November 5, 2005
Will Morgan Stanley Be Held in Criminal Contempt?
After Ronald Perelman won a $1.58 billion fraud judgment against Morgan Stanley for its failure to properly warn him about problems at client Sunbeam Inc., the financier pursued criminal contempt charges against the firm for alleged perjury by its lawyers and officers regarding the production of e-mail evidence. At the initial fraud trial, Judge Elizabeth Maass held that Morgan Stanley's repeated failure to produce e-mails permitted the court to find that the firm intended to defraud Perelman, so the only issue at trial was the amount of the damages. On top of the fraud verdict, the court has now heard Perelman's petition that Morgan Stanley be held in criminal contempt for its misleading statements to its opponent and the court about the completeness of its document production. The judge is considering the motion, which raises questions about the intent of the firm and its lawyers, and whether a private party can pursue a criminal contempt action. An adverse ruling would be more than a black eye for Morgan Stanley because it holds licenses to trade securities in all the states, and some of those could be placed in jeopardy by a criminal contempt citation. A nasty fight keeps getting nastier. A CNN.Com story (here) discusses the contempt proceeding. (ph)
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