The Royal Bank of Canada last week filed a counterclaim against former Chief Financial Officer Nadine Ahn, seeking to recover C$4.4 million (approximately US$3.2 million) in "excess compensation," involving payments the bank made to Ahn and former treasury management head Ken Mason.

The bank dismissed Ahn and Mason in April, accusing them of violating the bank's code of conduct by failing to disclose their "close personal relationship." Ahn and Mason separately sued RBC this month, claiming the bank mischaracterized their relationship and implied they had an extramarital affair, causing reputational damage.

In the counterclaim, RBC reiterated that evidence shows Ahn's relationship with Mason went beyond friendship, and stated the two exchanged increasingly "intimate" communications over the years. Documents RBC filed with the Ontario Superior Court of Justice (obtained by media including The Globe and Mail) cite text messages, instant messages, and emails between Ahn and Mason, as well as mementos they created, showing they had nicknames for each other.

RBC alleges that Mason ordered two 43-page "LoveBook" online keepsake books (delivered to his office) to celebrate the tenth anniversary of their meeting. The text in the book read: "Prickly Pear and KD lived happily ever after!"

The bank claims Ahn and Mason scheduled "liquidity meetings" on their work calendars—allegedly a code for cocktails. In May 2016, during one such meeting at a Toronto restaurant, the two wrote drink orders on coasters, accompanied by notes such as "concerts, nightlife, wineries." Mason had the coasters encased in Plexiglas and kept them in his office.

The bank wrote in its filing: "Ms. Ahn forwarded romantic poems to Mr. Mason, expressing that she fell in love with Mr. Mason the first time she saw him." According to Bloomberg, "Ms. Ahn and Mr. Mason continued to meet regularly outside the office during this period, and on August 18, 2017, arranged a lunch to celebrate their 'fourth anniversary.'"

The bank claims the two exchanged text messages "fantasizing about living together, such as lying in bed reading together." Mason allegedly drafted a poem mentioning Ahn, "a kiss, lingering physical contact, and an encounter in an elevator."

'Secret' relationship

RBC also noted that Ahn taught Mason how to hide text message notifications and told him not to see her when she was with her husband. The bank cited this as evidence the relationship needed to be kept confidential, The Globe and Mail reported.

The bank stated: "On March 11, 2019, Ms. Ahn texted Mr. Mason 'I love you.' Mr. Mason replied 'I love you too' 15 seconds later." The bank said it could not access their messages unless the two copied private communications into RBC systems, Bloomberg reported.

Lawyers for Ahn and Mason did not respond to requests for comment from The Globe and Mail and Bloomberg on Friday. RBC spokesperson Gillian McArdle said in a statement to The Globe and Mail: "Contrary to the statements of Ms. Ahn and Mr. Mason, the investigation revealed an undisclosed close personal relationship and that Ms. Ahn abused her CFO authority to directly benefit Mr. Mason. As she was a designated executive, we had an obligation to disclose."

'Project Ken'

The C$4.4 million RBC seeks to recover includes: C$3.3 million in bonuses from Ahn, and "C$1.14 million in excess compensation RBC paid to Mr. Mason due to Ms. Ahn's breach of fiduciary duty." RBC alleges Ahn used her position to secure "preferential treatment" for Mason. When Mason was appointed vice president and head of capital and term financing in November, Ahn "overrode" objections from Mason's superiors, senior bank officials. The bank stated: "The decision to promote Mr. Mason was effectively made by Ms. Ahn."

According to bank documents, the promotion was the "core objective" of "Project Ken," which Mason drafted in 2017, and "Ms. Ahn supported him in achieving that plan." RBC alleges that Ahn began advocating for a significant pay raise for Mason on the day she became CFO in 2021. In the two years before Mason's promotion to vice president, his compensation jumped from C$695,000 to C$1.1 million, an increase of 58%.

Additionally, when another employee raised concerns about Mason's compensation, Ahn dismissed that employee without cause. The bank stated that the former employee "has demanded compensation from RBC for wrongful dismissal due to Ms. Ahn's conduct."

'Same conflict of interest'

RBC also alleges that in 2022, Ahn dismissed an employee who had an undisclosed personal relationship with a subordinate. The bank said in last week's filing: "Ms. Ahn, when making the dismissal decision, knew she was in a substantially identical conflict of interest and had concealed it from RBC."

The bank said it received an anonymous tip in March that employees had seen Ahn and Mason "hugging, kissing, and exiting an elevator together at the Fairmont Royal York Hotel in downtown Toronto," and questioned why Mason had received a promotion. When lawyers asked Ahn about her relationship with Mason on her last day at RBC, Ahn initially said they were friends, "nothing more," and described her communications with Mason as "purely work-related."

RBC said in last week's filing: "Later in the interview, when shown multiple intimate communications between her and Mr. Mason, Ms. Ahn changed her account. Ms. Ahn's misconduct, combined with her dishonesty during the interview, made her continued tenure as a senior RBC executive untenable."

McArdle said: "Ms. Ahn was a respected member of the executive team and a senior leader with fiduciary responsibilities. We supported her career development and had confidence in her abilities. We were disappointed to learn the allegations were true."