WEST PALM BEACH, Fla. — In painstaking detail Tuesday, billionaire Ron Perelman's right-hand man outlined the rosy picture Morgan Stanley painted of Sunbeam's growth prospects before the sale of camping-equipment maker Coleman to Sunbeam in March 1998.

The $1.5 billion sale gave Perelman 14.1 million shares of Sunbeam stock, worth between $450 million and $680 million, in exchange for his 82 percent stake in Coleman.

Shortly after the sale, accounting irregularities at Sunbeam surfaced and by 2001, when Sunbeam filed for bankruptcy protection, its stock was almost worthless.  

Perelman is seeking $2.7 billion in damages from Morgan Stanley for its advisory role in the deal.

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The cosmetics mogul claims the top-tier investment banking firm knew of the accounting troubles but concealed them because of the $32 million in fees it would receive upon completion of the sale. Morgan Stanley acted as Sunbeam's sole investment banker in the transaction.

Howard Gittis, Perelman's second-in-command, testified Tuesday that on Feb. 23, 1998, the day after a final due diligence presentation by Sunbeam and Morgan Stanley, he received documents that detailed Sunbeam's current sales and growth potential.

"This is Morgan Stanley telling us those growth objectives were attainable," Gittis told jurors.

The documents included earnings and operating costs for the small-appliance maker and detailed how Sunbeam was planning to increase international distribution channels and create 30 new products per year.

The creation of new products, Gittis said, is essential for continued growth in the durable consumer goods market.

"I thought what Morgan Stanley was saying to us was that Sunbeam was strong," Gittis said. "That [Sunbeam] had enormous potential for growth."

Gittis testified earlier that he met Ron Perelman through a preschool that both of their children attended. Perelman retained Gittis, a former lawyer, after Gittis successfully tried a case against Perelman's father.  

As a possible telltale sign about the man behind the billions, Perelman recounted how he abandoned the family business after his father refused to take his investment advice. As he had predicted, the investment worked out badly for his father, Perelman said.

History of reliance 

To win the case, Perelman's team must prove it relied on information provided by Morgan Stanley in the sale of Coleman to Sunbeam.

Perelman's attorneys are using the long-standing relationship that the financier has with Morgan Stanley as evidence that Perelman and his associates trusted Morgan Stanley and relied on information the firm provided, almost without question. 

In an illuminating parallel, Gittis testified the due diligence performed by MacAndrews & Forbes, which owned and sold subsidiary Coleman to Sunbeam, was very similar to that used in the MacAndrews & Forbes purchase of Coleman in 1989.

In that transaction, Morgan Stanley also represented the opposing side when it negotiated for the Coleman family. The family owned one-third of the outstanding shares.   

When asked if there were any problems with the financial documents in the 1989 transaction, Gittis said, "Of course not."

Morgan Stanley also represented Perelman and his company in its 1986 purchase of Revlon.

Lawyers for Morgan Stanley claim Perelman is a sophisticated investor and did not rely on information the investment banking firm provided when he decided to sell Coleman.    

Answering to the jury

Perelman, who became a regular on the celebrity beat after his marriage to actress Ellen Barkin, offered some insight into how he operates his billion-dollar conglomerate when he answered juror questions Tuesday.

One panelist asked Perelman why he doesn't use e-mail.

"I am a dinosaur," he said. "When I grew up, we didn't even use calculators. We used slide rules."

Perelman said he has never had the desire to replace face-to-face contact with e-mail.

Jurors also asked him why with 14.1 million shares at stake, he did not become more involved in the Coleman-Sunbeam transaction.

"I have found, as is the case of most CEOs, when we get involved it tends to bring more theatrics and show-and-tell than just the facts," Perelman said. "The best way to get the facts is to send our team ... without having either side have to put on a show for the CEO."

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.