The board of the Chattanooga General Pension Fund agreed to a $5 million settlement with Morgan Stanley DW in a matter arising out of alleged breach of fiduciary duty for consulting work relating to William Keith Phillips, a consultant.
The $180 million pension fund had requested arbitration with the National Association of Securities Dealers. The fund will withdraw the arbitration, which hadn't started, as part of the settlement reached earlier this month.
Mr. Phillips was a consultant to the fund working at PaineWebber, UBS PaineWebber and then at Morgan Stanley, where he currently works. PaineWebber and UBS PaineWebber were consultants to the fund from 1996 to 2000, and Morgan Stanley was consultant until 2003. Morgan Stanley and Mr. Phillips denied liability and all allegations. The fund agreed to a separate $675,000 settlement with UBS Financial Services in December. UBS also denied liability and the allegations.
Michael A. McMahan, a city attorney, said a confidentiality agreement precludes the parties from speaking about the settlements or matters arising from them.
The Chattanooga fund hired Benchmark Financial Services to examine the consulting work in 2004. David Eichenthal, then Chattanooga city finance officer and chairman of the fund's board, alleged the consulting work of UBS PaineWebber and Morgan Stanley breached fiduciary relationship with the fund by "putting their financial interests ahead of the interests of the plan," according to a statement on the city's website.
"We entered into a confidentiality settlement agreement in December and this matter is resolved," said Doug Morris, UBS spokesman.
John Franklin, Morgan Stanley spokesman, said: "We take our obligations to our clients seriously and are pleased to have resolved this matter."
Ron Harris, an attorney for Mr. Phillips, said his client "has been advised of the confidentiality provision that prevents him from commenting."
The board replaced Morgan Stanley with Consulting Services Group.