Morgan Stanley Ordered to Pay $604 Million to Investor Perelman

A jury in Florida has ordered the investment bank Morgan Stanley to pay $604 million to investor Ronald Perelman. The award was handed down after the judge hearing the case accused Morgan Stanley of deliberately concealing evidence from Perelman's legal team.

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A jury in Florida has ordered the investment bank Morgan Stanley to pay $604 million to investor Ronald Perelman. The award was handed down after the judge hearing the case accused Morgan Stanley of deliberately concealing evidence from Perelman's legal team. NPR's Jim Zarroli reports.

JIM ZARROLI reporting:

Ron Perelman is a billionaire investor known on Wall Street as a savvy deal-maker. In 1998, he decided to sell his stake in the Coleman camping goods company to Sunbeam. Perelman said he wanted to be sure that Sunbeam was in good shape financially. So he turned for advice to its investment banker, Morgan Stanley. The deal went through and Perelman acquired a huge share of Sunbeam stock, but by 2001, Sunbeam had collapsed in an accounting scandal. Perelman sued Morgan Stanley, insisting that it must have known the truth about Sunbeam's precarious finances.

During the discovery phase of the trial, Perelman's lawyers repeatedly complained that Morgan Stanley was dragging its feet about releasing company e-mails that could be used as evidence, and the judge ultimately agreed. In a very unusual move, Judge Elizabeth Maass ordered the jury to find that Morgan Stanley acted in bad faith, effectively handing Perelman a victory. Henry Hu teaches securities law at the University of Texas.

Mr. HENRY HU (University of Texas): In the end, she basically decided that she couldn't trust Morgan Stanley and that, because of this kind of pattern of discovery abuse, in effect, Perelman couldn't get a fair trial.

ZARROLI: In a statement released after the verdict, Perelman's company said it appreciated the jury's thoughtful attention to the facts. Morgan Stanley said the verdict was disappointing but not a surprise given what the company called the highly prejudicial rulings imposed by the trial judge. The firm said it hadn't had a chance to defend itself against the main charges in Perelman's suit and it said it would appeal the decision.

Yesterday's ruling applies only to compensatory damages. The jury still has to decide whether to order punitive damages against the firm. Perelman has requested punitive damages of more than $2 billion.

Jim Zarroli, NPR News.

MONTAGNE: This is MORNING EDITION from NPR News. I'm Renee Montagne.

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