According to an Annual Report filed by Morgan Stanley with the
SEC earlier this month, the investment bank has reached “an
agreement in principle” with the enforcement division of the SEC,
but the settlement has not yet been presented to the full SEC.
“No assurance can be given that it will be accepted,” warns the
filing.
If it is accepted, a $15 million settlement would be the largest
sum ever paid for email retention failures, according to
reports.
The firm is also discussing settlement with financial watchdog
the National Association of Securities Dealers (NASD), although no
agreement has been reached.
The investigations relate to the 1998 sale of Coleman Co, owned
by billionaire Ronald Perelman, to Sunbeam Corp.
Sunbeam stock formed part of the purchase price, but the stock
value fell dramatically just shortly after the sale. Morgan Stanley
had advised Sunbeam in the deal and Perelman accused the firm of
complicity in an accounting scandal that hid Sunbeam's
problems.
The case turned against Morgan Stanley when the firm failed to
produce emails and documents sought by Perelman’s lawyers. This
annoyed the judge so much that she reversed the burden of proof so
that Morgan Stanley was obliged to prove its innocence.
The jury awarded Perelman $1.45 billion in damages. Business 2.0
magazine notes in its annual round-up of 'Dumbest moments in
business' that Perelman had reportedly offered to settle for $20
million.
The Perelman case is now subject to appeal, but regulators were
concerned that the failure to produce the documents indicated some
breach of federal regulations, and began their own
investigations.
