In what some are calling unusual in a market where teams often hop companies en masse, Calyon SG, a unit of French bank Credit Agricole, is in the midst of suing Mizuho Securities USA and several of its top CDO bankers for alleged damages to the company by doing just that.

Calling the departures an "illicit scheme," Calyon is seeking $150 million in compensatory damages and $600 million in punitive damages, according to its complaint.

Calyon is also seeking to stop Mizuho's new CDO team from working on any U.S. deals with customers they had previously negotiated with Calyon.

Calyon lost most of its U.S. CDO team, led by Alexander Rekeda, in December. While leaving as a group may not be so unusual, according to sources close to the case, a key driver behind Calyon's claim is that it alleges staff members signed employment contracts with Mizuho, returned to work the following day - and left with proprietary information.

According to the complaint, they "loot[ed] Calyon's computers and network for confidential and proprietary business information on behalf of Mizuho just hours and in some cases minutes before they tendered their sudden resignations." The suit also alleges that key Calyon staffers were working in concert with Mizuho for as many as three months leading up to the departure, and that Calyon's reputation was damaged in the aftermath.

The complaint against Mizuho primarily names Rekeda and Douglas Munson, a former director and salesperson in the company's structured credit sales department, for "breaching fiduciary duties of undivided loyalty, good faith and fidelity" they owed to Calyon as "trusted employees." Nine additional former Calyon employees are named in the case as acting in concert with Rekeda and Munson to provide Mizuho an "unfair competitive advantage" against Calyon.

In a written statement, Mizuho said the complaints were "without merit" and that it intended to fight the lawsuit. "Calyon's former employees left Calyon for Mizuho of their own volition. They were not recruited by Mizuho directly or through a search firm," Mizuho said in the statement. The bank added that none of the employees had employment, noncompete or nonsolicitation agreements with Calyon.

In the days following the loss of its CDO team, Calyon shifted employees from its London office to compensate for missing staff members, and it publicly announced plans to grow its U.S. CDO team by one-third. Loic Fery, a managing director and global head of credit markets and CDOs at Calyon, said the company was pursuing the goal of generating enough U.S. CDO volume and revenue to land among the top five CDO underwriters in the country - a move that would bring it closer in line with its European CDO standings. Half of those new hires, which the company estimated at 60, would be stationed in the U.S., Fery said.

Simultaneously, Mizuho made public its intentions to become a U.S. CDO issuer. Rekeda named the company's sizable balance sheet, its flexibility and its presence as a global distributor as attributes that position it for growth within the sector.

The bank announced plans to enter the ABS CDO and CLO markets in the first half of this year, followed by a shift toward commercial real estate and synthetic CDO transactions. The team is looking to add two traders, a structurer and a legal structurer.

"We are very excited about joining Mizuho Securities. I think this is a great place to be," Rekeda, now head of structured credit at Mizuho, said in December. Yuri Chumak, Xavier Capdepon, Gwen Snorteland and Rachel Yang left Calyon with Rekeda. Former Calyon senior ABS and CDO trader Paolo Torti joined Mizuho as head of structured credit trading. Mizuho also hired Munson and James Shepard as co-heads of U.S. debt capital markets, a new department for the company.

Former Calyon staffers William Budd, Daniel Will and Clifford Condon round out the team, which was set up to distribute new product lines for the bank, including project finance, corporate bonds, 144A and private placements. All were named as defendants in the Calyon complaint.

Under Rekeda's watch, Calyon tripled its year-over-year global CDO issuance volume in 2006. As of December, the firm was expecting to issue about $10 billion in U.S. structured finance CDO volume by yearend.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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