No Pals At Pali


New York – News that boutique investment bank Pali Capital is apparently running out cash is saturating the Street. Some indicate that this might occur as early as February. This, after Pali went on a hiring spree in 2009. Like many smaller investment banks Pali saw the demaise of the bulge firms and their acceptance of TARP money as an opportunity to staff up on research analysts, traders and bankers that had been displaced by the bulge bracket firms. Yet, its strategy went off course.

Pali has been plagued with high executive turnover and high legal bills as the founders of the company duke it out in court. Employees are departing at a rapid pace and the firm’s roster has dropped from 250 to 130 since its peak last year.  The two founders Cohen and Reifler are tangled in a dispute that looks more like a bad divorce than corporate litigation. As a result, the parent company Pali Holdings has racked up legal bills in the amount of $4.85 million, according to reports.

The legal risk, as well as cash flow concerns, are at the root of the decision by Braver Stern Securities Corp to break off talks with Pali regarding acquisition. Sam Molinaro (ex-Bear CFO) had been trying to coble a deal together in which he would take over as CEO of Pali and forge his comeback on Wall Street.  

Any solution to Pali’s problems appears to hinge on finding a buyer for the beleaguered bank, but the legal costs and unresolved exposure to more litigation among the founders and from ex-employees will be the greatest impediment to finding a buyer.


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