Icap will not pay Prebon’s £2m damage claim

Prebon began threatening legal action when the three brokers it hired – George Dranganoudis, Dennis Walton and Alexander Newman – elected to remain at Icap. “We had three signed contracts back from the three individuals. Now that they have not honoured the contracts – which we believe is through inducement by Icap – we will be going after these individuals," said Prebon chief executive Tony Verrier.

The £2 million damage claim is, according to a source close to Prebon, “largely to cover the expected profits of the team had they fulfilled their three year contracts with Prebon". The source said Prebon would be looking for £1 million from Icap and £1 million from the brokers themselves.

"Prebon is pretty upset” said the source. “Rather than build a coal team from scratch, [it] hired the top ranking brokers in the field. It now has nothing”

The Icap coal team, led by Dranganoudis, topped RiskNews' sister publication Energy Risk's coal broker rankings – the benchmark for energy trader and broker excellence – in 2004. Joint second place was awarded to Amerex, although a source said Prebon was not interested in hiring these brokers. “The Icap brokers were at the end of their tenure,” he said. “Prebon would not itself incite people to break their contracts.”

While no Prebon source was able to divulge the offers Prebon had made to the three brokers, Energy Risk has learned Dranganoudis was offered £350,000 plus bonuses, with the junior brokers offered around £150,000. And a source said, "The team would have shared an [annual] bonus of around £1 million."

While it is not known what, if anything, Icap offered the brokers to encourage them to stay, Verrier said he is sceptical about Icap's ability to put a more attractive offer and continue to make money.

However, a source close to Icap said, “Uncertainty over the state of Prebon’s balance sheet has been an important factor in the decision [for the team] to stay.” Managing director Paul Newman said, “The team recognise that a well-capitalised, stable environment provides the best conditions for growing the business, and for providing a first rate service to our clients.” Icap’s Sheard also pointed out that the most senior broker, Dranganoudis, had “been with Icap all his working life”.

Sheard continued: “We have been advised there is no basis for their extravagant demands for compensation, and we have no intention of paying it. We believe they are ill advised to pursue, if they do we will of course defend our position vigorously.”

But Prebon’s Verrier said Prebon is fully expecting to win its case. “We’ve had other cases where we’ve pursued people for breach of contract and won,” he said. “It’s not just the fact of the individual, it’s the fact that you might be signing them up six months, a year, even two years ahead, and you start making business plans around that. You may have invested a substantial amount of money. And if the individual reneges on the contract, it’s a real setback,” said Verrier. “And I blame Icap for trying to keep the team,” he added.