NASD Accuses Morgan Stanley Of Failing To Hand Over Emails And Blaming 9/11

The NASD says that securities giant Morgan Stanley lied when it said that millions of key email messages requested by plaintiffs and investigators in numerous proceedings against the company had been destroyed during the September 11 terrorist attack in 2001.

According to NASD head of enforcement and executive vice president James Shorris, thousands of cases were affected by this deliberate lie. “The firm made the claim they didn’t know the e-mail was restored, but everyone who came back to work on Sept. 17 turned on their computer, and the e-mail was there.”

The allegations were brought forth by the NASD late December in a disciplinary complaint. Pending an NASD hearing, remedies could include censure, a fine, disgorgement of gains associated with violations, a suspension or bar from securities industries, and payment of restitution.

While Morgan Stanley has not responded to the complaint, it has told the media that it did not interfered in anyway whatsoever with the NASD’s review and that the September 11 attacks on the World Trade Center did in fact destroy its archives and email servers. Morgan Stanley must file its challenge to the complaint soon. The securities firm is entitled to file pretrial motions and conduct discovery.

In 2005, Morgan Stanley was ordered to pay a $1.5 billion judgment for neglecting to hand over backups of digital documents (Coleman Holdings Inc. v. Morgan Stanley & Co., No. CA 03-5045 AI). Last year, Morgan Stanley agreed to pay the U.S. Securities and Exchange Commission $15 million to settle claims that email mishandling had taken place.

Because of the issues related to electronic discovery spoliation, many companies are now creating detailed inventories of their digital files in the event that they are faced with a preservation order or a lawsuit. The Federal Rules of Civil Procedure has added new amendments to clarify preservation issues.

As Shepherd Smith Edwards & Kantas LTD LLP, Our experienced team is devoted only to assisting investors nationwide to recover losses caused by inappropriate actions of stockbrokers and their firms. Contact Shepherd Smith Edwards & Kantas LTD LLP to schedule a free consultation.

More Trouble for Morgan Stanley, ABA.net, January 5, 2007

Related Web Resources:

Federal Rules of Civil Procedure, Cornell Law School
Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co. Inc., 2005 Extra LEXIS 94 (Fla. Cir. Ct. Mar. 23, 2005), Case Summaries, Lexis-Nexis