused him to contemplate suicide and led to him being dropped for a time as chief operating officer of his family’s business. He also blames the bank, which he accuses of breaching its fiduciary duty to him, allowing blatant conflicts of interest and failing to supervise Walker.
“He’s orchestrating to get my money to his girlfriend that he’ll manage — and he’s gonna profit, and so is UBS,” Kallman said in an interview. “I’m a client. I’m a co-trustee of a trust that he manages. And UBS, I’m their client as a co-trustee also.”
In the financial industry, the business of managing clients’ savings often blurs professional and personal realms. It’s not unusual for freshly hired advisers to sell products to friends and relatives to seed their entry into the business.
That lack of boundaries can later embroil a firm in family drama, litigation and potentially even regulatory violations. In 2021, JPMorgan’s securities unit forked over $9 million in damages and refunds after arbitrators found the firm liable for misconduct by two of its employees who were managing about $80 million in wealth for their 94-year-old grandmother.
‘Complete Shock’
Richard and Kineret Kallman married in 1996, a year before he and his brother took control of the family business, Bookazine. The company was founded 96 years ago by Kallman’s grandfather and handed down through generations, supplying books for independent bookstores, libraries and airports. Kallman, now 57, began working there when he was 17. He once told Publishers Weekly about his hope that the business would remain viable for his two young children.
The case against UBS centers on a trust fund his parents set up for their grandchildren in 2002, seeding it with tens of thousands of dollars that could be invested and used for education. Kallman was initially the sole trustee but later added his wife as a co-trustee. The assets long remained at JPMorgan, where they were transferred into a new trust in 2019. That agreement said either Kallman or Kineret could make account decisions so long as the other consented in writing, according to a copy of the trust filed in New York court.
Kallman said he was introduced to Walker more than 15 years ago, when he and Kineret were trying to get their children enrolled at a private school in Tinton Falls, New Jersey, that Walker’s own kids were attending. Walker later invited the Kallmans to an elite country club in neighboring Colts Neck. That was the last time Kallman said he remembered speaking with Walker until Kineret brought him up in 2023, when she said she was moving personal accounts to UBS to be managed by Walker and sought to move the trust there as well.
Walker, now 69, has been with UBS for about 17 years. His profile at the firm describes him as a top-ranking financial adviser to “ultra-high net worth clients in a boutique multi-family office environment” in New York and Red Bank, New Jersey. UBS and industry rankings have said his team oversees more than $1 billion of assets.
Kallman said he was always satisfied with the way JPMorgan handled the fund, but reluctantly agreed with his wife. That February, he received a 26-page document from UBS with a DocuSign form. According to the timestamp, Kallman signed it less than two minutes after opening it. He later told the court he never bothered reviewing it, nor did he ever meet with Walker.
The document made a significant change to the trust, according to a copy filed with the court, with two spaces filled in to let a single trustee authorize transactions. Kallman said he didn’t make those changes.
Three months later, according to his lawsuit, his wife returned from a trip to the Bahamas, said she wanted a divorce and pressed him to move out of their New Jersey home. Kallman said he didn’t see it coming.
His wife filed a civil domestic violence complaint against him, receiving a temporary restraining order. Kallman said the order was based on text messages he sent her after viewing a Ring camera video showing she left the house one evening and didn’t return home.
Kallman said the pieces fell into place for him when Walker made his surprise appearance at the divorce conference in mid-2023. Walker offered a handshake, said he was acting as a neutral friend, described how his own divorce was long, painful and expensive, and then demanded $9 million on Kineret’s behalf, according to Kallman and his complaint. His divorce lawyer ended the meeting on the spot.
“I’m in complete shock, I’m in complete disbelief,” Kallman recalled in the interview. “I realize that this is the guy now that’s taken my wife.”
Calling Police
Kallman’s lawsuit claims the relationship began before he signed the UBS documents and continued after the separation. It alleges Walker wooed his wife with promises of wealth, lavish vacations and private jet travel, and that he bought her a Bulgari necklace worth more than $30,000. Later in the year, Walker, Kineret and their children vacationed together for a month in St. Barts, according to a letter to the divorce judge reviewed by Bloomberg.
Kineret and Walker “successfully deceived him into agreeing to move the trust account to UBS so that they could control it,” Kallman’s lawyer, Alan Futerfas, alleged in the complaint.
