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Damages for Perelman more than $1-billion

By wire services
Published May 19, 2005

WEST PALM BEACH - Morgan Stanley must pay billionaire financier Ron Perelman more than $1.4-billion in damages, awarded by a jury that said it found clear evidence the investment firm acted fraudulently in Perelman's 1998 sale of his Coleman camping gear company to Sunbeam Corp.

The jury deliberated for nearly four hours Wednesday before deciding on $850-million in punitive damages. On Monday, the same jury awarded Perelman compensatory damages of $604.3-million.

Perelman, the Revlon cosmetics chief, had sought $1.8-billion in punitive damages. Florida law limited jurors to that amount, or triple the amount of compensatory damages.

The combined verdict of $1.45-billion is slightly more than the $1.4-billion in profit that the firm reported in its fiscal first quarter, which ended in February.

"This award should send a clear message to Morgan Stanley about what constitutes professional and ethical behavior," Perelman's company said in a statement.

In a statement, Morgan Stanley CEO Philip J. Purcell said the court "has done a great injustice to the employees and shareholders of Morgan Stanley. "We will fight to have this decision overturned and we fully expect to prevail," Purcell said.

Sunbeam filed for bankruptcy protection in 2001 after its financial troubles were discovered, and Perelman alleged he had lost millions because Sunbeam stock he received in the deal plunged in value.

U.S. District Judge Elizabeth Maass ruled before the trial began that Morgan Stanley helped Sunbeam, an investment banking client, defraud investors. The ruling was a default judgment against Morgan Stanley for failure to make available reams of documents.

As a result, Perelman had to prove only that he relied on the fraudulent statements when deciding to sell Coleman.

"Morgan Stanley hid evidence, Morgan Stanley destroyed evidence, Morgan Stanley filed false certifications, Morgan Stanley lied to the court and Morgan Stanley sought in every way possible to cover up its wrongdoing," Perelman's attorney, Jack Scarola, said.

Perelman accepted 14.1-million shares of Sunbeam stock in the buyout.

Morgan Stanley contends Perelman benefited from the deal because he pocketed $160-million in cash along with the stock, while Sunbeam absorbed $519-million in Coleman's debt.

Morgan Stanley also cast itself as a victim of the Sunbeam fraud, saying it lost $300-million when the company collapsed, a fact the jury was not allowed to hear.

[Last modified May 19, 2005, 00:43:18]