Morgan Stanley (NYSE:MS) skewers Skowron, court rules $10.2M in restitution
A U.S court ruled that, Morgan Stanley (NYSE:MS) is entitled to $10.2M in restitution from Joseph Skowron, “Chip”. He was formerly a hedge-fund manager who has been serving a 5-year prison sentence for insider trading. The 44- year old Skowron asked Manhattan’s, United States Court of appeals to overturn the restitution order that a judge had imposed after he had pleaded guilty of conspiring to obstruct justice and commit a securities fraud. Denise Cote, a U.S District Judge said that Skowron owed Morgan Stanley, 20% of his salary from 2007-2010, which amounted to$6.4M. She ruled that he is also liable to pay $3.8M in legal fees.
A manager goes awry
Today, the appellate court upheld Cote’s ruling that this compensation is actually bank property as Skowron had failed to provide honest services for which he had been compensated by MS. He had been a manager at the bank’ FrontPoint Partners LLC, till April 2011, when he had been charged. The charge was that he had been using a lot of insider information to avoid losses of $30M. In the opinion, the 3-judge appellate panel wrote that Skowron had deprived the bank of his honest services and he had participated in a bribery scheme for obtaining inside information.
Fraud and more
According to the panel, MS also deserves to be paid for the legal fees that stemmed from an SEC investigation. The bank had paid $33M to settle with the Securities and Exchange Commission over the illegal trades that Skowron had indulged in. At the time of the sentence, Skowron’s net worth was $22M.
On 31 Oct, Morgan Stanley had sued Skowron, and sought the $33 million that Cote had said that it was not really entitled to. This was in addition to the entire $32M that it paid Skowron from 2007- 2010. The bank pegged Skowron as a faithless servant who had lied compulsively to continue receiving payment from the bank.