Bloomberg News

Morgan Stanley Settles Washington, Abu Dhabi Investor Suits (1)

April 26, 2013

Morgan Stanley (MS:US) said it settled suits brought by investors in two structured investment vehicles called Cheyne and Rhinebridge,

The investors, led by Abu Dhabi Commercial Bank (ADCB) and King County, Washington, also agreed to drop their claims against Moody’s Investors Service Inc. and Standard & Poor’s, the world’s largest provider of credit ratings owned by New York- based McGraw-Hill Cos. (MHP:US), the investors said in a notice filed in U.S. District Court in Manhattan today.

The plaintiffs claimed the defendants gave the vehicles inflated ratings in two separate suits filed in federal court in Manhattan in 2008 and 2009. The rating companies worked with Morgan Stanley to structure the notes, and their compensation was based on the notes receiving the desired ratings, the plaintiffs claimed.

The investors claimed Morgan Stanley was negligent in conveying ratings that it should have known were inaccurate.

A trial in the Abu Dhabi case had been scheduled to begin before U.S. District Judge Shira Scheindlin on May 6, court records show.

“We’re pleased to have settled these cases,” said Mark Lake, a spokesman for Morgan Stanley. Lake declined to provide any details of the settlements.

“McGraw-Hill has settled the Abu Dhabi and King County cases without any admission of liability or wrongdoing,” Jason Feuchtwanger, a spokesman for McGraw Hill said. “The terms of the settlement are confidential.”

Michael Adler, a Moody’s spokesman, didn’t immediately comment on the settlement.

Samuel Rudman, who represents the investors in both suits, didn’t immediately return a call seeking comment on the settlement.

The cases are King County, Washington v. Morgan Stanley, 09-cv-08387; Abu Dhabi Commercial Bank v. Morgan Stanley & Co., 08-cv-07508, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Peter Blumberg at pblumberg1@bloomberg.net


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