Morgan Stanley Fined Over Sept. 11 Lost E-Mail Claim

By David Scheer

Sept. 27 (Bloomberg) -- Morgan Stanley, the second-largest securities firm, will pay $12.5 million to settle regulatory claims it wrongly withheld e-mails in arbitration cases by saying they were lost in the Sept. 11 attacks, the company's third sanction since 2002 for mishandling the records.

The firm's Morgan Stanley DW subsidiary failed on ``numerous occasions'' to produce e-mails for plaintiffs and regulators, the Financial Industry Regulatory Authority said in a statement today. The accord is the first of its kind, providing $9.5 million to claimants affected by the lapses, said Finra, the Washington-based brokerage regulator.

The government already sanctioned Morgan Stanley twice for mishandling electronic messages under former Chief Executive Officer Philip Purcell. Last year, it paid a record $15 million to settle a Securities and Exchange Commission probe of deficient e-mail preservation. In 2002, the SEC and other regulators faulted the New York-based firm for destroying e-mails and backup tapes.

``Hiding behind the events of Sept. 11 to avoid litigation obligations is unseemly,'' said Steven Caruso, president of the Public Investors Arbitration Bar Association and a partner at the New York office of Maddox Hargett & Caruso PC. ``This sets a new standard for how low a firm will go to take advantage of their clients.''

The settlement documents don't accuse the firm of withholding the e-mails intentionally, according to Finra spokesman Herb Perone.

`Legacy Legal Matters'

``That allegation is false. The minute that we discovered that we had these e-mails we notified regulators and began turning them over in arbitration discovery,'' said Jim Wiggins, a spokesman for Morgan Stanley. The company didn't admit or deny wrongdoing under the settlement.

Current CEO John Mack made improving the firm's standing with securities regulators a priority when he took the helm in June 2005. Today's accord resolves a claim filed in December by Finra's predecessor, NASD.

``We are pleased to have reached an agreement with Finra to resolve these legacy legal matters and put them behind the firm,'' Morgan Stanley said in an e-mailed statement.

Days after the terrorist attacks destroyed Morgan Stanley's 12 e-mail servers in New York, the company recovered millions of messages from backup tapes, Finra said. Additional data were stored on networks and individual computers throughout the firm.

Still, Morgan Stanley ``routinely'' claimed all e-mails before October 2001 were gone, the regulator said. The company later allowed much of the data to be erased.

Payments to Customers

``The integrity of our process demands that brokerage firms comply with their obligations to search diligently for'' e-mails and turn them over ``in a timely way,'' said Susan Merrill, Finra's enforcement chief.

The accord allows customers whose arbitration claims may have been affected to automatically receive payments of as much as $5,000. Many clients also have the right to obtain pre-Sept. 11 e-mails. Those people may then ask the fund's administrator for more money, up to $20,000, based on the facts of their case.

Accepting payments doesn't prevent clients from pressing their original claims in other venues, such as court, Finra's Perone said.

Finra was formed this year through the merger of the NASD brokerage regulator and the New York Stock Exchange's enforcement arm.

Morgan Stanley's shares rose 2.5 percent to $64.55 in composite trading on the New York Stock Exchange. The stock has slipped 4.5 percent this year.

SHARE:

Email This

Latest Politics/Corruption
- Budget Crisis? LA unveils $578Million school, costliest in the nation
- It's Just Another Crisis
- Las Vegas Considers Hula-Hoop Ban
- Can Lawyers Design Computer Chips?
- UN tries to resurrect climate con: New taxes needed for climate fund -- $100 billion a year; Carbon taxes, add-ons to int'l air fares; levy on cross-border money movements
- Material girl Michelle Obama is a modern-day Marie Antoinette on a glitzy Spanish vacation
- Elena Kagan Confirmed To Supreme Court
- Obama Drops 2009 Pledge to Withdraw Combat Troops from Iraq

No Comments Posted

Add Comment

Add Comment

Name

Comment

* No HTML

Verification *

Please Enter the Verification Code Seen Below

PLEASE NOTE

Please read our About Page, our Disclaimer, and our Comments Policy.

Please note: InformationLiberation is neither liberal or conservative. When one takes the time to research the "liberal elite," whom the conservatives oppose, and the "conservative elite," whom the liberals oppose, one finds both "elite" are one and the same. "Liberal" or "Conservative" is not a substantive choice, it is only the carefully crafted illusion of a choice, for both parties come together when they are instructed to.

"The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson."
A letter written by FDR to Colonel House, November 21st, 1933

"Fifty men have run America, and that's a high figure."
Joseph Kennedy, father of JFK, in the July 26th, 1936 issue of The New York Times.

If you care to know who runs the world you live in, view these films. If you care not then I leave you with this quote to ponder:

"There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution."
Aldous Huxley, Tavistock Group, California Medical School, 1961 Audio - Transcript

FAIR USE NOTICE

This site contains copyrighted material the use of which in some cases has not been specifically authorized by the copyright owner. Such material is made available for the purposes of news reporting, education, research, comment, and criticism, which constitutes a 'fair use' of such copyrighted material in accordance with Title 17 U.S.C. Section 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It is our policy to respond to notices of alleged infringement that comply with the Digital Millennium Copyright Act (found at the U.S. Copyright Office) and other applicable intellectual property laws. It is our policy to remove material from public view that we believe in good faith to be copyrighted material that has been illegally copied and distributed by any of our members or users.

About Us - Disclaimer
"Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing ever happened..." - Winston Churchill