Now in Legal Rebels:
Posted Sep 27, 2007 05:16 pm CDT
After the 9/11 terrorist attacks, Morgan Stanley said it couldn’t produce a number of e-mails in arbitration cases because they had been destroyed along with the company’s New York City computer servers. But in fact the brokerage reportedly had the e-mails all along on backup files.
Now Morgan Stanley has agreed to pay $12.5 million to resolve the issue, although it hasn’t admitted wrongdoing, reports Reuters. Of that amount, $9.5 million will be paid into a fund for thousands of arbitration claimants, and $3 million will be paid as a fine to the Financial Industry Regulatory Authority.
“According to FINRA documents, Morgan Stanley falsely maintained to arbitration claimants and regulators until March 2005 that it had no e-mails predating October 2001,” writes Reuters. “But, according to the documents, Morgan Stanley had not prior to March 2005 searched the restored e-mails, and until that date destroyed millions of the restored e-mails by overwriting backup files and letting users delete them on their own.”
Early last year, Morgan Stanley agreed to pay $15 million to settle a similar case concerning e-mails that it reportedly told the Securities and Exchange Commission had been destroyed when in fact backups were available, Reuters reports.
A brokerage spokesman says the company is pleased to resolve the latest e-mail issue but declined further comment.