Company: Morgan Stanley
Morgan Stanley faces $850m payout
|18th May 2005
|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."