Represented by the prominent class-action lawyer William Lerach, a small US pension fund has filed a lawsuit against Morgan Stanley's board of directors, citing years of "gross mismanagement" and the awarding of inappropriately large severance packages to two former executives.
The suit has been brought in the name of The Central Laborers’ Pension Fund; a small Illinois company that provides pension benefits to retired construction workers and owns 7,000 shares in Morgan Stanley.
The bank’s former chief executive, Philip Purcell, and co-president Stephen Crawford were both named in the lawsuit, as were the Morgan Stanley lawyers.
William Lerach said he hopes to recover some of the $113 million payout in cash and stock awarded to Mr Purcell when he was replaced by John Mack on June 30. Purcell was ousted after a long battle in which former executives at Morgan Stanley accused him of mismanagement.
Lerach also hopes to see the return of the $32 million Stephen Crawford received. Crawford, an ally and protégé of Phillip Purcell, served as co-president from March until last week when he decided to leave in order to take advantage of the golden handshake that would have vanished, had he stayed beyond August 2005.
Lerach said that the Central Laborers’ Pension Fund is just unwilling to sit idly by and watch this most recent example of wretched corporate excess.
A spokesman for Morgan Stanley said the investment bank had yet to see the pension fund’s claims and declined to comment.