Morgan Settles With Parmalat

Morgan Stanley has agreed to an out-of-court settlement with Parmalat, becoming the first investment bank to reach a legal deal with the Italian dairy group, the companies said Thursday.

The agreement, which could pave the way for similar deals with other lenders, settles “all existing potential actions and claims, including compensation of damages,” the two sides said in a joint statement.

Morgan Stanley will pay 155 million euros, or $187 million as of Thursday’s exchange rate, to settle charges that it knew Parmalat was failing even as it helped the company raise billions of dollars in capital in the U.S. and other markets.

The investment bank also released Milan, Italy-based Parmalat from any counterclaims on losses it took as part of its advisory and underwriting role.

“Morgan Stanley continues to believe that the firm and its employees’ conduct was proper and this settlement does not constitute any admission of liability,” said Carlos Melville, a Morgan Stanley spokesman.

Morgan Stanley arranged a $362-million bond issue in June 2003 for the Italian company, six months before the company’s decade-long, $18-billion fraud was uncovered in December 2003.

In February, Parmalat filed a suit over the deal, seeking to recover $177 million plus interest from Morgan Stanley.

Also Thursday, a Florida judge raised the damages awarded against Morgan Stanley to $1.58 billion in a fraud suit brought by billionaire investor Ronald Perelman.

A jury in West Palm Beach, Fla., last month awarded $1.45 billion in compensatory and punitive damages in a lawsuit Perelman brought against the investment bank over its role in advising appliance maker Sunbeam Corp. in its 1998 purchase of Perelman’s camping goods company, Coleman Co.

In a written ruling, Judge Elizabeth Maass awarded Morgan Stanley about $84 million in credits related to past Sunbeam-related payments made by other parties to Perelman. She also awarded about $250 million of interest on the punitive damages.

Together, the rulings increased Perelman’s award by a net $130 million, taking the total to about $1.58 billion.

Morgan Stanley repeated its intention to appeal the judgment. “Today’s ruling does not alter Morgan Stanley’s intention to appeal the original verdict,” Morgan Stanley spokesman Andrew Walton said. “We believe we have multiple grounds on which to appeal and expect to prevail.”