BIRMINGHAM, Alabama -- A former chief financial officer of Birmingham-based investment bank Sterne Agee Group, Inc., is suing his former employer and its chief executive, James Holbrook Jr., accusing them of fraud, breach of contract, conversion and defamation.

According to the lawsuit, filed in Jefferson County Circuit Court on Friday, the former Sterne Agee CFO, Brian Barze, says he was fired after repeated attempts to curb wasteful spending at the company, including Holbrook's personal expenses paid from company funds.

"As Barze soon learned, Holbrook uses Sterne Agee and its resources and corporate toys for Holbrook's own personal pleasure, thereby contributing enormously to the wasteful and abusive spending at Sterne Agee that detracts from its profitability," the lawsuit states.

The complaint details some of those expenses, including luxury watches, jewelry, women's shoes and other gifts for employees and Holbrook's friends. The lawsuit also says that Holbrook used company funds to pay for personal trips on the company's jets and that the company maintains a yacht, a powerboat and a Florida condominium "almost exclusively for Holbrook's personal pleasure."

According to the lawsuit, Holbrook instructed Barze to require employees to contribute money to a political action committee or the employees would not qualify for annual bonuses.

In a statement Tuesday afternoon, Sterne Agee disputed Barze's claims, saying his lawsuit grossly mischaracterized the expenses, which the company calls customary business expenses for its industry.

"In an effort to lever Sterne Agee into paying him severance pay for which Sterne Agee has no contractual obligation, Mr. Barze recently threatened to make allegations -- unconnected with his underlying breach of contract claim and unconnected with his financial reporting misconduct -- that he terms 'abusive spending' at Sterne Agee," the company said in the statement. "Sterne Agee rejected improper efforts, and so Mr. Barze sued Sterne Agee."

Barze's lawyer, John Somerville, says that the expenses are relevant to the lawsuit. It was because Barze confronted Holbrook about those expenses that he was fired, he said.

"Sterne Agee says spending for personal use of jets and yachts and the Kentucky Derby and purchase of women's jewelry is irrelevant," Somerville said. "But this is why Brian was fired - for trying to stop that. And then Holbrook made up stories about Brian to explain why he went through yet another CFO."

In 2009, Barze worked at another company as CFO and was being groomed to be its chief executive, when Stern Agee approached him about becoming its CFO. According to the lawsuit, Holbrook promised Barze that if he left the other company and if things did not work out at Sterne Agee, then Sterne Agee would pay Barze at least one year's salary.

The company disputes that it recruited Barze, but says instead that it was Barze who first courted Sterne Agee.

When Barze took the job, he was asked to sign an employment agreement. Holbrook told Barze that the agreement was standard for all employees and would not affect their oral agreement, the lawsuit says.

After joining Sterne Agee, Barze says in the lawsuit, he became aware of the personal expenses, including credit card charges for personal items, and he frequently challenged Holbrook about them.

The lawsuit recounts a subsequent lunch conversation Barze had with Holbrook's son, Billy Holbrook, who served as the company's Chief Operating Officer.

"At that lunch, Billy Holbrook advised Barze, 'You are trying too hard. All you have to do is sit back, do less, do whatever Dad wants you to do, and you will make a lot of money,'" the lawsuit says.

Ultimately, Barze was fired on August 21, 2012. Since then he has tried to claim his severance as promised by Holbrook, in addition to about $358,000 worth of stocks, bonds and other personal funds he had invested in the company, the lawsuit says, but the company has refused to give Barze control of those personal assets.

It is because of that Barze has accused Sterne Agee and Holbrook of conversion, a legal term in civil courts of depriving someone of control of personal property.

Since Barze was fired, Holbrook has told people outside the company that Barze was terminated for illegally manipulating the company's books, the lawsuit says. Barze maintains that assertion is false, and he is suing the company and Holbrook for defamation because of it.

In its statement, Sterne Agee insisted that Barze had been fired for making material accounting mistakes.

"In August 2012, after top management learned that Mr. Barze had created financial statement inaccuracies in material amounts in Sterne Agee's books and records, which resulted in an unanticipated write down to Sterne Agee's 2012 financials, Sterne Agee terminated Mr. Barze's employment for cause for such actions, and for violation of his fiduciary duties as the Chief Financial Officer," the company said.

John Somerville said the defendants in the lawsuit had left his client little choice but to sue.

"Ultimately Sterne Agee and Jim Holbrook left Brian with no alternative but to file suit to clear his name and also get property like the stock that they are withholding," he said. "Like at the old HealthSouth, people know there are problems in a company when it runs through multiple CFOs. Old HealthSouth had five CFOs in eight years. Sterne Agee had four CFOs in six years. Holbrook fired Brian for trying to restore fiscal responsibility."

The Sterne Agee Group consists of seven subsidiaries and manages more than $17 billion in assets, the company's website says.

Burr & Forman attorney Michael Choy will represent Sterne Agee in the lawsuit. Mike Redicker of Haskell Slaughter is representing Holbrook.

"Responses will be filed on behalf of each defendant pursuant to the Alabama Rules of Civil Procedure in due course," Choy said in an email Tuesday afternoon.

Updated at 4:50 to include further comments by Sterne Agee and Barze's attorney.

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