Walker continued seeking money from Kallman and communicated frequently with Kineret’s divorce lawyer, Edward Fradkin, who had previously represented Walker years earlier in his divorce, court records show. He allegedly called Fradkin and said Kineret would be willing to downgrade the restraining order if Kallman paid her $250,000 and signed over the family’s $2 million home in Morganville, New Jersey, according to the complaint.
Walker also wrote to Fradkin about challenging the couples’ prenuptial agreement and investigating Bookazine’s financials. The messages were sent from Walker’s personal email accounts, which Kallman’s lawyers allege may have violated federal recordkeeping rules requiring employers to track their financial advisers’ business-related communications.
Meanwhile, the animosity between Kallman and Walker escalated.
In September 2023, Walker called police in Sea Girt to report that Kallman had harassed Kineret, according to the amended complaint. Kallman was arrested and pleaded guilty, receiving a year’s probation.
Months later, Kineret’s lawyer, Fradkin, reached out to the police — this time raising alarms about Walker. With negotiations stuck and frustrations mounting, the UBS broker allegedly threatened the husband’s lawyer, Frank LaRocca: “Tell LaRocca that it could be dangerous to his health while he is walking from his office to his car.”
A police report describing the alleged outburst notes Fradkin said he doubted Walker would carry it out but that he didn’t want to serve as Kineret’s lawyer anymore. Indeed, court records show Fradkin soon exited the case and that a judge ordered Walker to stay out of it unless subpoenaed.
Fradkin didn’t respond to messages seeking comment. LaRocca said in an interview that the police made some sweeps of his street, just to be safe. No charges were filed.
‘Properly authorized’
Kallman sued his wife, Walker and UBS Financial Services in October after learning that a disbursement was made from the trust. He claims that he lost the ability to keep tabs on the trust and tried to deny his daughter’s request to withdraw funds, in part to pay her tuition to New York University, because he said he was worried about the tax implications. In January, Kallman learned that her trust balance — once about $275,000 — was gone.
In his public employment records with Finra and the SEC, Walker has acknowledged he’s fighting a customer complaint, denying wrongdoing.
“The one distribution at issue — which was handled by my assistant and not by me — was properly authorized by the plaintiff’s wife and was permitted by the documentation UBS has on file,” Walker wrote. He noted that the money went to the proper beneficiary, the couple’s daughter.
The complaint “has nothing to do with me; it is a disappointing byproduct of a contested divorce,” he added, vowing he will “seek to have this expunged from my otherwise unblemished decades-long record.”
Walker previously had three other client complaints expunged from his record, according to court documents. The statement to regulators makes no reference to the allegation of a romantic relationship or that he was accused of meddling in the divorce proceedings.
UBS and Walker are pushing to move the case out of the court system and into a Finra arbitration panel — a venue that is a lot less public. The firm has argued that even if allegations against Walker were true, such actions would have been outside of the scope of his employment.
In an effort to keep the case out of arbitration, Kallman argues that his signature was deceptively obtained, saying if he had been aware of the affair he never would have moved the trust to UBS. He also argues the relationship was a material conflict that should have been disclosed per UBS’s customer agreement.
“They had an obligation to contact me to tell me about a potential conflict,” Kallman said, noting that two years later, Walker is still listed as the trust account’s manager.
No matter where the case ends up, it shows the myriad ways that wealth-manager relationships have been scrambled with personal ties to disastrous effect in the industry.
Among the most prominent, arbitrators ordered Morgan Stanley to pay $34 million in 2016 to the family of a co-founder of the Home Shopping Network after one of its advisers who had been in a romantic relationship with her client was accused of unauthorized trading on his account. The adviser agreed to be barred from the brokerage industry by Finra, without admitting or denying the allegations.
A half-decade later, arbitrators found JPMorgan’s securities unit liable for elder abuse in the case of the 94-year-old department store heir whose fortune was managed by her grandsons. The pair, who were terminated from JPMorgan and ordered to pay damages by a Finra arbitration panel, denied wrongdoing.
Read More: She Waged War on JPMorgan and Her Own Grandsons (and Won)
Kallman said he wonders if UBS was aware that Walker was directly involved in the divorce proceedings.
“I believe that when you work for a company like UBS, you’re supposed to have in your diary or in your calendar where you are,” Kallman said. “Did he let UBS know that day that he was at my settlement agreement meeting, did he let them know he was sitting in on my mediation?”