WEST PALM BEACH, Fla. — In his second day of testimony, billionaire financier Ron Perelman battled with lawyers for investment firm Morgan Stanley over whether a disastrous business deal was an independent decision on his part or the fault of bad information from Morgan Stanley.

Perelman is suing the firm for $2.7 billion, claiming it intentionally misled him when he sold his controlling stake in Coleman for $1.5 billion to Sunbeam. The deal included Sunbeam stock worth between $450 million and $680 million.

Shortly after the deal closed in March 1998, accounting irregularities at small-appliance maker Sunbeam surfaced and its stock price plunged. Perelman alleges Morgan Stanley knew of the accounting irregularities - which included inflating sales figures by booking sales in the wrong quarter - and misrepresented Sunbeam's financial state in numerous financial documents and discussions.

Lawyers for Morgan Stanley claim any lapse in due diligence was the fault of Perelman's team.

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For the second time, a June 1997 article that appeared in Barron's became a leading point in defense lawyer Mark Hansen's cross-examination. The article, titled "High Noon at Sunbeam," took issue with the company's accounting methods. Perelman testified he had not read the article in the financial weekly and said his advisors had not alerted him to any "red flags" contained in it.

The article asserted that Sunbeam, seller of Mr. Coffee and Oster products, was using "cookie-jar" reserves — a practice that stores cash for use in a later quarter — to make Sunbeam appear more profitable.

Perelman testified the only questionable practices he investigated were in Sunbeam's annual report released on or about March 6, 1998. In the report, Sunbeam recorded what is known as bill-and-hold sales. These resulted from sales of some of its consumer goods to suppliers that wouldn't reach customers until a later quarter. The practice temporarily inflates earnings and paints a rosier financial picture of a company than may be the case.

Perelman claimed he discussed the accounting in the report with his advisors, William Nesbitt and James Maher. After Maher and Nesbitt spoke to representatives from Morgan Stanley, Perelman said, they viewed the early sales as "a positive" because Morgan Stanley assured them they were made to eliminate lapses in inventory, not to artificially inflate sales.

"We were told by Morgan Stanley that [this practice] was going to eliminate out-of-stock goods on the shelves," Perelman said. "We were told by Morgan Stanley that these were legitimate sales."

In a similar stroke, used to paint Perelman as lax in investigating Sunbeam's "red flags," Hansen asked if Perelman's team contacted Sunbeam's customers — stores which sell the products — about the bill-and-hold sales. Perelman maintained he did not contact Sunbeam's customers directly because Sunbeam wouldn't allow it.

"We were prohibited by Sunbeam of going to the customers," Perelman said. "We had to rely on Morgan Stanley that [information regarding the sales] had to be true."

As a result of an earlier ruling by Judge Elizabeth Maass, who instructed the jury to accept, as fact, that Morgan Stanley helped Sunbeam defraud investors, Perelman need only prove that he relied on information provided by Morgan Stanley and that he suffered financial losses because of it to win the case.

Later during cross-examination, Hansen revisited a tantrum thrown by former Sunbeam CEO Al Dunlap as another indication that Perelman ignored warning signs about Sunbeam. Perelman met with Dunlap in 1997 to consider a deal between Coleman and Sunbeam. Perelman testified that he interpreted Dunlap's behavior during the meeting, which included cursing and yelling, as merely an attempt to put on a show.

"Some of the finest executives in the world are characters ... have a persona of being tough, sweet, miserable or cheap," Perelman said. "He had this tough persona. I loved it."

Perelman testified that he trusted Dunlap's management abilities because he had successfully turned around Scott Paper and sold it to Kimberly-Clark, and because of an endorsement by close friend and associate Jimmy Goldsmith.

"I had several yardsticks that I judged Dunlap by," Perelman said. "Jimmy thought a great deal of Dunlap and I thought a great deal of Jimmy."

After addressing questions about why he looked only at public financial documents and trusted Sunbeam's representatives in the deal, instead of performing his own investigation, Perelman said the strategy had worked well for him in the past and he continued to trust this method until the Sunbeam debacle. He used the same process when he bought corporate giants Technicolor and Revlon.

"With Technicolor, all I did was look at publicly filed information and talk to their investment bank," Perelman said. "We did rely on Sunbeam and Morgan Stanley to tell us the truth. This is the first time in my business career that this wasn't the case."

Despite his insistence that he relied on Morgan Stanley in the Sunbeam deal, Perelman conceded that he had not personally spoken with Morgan Stanley analysts or attended any of their presentations while the deal was being vetted. He instead sent his advisors to monitor and negotiate the deal and presentations.

Perelman, who is married to actress Ellen Barkin, is worth an estimated $4.9 billion.

The case is being tried in the 15th Judicial Circuit Court in Palm Beach County. The trial is being streamed live on Court TV Extra.