Jefferies bankers take drug tests to counter divorce claims

Richard Handler, chief executive officer of Jefferies Group LLC, said he and some investment bankers took drug tests to refute claims by the estranged wife of another banker that narcotics use is widespread at the firm.

“Suggestions of rampant drug use are pure fabrication,” Handler, 53, and Chairman Brian Friedman, 58, said in a memo posted Friday on the firm’s website. “The two of us can of course attest that all tests came back drug-free.”

The testing is a response to allegations made by Christina Kelly amid a divorce battle with Sage Kelly, Jefferies’s head of health-care banking. Handler said yesterday that Kelly is taking a leave of absence. The allegations, some of which involve Kelly’s colleagues and clients, appeared in the New York Daily News, Gawker and the New York Post.

“This past week has been beyond painful for us, as a child-custody case has led to groundless questions about the integrity of our firm,” Handler and Friedman wrote in the memo.

The two executives said they made an unexpected visit yesterday to the health-case banking group. “The two of us are going to go take a drug test and do you want to join us?” the men asked the bankers, according to the memo.

Ben Lorello, global head of investment banking, and the three other bankers mentioned in the custody case volunteered to take a test, as did all the other managing directors in the group, according to the memo.

“We are embarrassed that we even have to discuss these matters, but this should put to rest the heart of the allegations about our firm,” Handler and Friedman said. “Sometimes truth does come in a jar.”

Handler is also CEO of Jefferies’s New York-based parent, Leucadia National Corp.