Worker’s Pension Fund Files Shareholder Lawsuit Against Morgan Stanley
Contact: Michael Khoo, Kawana Lloyd,Alex Howe: 202 822-5200
Tuesday, July 19, 2005
Case Brought on Behalf of Company and Share Owners; Purcell, Crawford Got Huge Payoffs for Years of Mismanagement
The Central Laborers’ Pension Fund (CLPF), a Taft-Hartley pension fund with assets of one billion, Tuesday filed a derivative lawsuit in federal court against the former and present officers and board members of the troubled financial services firm Morgan Stanley – charging that self-dealing and “grotesque mismanagement” has cost stock owners millions of dollars.
Named in the suit filed by the nation’s leading shareholder litigation firm were Philip J. Purcell, the recently ousted Morgan Stanley Chief Executive Officer, and his co-president Stephen S. Crawford, who between them took cash and benefits worth some $145 million in departure payments compensation authorized by the company’s board. Crawford was paid $32 million to leave a job he held for only three months.
The case was filed in federal court for the Southern District of New York on behalf of the Central Laborers’ Pension Fund.
The suit charges that Morgan Stanley’s former general counsel, Donald Kempf, and outside counsel Kirkland & Ellis were guilty of negligence and malpractice in counseling Morgan Stanley to hide or destroy evidence in several lawsuits which eventually cost the firm more than $1.5 billion.
The suit also names each board member in a case brought by a labor and management pension fund on behalf of itself and nominally on behalf of the corporation, Morgan Stanley, seeking to recover the money paid out to Purcell and Crawford and to implement changes in management and corporate governance.
It charges that the departure of Purcell and Crawford with excessive golden parachutes were part of a years-long pattern of reckless governance by Morgan Stanley’s board of directors and officers, which have crippled the company’s financial performance.
Edward M. Smith, Chairman of the CLPF and a vice president with the Laborers’ International Union of North America who serves as the union’s representative on the jointly administered pension fund said the fund continues to hold more than 7,000 shares of Morgan Stanley stock, which at its peak was valued at $109 per share in 2000 but this year has dipped as low as $30 per share.
“I have a fiduciary obligation to recover, on behalf of the participants and beneficiaries of the pension fund, the money lost because of the misconduct and gross mismanagement of Purcell and Crawford,” Smith said. The suit calls for the payments to Purcell and Crawford to be rescinded.
The fund, domiciled Illinois, provides monthly pension benefits to more than 5,700 retired construction workers and their families and provides benefits for approximately 14,000 active and inactive members of the Laborers’ International Union of North America in the Midwest region.
The suit says Morgan Stanley’s board of directors was dominated by associates of Purcell, brought on to the board after the 1997 merger between Dean Witter and Morgan Stanley, who systematically breached the responsibility to independently oversee the company’s affairs on behalf of stockholders.
Lerach Coughlin Stoia Geller Rudman & Robbins LLP is a 150-lawyer firm with offices in San Diego, Los Angles, San Francisco, New York, Boca Raton, Washington, D.C., Philadelphia, Houston and Seattle. It engages in a broad range of shareholder, consumer, health care, insurance and other class action litigation and has been responsible for more than $25 billion in recoveries.