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Company Morgan Stanley [Company Info]
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Date Issue Title
18th May 2005 Fraud Investigation Morgan Stanley faces $850m payout

Report
Morgan Stanley will have to pay $850m (462m) in damages to Revlon boss Ron Perelman after being found guilty of conspiring to defraud the financier.

A Florida court concluded that the US investment bank had acted improperly in relation to a 1998 deal in which Mr Perelman sold Coleman Inc. for $1.5bn.

Sunbeam, which bought Coleman, filed for bankruptcy in 2001 after a huge accounting fraud was uncovered.

Morgan Stanley, which advised Sunbeam, said it would appeal the verdict.

The bank is facing a total pay-out of $1.45bn, having previously been ordered to pay $604m in compensation to Mr Perelman, who is chairman of cosmetics giant Revlon.

Mr Perelman, who sought $1.8bn in punitive damages, had argued that Morgan Stanley had played a vital role as Sunbeam's advisors in attracting him to the company.

The financier acquired more than 14 million shares in Sunbeam as a result of the deal, shares which subsequently became worthless once the scale of the fraud at Sunbeam emerged.

Lawyers for Morgan Stanley argued that Mr Perelman - who is married to the actress Ellen Barkin - had benefited financially from the Coleman deal, by receiving $160m in cash as well Sunbeam shares.

They claimed that the $604m award was adequate compensation.

Morgan Stanley said it had also been a victim of the Sunbeam fraud, losing $300m.

"This court has done a great injustice to the employees and shareholders of Morgan Stanley," its chief executive Philip Purcell said in a statement responding to the verdict.

"We will fight to have this decision overturned and we fully expect to prevail."

Other Reports on Morgan Stanley
Date Issue Company Report
17th Aug 2008 Questionable Practice Morgan Stanley US banks give clients $7bn refund
20th Jul 2005 Other Issue Morgan Stanley Pension fund sues Morgan Stanley
12th Jan 2005 Fraud Investigation Morgan Stanley Morgan Stanley hit by record fine

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