Morgan Stanley will pay $41.5 million to settle two class action lawsuits charging that mutual funds owned by the brokerage firm defrauded investors by overvaluing their assets. The company also faces a Florida suit filed by investor Ronald Perelman.
Van Kampen Prime Rate Income Trust, a Morgan Stanley subsidiary, agreed to pay $31.5 million, while Morgan Stanley will pay $10 million to settle a suit involving the Morgan Stanley Senior Loan Fund.
Morgan Stanley has denied it defrauded investors and did not admit any wrongdoing as part of the settlements.
Each settlement sum represents the difference between what investors paid for their shares and what they would have paid if the shares had been fairly priced, said Paul Geller, one of the lawyers handling the cases.
U.S. District Judge Richard Howell in Manhattan gave preliminary approval to the Morgan Stanley settlement and is expected to give final approval May 25. U.S. District Judge William Hart in Chicago was advised Wednesday of the settlement agreement in the Van Kampen suit.
Meanwhile, in Florida, a jury is hearing arguments in a lawsuit filed by an investor accusing Morgan Stanley of giving a stamp of approval to a company and hiding its financial woes in pursuit of big investment-banking fees.
Ronald Perelman told a Florida jury in West Palm Beach that, on the advice of Morgan Stanley, he sold his stake in Coleman Inc. to appliance firm sunbeam, which later became engulfed in an accounting scandal, thereby driving down the value of his stock, The Wall Street Journal reported.
We did not expect Morgan Stanley to lie to us and tell us untruths, said Perelman, who sold his stake to Sunbeam for approximately $1.5 billion.