Hightower Advisors is suing a Washington-based RIA and some of its advisers, alleging the RIA conspired with a former Hightower employee to steal confidential client information that allegedly cost Hightower $150 million in client assets .
It's the latest legal development in adviser Lars Knudsen's battle with Hightower, which began after the RIA buyer fired him last winter. But this newest complaint does not name Knudsen, and instead targets Hohimer Wealth Management, where Knudsen went to work after being fired.
In a statement to WealthManagement.comKnudsen said the allegations had already been dismissed in previous lawsuits and that this shows Hightower will “say or do anything to intimidate or destroy anyone who stands up to them,” calling it a pattern of “bullying behavior.”
“They're doing that in this new filing, and they've done it to former Hightower advisers from Delaware to California and everywhere in between,” Knudsen said. “They are also sending a signal to every Hightower advisor that if they choose to leave the firm, they will also be dragged through the legal and financial fog they have created for me and many others.”
According to legal filings, Knudsen is a Washington-based adviser who founded Triad Wealth Management before spinning off that business to Hightower in 2014. In 2018, principals of the firm's Bellevue branch (including Knudsen) formed Hightower Bellevue Advisors, provided more independence (and ownership stake). Hightower claimed that Knudsen signed non-solicitation pledges as part of that agreement.
In this latest lawsuit filed in Washington state court, Hightower claims it conducted an internal investigation in 2023 and 2024 that found Knudsen diverted client funds from the firm to outside businesses. Specifically, the firm alleged that Knudsen directed over $30 million in client funds to 11 real estate LLC ventures that he managed outside the firm. (Knudsen's wife was a member or manager, and Knudsen was a member of some of the LLCs, according to Hightower.)
Hightower also alleged that Knudsen engaged in a pattern of “severe verbal abuse and harassment” and brought a gun into the office in violation of Hightower's policy. (Knudsen has denied the allegations.) Hightower fired Knudsen in late February, according to this new complaint. Hightower then sued Knudsenclaiming he broke non-compete agreements with his former employer just weeks after he was fired.
However, Knudsen retaliated with his complaint in federal court, alleging that Hightower “hijacked” advisers' books of business before pushing those employees to reap the rewards.
In addition to Hohimer Wealth Management as a business entity, the defendants in the newest lawsuit are Hohimer financial advisors Bryan Abdelnoor and Kyle Balcos and client service associate Hannah Atchison. Knudsen is not listed as an advisor on the firm's website, nor is the firm registered with the SECbut Andrew Escobar, Knudsen's attorney, confirmed that he is with the firm. Hohimer Wealth did not respond to a request for comment.
In her lawsuit, Hightower alleged that Knudsen contacted Hohimer “immediately” after he was fired and began “covertly cooperating” with Abdelnoor, Balcos and Atchison.
“Simply put, the defendants schemed to use the client relationships and confidential information entrusted to Knudsen at Hightower to bring those clients to Hohimer, to the financial benefit of the defendants at the expense of the plaintiffs,” the complaint said. . “Knudsen and the defendants hid their efforts from the plaintiffs.”
In March, Hightower allegedly sent a cease and desist letter to Hohimer's managing partner, David Hohimer, detailing Knudsen's firing and the allegations that led to it. The letter said he had agreed to “certain restrictive covenants upon termination, which are in effect.” According to Hightower, Hohimer never responded to the letter.
According to Hightower, the alleged scheme is working; approximately 61 clients served by Knudsen on behalf of Hightower are headed to Hohimer, with a total value of $150,652,285. Hightower claimed the latest customer defection occurred on Nov. 7 and said “many” customers have informed Hightower that they have been contacted by Knudsen or other Hohimer officials arguing that their money is not “safe” at Hightower.
“If any remaining customers are diverted, Hightower will lose those relationships for years into the future,” he said. “The damages resulting from such occurrences are considerable.”
But Knudsen has argued in court filings that Hightower pressured him to retire, while other advisers at his old firm disparaged him to clients to fire him. In a statement to WealthManagement.comEscobar said there was “absolutely no 'collusion'” and argued that Hightower “knowingly asserted” false claims, which would be sanctioned by the court.
“Hightower is simply trotting out many of the same tired allegations that have been explained away or outright dismissed in previous litigation,” he said. “They can continue to use this tactic of using the legal system to intimidate and bankrupt people like Lars, but they know they are wrong.”
in April, a state judge ruled that Hightower could not distribute Knudsen's Form U5 to anyone other than a regulatory authority and could not discredit it to customers. last month, Hightower dismissed the claims in Illinois federal court v. Knudsen, alleging that he broke his oath of non-solicitation days before a judge was to rule on Hightower's request for an injunction.
“The reason is clear—Hightower knew that the magistrate judge was about to deny his request for a preliminary injunction and rule that the restrictive covenants are overbroad and unenforceable, and he feared such a public loss, which would likely have invalidated Hightower. agreements with dozens of advisors across the country,” said Escobar. “Lars has no doubt that the Washington court will reach the same conclusion.”
Hightower declined to comment for this story, saying it does not comment on pending litigation. The firm has previously said it would pursue its claims in “binding arbitration,” which Escobar expected to be resolved by January 2025.
Knudsen also recently filed a complaint against four directors at Bellevue Hightower, arguing they diverted funds from the firm to prevent him from receiving compensation he was owed. This lawsuit is ongoing. According to Escobar, they intend to file a motion for summary judgment in arbitration in the coming weeks, with Escobar saying they are “confident” they will prevail.