Perelman vs Morgan -
Morgan Stanley Must Pay $1.45 BillionTo
May 19, 2005 / Morgan Stanley must pay
billionaire financier Ron Perelman $1.45 billion in damages,
awarded by a jury that said it found clear evidence the
investment firm acted fraudulently in Perelman's 1998 sale
of his Coleman camping gear company to Sunbeam
The jury in West Palm Beach, Fla.,
deliberated for nearly four hours Wednesday before deciding
on $850 million in punitive damages. On Monday, the same
jury awarded Perelman compensatory damages of $604.3
"This should send a clear message to
Morgan Stanley about what constitutes professional and
ethical behavior," said Perelman's company, Coleman (Parent)
Perelman had sought as much as $1.8
billion in punitive damages, the maximum allowed. Florida
law limits punitive damages to triple the amount of
Morgan Stanley said that it planned to
appeal and that the verdict would not impede its business.
The firm's attorneys contended that they were denied a fair
trial because Judge Elizabeth Maass ruled that Morgan
Stanley helped Sunbeam, an investment banking client,
defraud investors because it failed to turn over evidence in
As a result, Perelman had to prove at
trial only that he relied on fraudulent statements provided
by Morgan Stanley when deciding to sell his controlling
stake in the camping company.
In a statement, Morgan Stanley Chief
Executive Philip J. Purcell said the court "has done a great
injustice to the employees and shareholders of Morgan
"We will fight to have this decision
overturned, and we fully expect to prevail," Purcell said.
"Morgan Stanley is financially strong, and this latest
development, while disappointing, will not impede our
ability to serve our clients and grow our
Sunbeam filed for bankruptcy protection
in 2001 after its financial troubles were discovered, and
Perelman alleged that 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 said 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 Wednesday that Morgan Stanley
kept hidden as many as 60 million pages of potential
evidence. That was the basis for Maass'
"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
Morgan Stanley said 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
Hansen said Perelman was not a
vulnerable victim in the case but was a sophisticated
investor with "an army of advisors."
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