03/05/2010

Executives Quit ICP Capital Amid Turmoil

Following a period of rapid growth, trading firm ICP Capital is suddenly grappling with a range of issues - including troubles in raising capital and retaining key personnel.

Related tensions boiled over two weeks ago, when chief executive Thomas Priore got into a shouting match with lieutenant Carlos Mendez in the firm's New York headquarters. Mendez abruptly quit. Shortly after, Mike Flynn, Robert Roberto and Ed Steffelin headed for the door as well.

ICP runs two main lines of business: a broker-dealer arm focusing on structured products and an asset-management division that works on collateralized debt obligations, operates funds and advises clients. Mendez had built the brokerage area into the company's most profitable component, while the asset-management unit has struggled under Priore's watch.

It's unclear what specific issue triggered the altercation between the two, but it was just the latest in a series of setbacks for ICP.

The firm has doubled its staff during the past 18 months to about 120 employees, but now faces trouble retaining some of the recent hires. A number of traders and sales specialists on the brokerage side signed on with the expectation that ICP would raise capital so it could build an inventory of structured products. So far, however, the firm has made little progress with that effort.

A similar issue plagued Utendahl Capital, which hired a team of structured-product traders only to see most of them leave late last year after the New York firm failed to raise capital.

Meanwhile, ICP's asset-management business is effectively dormant. A recent effort to launch a REIT never panned out.

The firm also faces a separate SEC investigation of its CDO business, which oversees four transactions issued under the Triaxx banner in 2006 and 2007. Those deals had a combined face value of more than $9 billion, according to Asset-Backed Alert's ABS Database. The regulator is apparently looking at the operation as part of a general examination of CDO managers' roles in the financial crisis.

Despite the challenges, ICP has gone without a designated chief financial officer or general counsel for most of its history. An apparent lack of attention to regulatory compliance, in particular, has become a point of concern for some insiders.

Still, by all accounts ICP continues to make good money from its broker-dealer operation, particularly in London. The staff is largely intact, and one source said it appears the firm remains in talks to raise capital to build an inventory of securities.

The question now is whether others will follow Mendez out the door. Word has it that Mendez and Roberto, a senior managing director who oversaw sales and trading, are pursuing separate initiatives. Steffelin has signed on as director of institutional sales and research at Walton International, a Scottsdale, Ariz., real estate and asset-management company. He had been running two funds that he brought over from prior employer GSC Capital in 2008. Flynn's destination is unknown. He was a senior member of ICP's brokerage team.

ICP was formed in 2004 as a Bank of New York affiliate and broke away from the bank in 2006. Priore, who holds a majority stake in the firm, led the spinoff. He previously worked at Guggenheim Capital, and set up collateralized debt obligations for the former PaineWebber before that. He declined to comment.

Back Print