Institutional Investors Sue Morgan Stanley, Alleging Company's Compensation and Bonus Payouts were Improper
Complaint Names Chairman John J. Mack, President and CEO James P. Gorman, Company board members and executive officers; Morgan Stanley's 2009 compensation and bonuses attributable to government bailout and not employee performance or skill
NEW YORK, Feb. 11 /PRNewswire/ -- Two U.S. Pension funds have filed a lawsuit against certain present and former officers and directors of Morgan Stanley, alleging that the Company's Board of directors breached their fiduciary duties in allocating over 62 percent of the Company's net revenue in 2009 as compensation for employees, and that certain incentive payments made by the Company in 2006 and 2007 should be repaid because they were based on financial results that were later proven to have been worthless and illusory, and ultimately contributed to the near-collapse of the Company.
The suit was brought in the Supreme Court of the State of New York by the Security Police and Fire Professionals of America Retirement Fund and the Central Laborers' Pension Fund. The plaintiffs accuse Morgan Stanley's board of breaches of fiduciary duties and unjust enrichment for failing to administer the company's compensation plans in the best interests of the company and its shareholders for the years 2006, 2007 and 2009.
The lawsuit was filed by leading shareholder and corporate governance law firm Grant & Eisenhofer.
According to the complaint, in spite of its poor performance in 2009, where total income from continuing operations was only $1.15 billion, the Company proposed that $14.4 billion, or 62 percent of net revenues would be used for compensation and bonuses. Furthermore, Morgan Stanley's 2009 performance is attributable to the assistance and intervention of the federal government. In recent weeks the government and public officials have harshly criticized the banking industry for their outrageous bonus packages.
In 2009, Morgan Stanley received $10 billion from the federal government through the emergency Troubled Asset Relief Program (TARP), and an additional $1.5 billion through a payment from embattled insurer AIG that was funded with taxpayer money. Morgan Stanley's current Chairman and former CEO has acknowledged that the multi-trillion dollar bailout of the financial industry by the American Taxpayer rescued not only the Company but the entire financial industry from near ruin.
Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides its products and services to customers, including corporations, governments, financial institutions and individuals. The company operates in three business segments: Institutional Securities, Global Wealth Management Group, and Asset Management.
Note: Grant & Eisenhofer P.A. represents institutional investors and shareholders internationally in securities class actions, corporate governance actions and derivative litigation. The firm has recovered more than $12 billion for investors in the last five years, including a $3.2 billion settlement from Tyco International, a $448 million settlement from Global Crossing and a $400 million settlement from Marsh & McLennan. G&E has also been selected among The National Law Journal's "Plaintiffs' Hot List" for the past five years, and is a member of its Hall of Fame. RiskMetrics Group named Grant & Eisenhofer the Number 1 law firm in average shareholder recoveries in securities class actions in 2007 and 2008. For more information, visit www.gelaw.com.
SOURCE Grant & Eisenhofer P.A.
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