Morgan Stanley Securities Litigation
Joel Stratte-Mcclure v. Morgan Stanley, et al, CV08-00963-AG
This case is pending before Judge Deborah Batts in the U.S. District Court for the Southern District of New York (hereafter, "Morgan Stanley Securities Class Action") and is brought on behalf of persons or entities who purchased or otherwise acquired Morgan Stanley common stock between June 20, 2007 and December 19, 2007 (the "Class Period"). The court-appointed lead plaintiff, State Boston Retirement System, along with named plaintiff Fjärde AP-Fonden (Fourth Swedish National Pension Fund), filed the Amended Class Action Complaint on November 24, 2008 (the "Complaint"). Kessler Topaz serves as Co-Lead Counsel for Lead Plaintiff and for the putative class.
The Complaint brings claims against Morgan Stanley, and certain of its current and former senior officers, including CEO John Mack, former co-President Zoe Cruz, and CFO's David Sidwell and T. Colm Kelleher, under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and Rule 10b-5, promulgated thereunder, 17 C.F.R. § 240.10b-5.
The gravaman of the Complaint is that the Defendants inflated the price of Morgan's common stock during the Class Period by knowingly and/or recklessly concealing Morgan's exposure to losses due, in large part, to subprime trading positions that one of Morgan's key proprietary trading group's had maintained during the Class Period. These trading positions were based on bets on the movement of U.S. subprime securities and as losses mounted on these positions, the Defendants misled the markets into believing that Morgan was adequately hedged against the collapse of U.S. subprime securities, when in fact, they knew that the Company stood to lose billions based on trading positions that had soured. Indeed, during the Class Period, Morgan specifically touted its lack of exposure to U.S. subprime losses, securing a ratings upgrade from Standard & Poor's and buy ratings from analysts as a consequence. Morgan's misleading disclosures and omissions about its potential subprime losses were in the face of explicit requests from the SEC that the Company provide investors with complete disclosure regarding the Company's exposure to U.S. subprime securities. On December 19, 2007, contrary to its previous representations to investors, Morgan Stanley revealed that it had suffered $9.4 billion in losses due to write-down s of previously undisclosed exposures to U.S. subprime securities. In response to these disclosures, Morgan's stock price collapsed, resulting in Class Members' losses.
The Defendants filed motions to dismiss the Complaint in the spring of 2009 and briefing on these motions concluded in the summer of 2009. The briefs are sub judice before Judge Batts.