Billionaire puts Morgan Stanley in the dock

MORGAN Stanley faces a new headache today as the jury starts to hear evidence in a $2.7bn (£1.43bn) civil fraud case in Florida brought by a billionaire investor.

The investment bank is currently struggling with sniping from a group of dissident shareholders for a change of chief executive to reverse its declining fortunes.

Ronald Perelman is suing the bank, claiming it committed fraud by hiding accounting mayhem at appliances company Sunbeam. In opening arguments the bank said Perelman had his own bevy of lawyers and advisers at the time of the deal in question and it was ludicrous for him to say he relied on Sunbeam's advisers, Morgan Stanley, for information when making the decision.

The bank advised Sunbeam when Perelman sold it a camping company for $1.5m, including $680m in shares which became worthless when Sunbeam went bankrupt.

Perelman is claiming $2bn punitive damages as well as his losses. Before the jury was seated the judge ruled that Morgan Stanley was a party to the fraud because it failed to hand over crucial emails to the plaintiffs.

Morgan Stanley was one of several banks fined $8.4m in 2002 over deleted emails. Now the bank says it has received a regulator's notice warning of potential enforcement action for 'purported violations' of a prior order aimed at preventing the destruction of internal company records, including emails.