Perelman Wins $1.4B Against Morgan Stanley
biz.yahoo.com
Thursday May 19, 6:47 am ET
By Jill Barton, AP Business Writer
Perelman Wins $1.4 Billion in Damages in Lawsuit Against Morgan Stanley Over Sale to Sunbeam
WEST PALM BEACH, Fla. (AP) -- Billionaire financier Ron Perelman added $1.45 billion to his bank accounts this week, at least on paper, as a jury decided that investment firm Morgan Stanley acted fraudulently in Perelman's 1998 sale of his Coleman camping equipment company to Sunbeam Corp.
The Florida jury Wednesday awarded $850 million in punitive damages, atop the $604.3 million it awarded him in compensatory damages on Monday.
Perelman may not wind up with the full amount, however.
Morgan Stanley plans to appeal and pledged that the verdict would not impede its business.
In its April 6 quarterly earnings report filed with the Securities and Exchange Commission, Morgan Stanley said it had $360 million in reserve to pay for legal damages in the case. While not nearly enough to cover the judgments, Wall Street analysts say the case likely will be settled.
Perelman's attorney, Jack Scarola, agreed.
"Clearly, with numbers in this range, there is a very strong interest by Morgan Stanley to get this case resolved quickly," he said, noting that Morgan Stanley could be paying up to $250,000 a day in interest payments while appealing.
Perelman, the chairman of cosmetics company Revlon Inc., had sought up to $1.8 billion in punitive damages, limited to that by Florida law that sets the maximum at triple the amount of compensatory damages.
His company, Coleman (Parent) Holdings, said the jury's rulings "should send a clear message to Morgan Stanley about what constitutes professional and ethical behavior."
The firm's attorneys argued they were denied a fair trial because Judge Elizabeth Maass ruled early on that Morgan Stanley helped Sunbeam, an investment banking client, defraud investors because it failed to turn over evidence in the case.
In a statement, Morgan Stanley CEO Philip J. Purcell said the court "has done a great injustice to the employees and shareholders of Morgan Stanley."
Sunbeam filed for bankruptcy protection in 2001 after its financial troubles were discovered, and Perelman alleged he had lost millions because 14.1 million shares of Sunbeam stock he received in the deal plunged in value.
Morgan Stanley also cast itself as a victim of the Sunbeam fraud, saying it lost $300 million when the company collapsed.
Perelman claimed Morgan Stanley deceived him because it stood to earn $40 million from Sunbeam's acquisition of Coleman. His attorney, Jack Scarola, told jurors in closing arguments on Wednesday that Morgan Stanley kept hidden up to 60 million pages of potential evidence, which was the basis for Maass' ruling.
"Morgan Stanley hid evidence. Morgan Stanley destroyed evidence. Morgan Stanley filed false certifications. Morgan Stanley lied to the court and sought in every way possible to cover up its wrongdoing," Scarola said.
Morgan Stanley contends Perelman benefited from the deal because he pocketed $160 million in cash along with the stock shares, while Sunbeam absorbed $519 million in Coleman's debt.
Morgan Stanley attorney Mark Hansen urged jurors against a punitive damages award. He said the $604.3 million compensatory damages verdict was already a "severe blow" that "devastated" the firm.
Hansen said Perelman was not a vulnerable victim in the case but was a sophisticated investor with "an army of advisers."
But Scarola argued that Morgan Stanley took advantage of Perelman because he trusted the firm after using it in previous business deals. |
