The former president of U.S. Bancorp’s wealth-management business for the ultrarich has resigned as boss of rival Cresset Capital Management.

Michael Cole for several years had run U.S. Bancorp’s Ascent Private Capital Management, its lucrative business that serves clients worth at least $75 million.

He left Ascent in 2018 for Chicago-based Cresset and recently left that post, a few months after U.S. Bancorp (USB) and Cresset settled a 2018 federal lawsuit. USB alleged that Cole stole critical strategy and client information from Ascent as he was preparing to leave for Cresset.

The suit alleged Cole used a data-storage thumb drive to download confidential information about Ascent’s strategy, clients and financial performance in order to benefit his new employer. It also alleged he lured key employees to join him at Cresset, in violation of his duty to Ascent.

Cole denied that he swiped anything or shared it with Cresset.

An updated USB complaint in 2019, to which Cresset had yet to respond in detail before entering into settlement talks late last year, was much more specific about Cole’s alleged infidelity to USB.

The ship-jumping and resulting litigation drew widespread interest in the wealth-management trade, where executives are paid millions annually to help the wealthy get wealthier and provide related financial guidance, estate planning and philanthropic advice.

Wealth management is a fast-growing profit center. In 2019, the wealth-management and investments business at USB increased profit 10% to $895 million on a 3% gain in revenue.

Cole and his partners doubled the size of Cresset to nearly $9.5 billion in assets, including an acquisition in June.

“During my tenure we grew the firm from a startup to one of the fastest growing registered investment advisers in the country,” Cole said in an e-mail to colleagues several days ago. “I will continue my connection with the firm as an equity investor and owner. Nevertheless, it is now the right time for me to explore other endeavors and opportunities.”

Cole and Cresset had denied the accusations of taking trade secrets and confidential financial information, and charges of breach of contract and fiduciary responsibility. They also rejected the charge that Cole recruited Ascent employees to join him at Cresset before he left USB.

Neither Minneapolis-based USB or Cresset, which operates from offices including Chicago and Los Angeles, would comment on Cole’s departure or the confidential USB-Cresset settlement. A federal judge in California dismissed the case in April at the request of the parties.

Industry insiders speculated that USB may have conditioned the settlement of the case on Cole’s resignation from Cresset.

USB was very specific in its suit about meetings, documents and times. That indicates that it was using customized industry software that tracks the use of proprietary USB data and also provides a road map to pursue disloyal employees.

“For example, if USB had relatively solid evidence that Cole had the bank’s proprietary information without an adequate explanation, they could have demanded Cole’s resignation as a condition of the settlement, the threat being that if he didn’t resign, they would proceed with the litigation and depose him, which would place him in the awkward position of having to respond to questions, under oath, regarding his possession of USB’s proprietary information,” speculated Ben Anderson, a veteran Twin Cities financial-services attorney who is not involved in the case.

And that development could have placed pressure on Cresset’s management regarding whether to continue to employ Cole. Anderson added that the expense and distraction of the litigation could have also led the parties, especially Cresset, to settle.

“Litigation is an expensive and potentially significant distraction for the leadership team of an investment management firm, especially one that is growing. It is common for investment managers involved in a material litigation or regulatory enforcement matter to field round after round of calls from investors asking for updates regarding the matter. It’s reasonable for investors to ask these questions — many are fiduciaries themselves,” Anderson said. “But in my experience, it can nonetheless be exhausting for management to continue responding to investor calls asking the same question over and over, particularly where there’s no clear answer that the investment manager can provide, because there’s not necessarily any sign that the matter will be resolved soon.”

That Cole remained an investor in Cresset even though his employment ended indicates to folks watching this case that both sides had an interest in his departure as a key player at the wealth-management firm.

 

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. Reach him at nstanthony@startribune.com.