Axiom risks dissolution over dispute

Nicholas Stephan and Wesley Wang, at loggerheads with Cawley for the past six months, have lodged a petition with the New York State Supreme Court, alleging the company has been damaged beyond recovery by the resignation of the vast majority of its traders. In their petition, Stephan and Wang blame Cawley’s poor management for the resignations. Judge Walter Tolub is due to hear their case this morning and Frank Penski of Nixon Peabody, Stephan and Wang's lawyer, said he expected a quick decision. "[Tolub] said he would do his best to make a ruling soon, maybe that same day," Penski told RiskNews.

In affidavits attached to the petition, former Axiom employees claim Cawley used company funds to pay for babysitters, and also for visits to strip bars and escort agencies. The petition is also accompanied by a forensic accountant's report into Cawley's expenses and credit card bills, which alleges, "Cawley has misappropriated a significant amount of funds".

Cawley could not be reached for immediate comment, but told a leading news agency that the allegations are entirely baseless and his team would “respond vigorously in court”.

According to affidavits filed by Stephan and Wang, most of the staff said they resigned when they heard that Cawley – ousted as chief executive at a board meeting in December last year – would be returning to the company. Stephan and Wang have acted as chief executive and chief marketing officer respectively since his departure, but an arbitrator ruled last month that Cawley had been improperly removed from office and should return.

Stephan and Wang, and other former employees, also claim that Cawley's management style was mendacious, bullying and manipulative, adding that with this record he would find it very difficult to recruit new traders to get the company back to strength. With Cawley still involved in the company, they say, given his management and the tensions between him and themselves, "dissolution is not only warranted, but is the most favourable option”.

In another twist, according to the petition, Cawley has installed John Ho Park, the trader involved in the collapse of futures traders Griffin Trading and GLH Derivatives in London in 1998, as a director of the company. According to the Securities and Futures Authority (SFA) investigation in 2001, "Park did not tell [his compliance officer] the truth about his positions... he is no longer fit and proper to be registered with the SFA in any capacity."

Axiom, which is an active broker in credit derivatives, refused to comment on the petition.