US - Two US pension funds have sued Morgan Stanley accusing the bank's board of breaches of fiduciary duty and unjust enrichment for failing to administer its compensation plans in the best interests of the company and its shareholders.
The Security Police and Fire Professionals of America Retirement Fund (SPFPARF) and the Central Laborers' Pension Fund (CLPF) allege that, in spite of its poor performance in 2009, where total income from continuing operations was $1.1bn, Morgan Stanley proposed that $14.4bn of net revenues would be used for compensation and bonuses.
The complaint also alleges certain incentive payments made by the company in 2006 and 2007 should be repaid because "they were based on financial results that were later proven to have been worthless and illusory, and ultimately contributed to the near-collapse of the bank".
Law firm Grant & Eisenhofer, which represents the two pension funds, said in 2009 Morgan Stanley received $10bn from the federal government through the emergency Troubled Asset Relief Program and an additional $1.5bn through a payment from embattled insurer American International Group that was funded with taxpayer money.
The suit was brought in the Supreme Court of the State of New York.
Morgan Stanley did not immediately return an email seeking comment.
In December last year SPFPARF and CLPF, represented by the same law firm, filed a complaint against Goldman Sachs alleging the bank breached its fiduciary duties by allowing an expected US$22bn in 2009 bonuses. In January, the two pension funds asked the court to schedule an expedited hearing on their request to block the payments. (Global Pensions, January 13, 2010)
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