Two pension funds are suing Morgan Stanley as well as certain current and former directors and officers of the company, alleging the financial services giant breached its fiduciary duty through its compensation policies.
The Security Police and Fire Professionals of America Retirement Fund, Roseville, Mich., and the Central Laborers' Pension Fund, Jacksonville, Ill., filed suit Feb. 11 in New York state Supreme Court asking that some incentive payments made in 2006 and 2007 be returned “because they were based on financial results that were later proven to have been worthless and illusory,” according to a news release issued by the funds' law firm, Grant & Eisenhofer.
The Central Laborers' Pension Fund's annuity plan had assets of $94.9 million as of Sept. 30, 2009, according to the fund's website. The Security Police and Fire Professionals Retirement Fund had $5.8 million in assets as of early December.
According to the complaint, the plaintiffs seek to recover “billions in compensation” paid by Morgan Stanley to employees in 2006, 2007 and 2009. The plaintiffs allege that during this period, Morgan Stanley paid $45 billion in compensation while its stock price fell by about two-thirds.
“Defendants' conduct shows that they have scant regard for the interests of … shareholders and that they have instead operated the company principally for the benefit of its employees,” the complaint states.
Both of the funds are Morgan Stanley shareholders, but the size of the holdings couldn't be learned by press time.
Among the defendants are John J. Mack, the current board chairman and former chief executive, and James P. Gorman, a director who succeeded Mr. Mack as CEO in January and who also holds the title of president.
“Morgan Stanley believes this suit is without merit, and we intend to defend ourselves against it,” Erica Platt, a spokeswoman, said in an interview.