Tuesday, December 29, 2009
Morgan Stanley is being sued for fraud
One of the many investors scalped by MS in the runup to the Bush Depression has put two and two together and is suing the investment bank, charging that they, in cooperation with Moody's deliberately sold crap that they were betting would fail.
The lawsuit filed December 24 in Manhattan federal court said Morgan Stanley collaborated with credit rating agencies Moody's Investors Service and Standard & Poor's to obtain "triple-A" ratings for notes marketed in 2007 as part of a collateralized debt obligation (CDO) known as Libertas.We wish great success to the plaintiffs and can oly wish it were a criminal complaint.
According to the complaint, the CDO was backed by low-quality assets, including securities issued by subprime lenders New Century Financial Corp, which quickly went bankrupt, and Option One Mortgage Corp, then owned by H&R Block Inc (HRB.N).
The complaint alleged Morgan Stanley knew the CDO's assets were far riskier than the ratings suggested, but was "highly motivated to defraud investors" with pristine ratings because it was simultaneously "shorting" almost all the assets. This was a bet that their value would fall, which they did in 2008.
"Morgan Stanley was betting the entire investment it was promoting would fail," according to the complaint, which was made available on Tuesday. "The firm achieved its objective."
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You know this'll get thrown out. Most federal courts have a record of siding with business over individuals.
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