WEST PALM BEACH, Fla. – A Florida jury Wednesday ordered Morgan Stanley (search) to pay $850 million in punitive damages on top of $604 million it has already awarded billionaire investor Ronald Perelman (search) for a business deal that went wrong.
The six-man, three-woman jury in West Palm Beach, Fla., took about four hours to reach its unanimous decision to add a punishment to an earlier ruling that Perelman should be compensated for what the court viewed as a conspiracy to defraud the businessman.
The Wall Street bank repeated its intention to appeal the verdict, as well as the punitive damages award that brought the total it was ordered to pay to more than $1.45 billion.
"This court has done a great injustice to the employees and shareholders of Morgan Stanley," the investment bank's chief executive, Philip Purcell, said in a statement. "We will fight to have this decision overturned and we fully expect to prevail."
Morgan Stanley (MWD) shares fell 37 cents, or 0.7 percent, to $48.55 in trading after the bell, when it had closed at $48.92 on the New York Stock Exchange on Wednesday.
In a closing statement at the end of the punitive-damages phase of the trial, a Morgan Stanley lawyer had urged the jury not to heed attempts by Perelman's attorneys to "stoke your anger" and undermine the bank as a bulwark of the U.S. economy.
"What would be the purpose of severely hurting one of our two top investment banks, a key engine of our economy?" lawyer Mark Hansen said in the court.
"That's self-destruction," Hansen said, adding Morgan Stanley had played a small part in the deception undertaken by appliance maker Sunbeam Corp. (search) when it bought Perelman's camping equipment company Coleman Co. (search) in 1998.
Perelman, chairman of cosmetics company Revlon Inc. (REV), sold Coleman for $1.5 billion in cash, assumed debt and Sunbeam stock but the shares soon became worthless when it was revealed that Sunbeam's accounts were based on large-scale fraud. Sunbeam filed for bankruptcy in 2001.
Hansen said Perelman had also been fully compensated for any money he lost when the jury Monday awarded $604.3 million in compensatory damages.
Perelman had sought $2.7 billion.
Morgan Stanley had already said it plans to appeal the judgment on the grounds that Circuit Court Judge Elizabeth Maass was biased. Wall Street analysts expect the real legal battle to take place during the appeals process.
Hansen said Morgan Stanley's failure to provide the plaintiffs with e-mails -- a failure that led Maass to punish the bank with a pretrial ruling that it had conspired with Sunbeam to defraud Coleman Co. -- was not a sign it wanted to conceal evidence but the product of mistakes that can afflict large and unwieldy organizations.
Perelman's attorney, Jack Scarola, however, asked the jury to award between $1.2 billion and $1.8 billion in punitive damages. He said in his closing statement that Morgan Stanley played a central role as Sunbeam's advisers in wooing Perelman and in using Sunbeam's inflated share price as currency for a buyout of Coleman.
"What a punitive damages verdict in this case will say to America is that those of you who believe that the world of business should be governed by the law of the jungle are wrong, those who believe that in the world of business might makes right are wrong," Scarola said.
He listed a series of occasions on which Morgan Stanley executives had defied a court order to search the bank's e-mail databases and backup tapes for documents relating to Sunbeam as indications the bank had something to hide.
"Morgan Stanley sought in every way possible to cover up its wrongdoing. Our suggestion is that Morgan Stanley be punished by extracting from it a sum of money that will hurt but not bankrupt, a sum of money that is in proportion to the hurt," he said.