An intricate tale of Wall Street deception that featured a defrauded billionaire as the lead player came to a close Friday when jurors began deliberating the case involving financier Ron Perelman and investment banking giant Morgan Stanley.

Perelman is suing Morgan Stanley for $2.7 billion for its advisory role in the sale of camping-equipment maker Coleman to Sunbeam for $1.5 billion in March 1998. Morgan Stanley acted as Sunbeam's sole investment banker in the deal.

In a booming voice, Perelman's attorney, John Scarola, told the jury Thursday that Morgan Stanley had a $33 million motive to complete the sale of Coleman to Sunbeam even if it meant fraudulently concealing information about Sunbeam's financial health. 

"It is established that Morgan Stanley knew the truth about Sunbeam but that Morgan Stanley lied to [Coleman]," Scarola said. "Morgan Stanley received detailed information that directly contradicted the firm's assertions to Coleman."

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As part of his consideration for Coleman, Perelman accepted 14.1 million shares of Sunbeam stock. The price of the shares, valued between $450 million and $680 million, plummeted after accounting irregularities surfaced at Sunbeam. 

Perelman alleges Morgan Stanley knew of the accounting trouble but hid the truth to collect investment banking fees.

"You can fool some of the people all of the time; you can fool all of the people some of time; but you can't fool all of the people all of the time," Scarola said in his closing argument. "The time for fooling people has ended."

Scarola, a partner at Searcy, Denney, Scarola, Barhart & Shipley of Palm Beach, asserts Morgan Stanley put money before integrity when it took on Sunbeam as a client and underwrote a $750 million debenture that helped raise much needed cash for the small-appliance maker. 

Red flags or not?

Throughout the trial, Morgan Stanley's counsel portrayed Perelman as an instinctive dealmaker whose self-reliance led him to strike out on his own after a financial disagreement with his own father.

The issue of reliance is pivotal to the case. If Morgan Stanley's attorneys can convince the jury Perelman acted on his own when he decided to sell Coleman to Sunbeam, instead of relying on information the firm provided, Morgan Stanley will be released from liability.

Mark Hansen, an attorney for Morgan Stanley, said Perelman made an independent decision when he ignored the advice of his team and moved ahead with the Sunbeam deal.

"Despite numerous red flags that Sunbeam was a house of cards," Hansen said. "He got the deal he wanted for his sagging Coleman shares."

Morgan Stanley refutes Perelman's claim that Coleman was a gem of a company and contends the maker of outdoor gear was in dire need of an overhaul.

Perelman spotted an opportunity, according to Hansen, when Sunbeam's stock price jumped 50 percent the day the consumer electronics maker announced celebrity CEO Al Dunlap would be revamping the company. Dunlap, known as "Chainsaw Al" and "Rambo in Pinstripes" had just come off a wave of success at Scott Paper.

Perelman advanced the deal, Hansen said, in hopes of cashing in on "the Dunlap effect."

As Dunlap's reputation skyrocketed, so did the stock prices of his employers. This fact, Hansen said, attracted Perelman to Sunbeam.

If Perelman sold Coleman to Sunbeam with Dunlap at the helm, a stock price spike would follow and Perelman could cash in and receive some much needed debt relief for Coleman.

"Perelman is interested in riding Dunlap's coattails up the stock price trail," Hansen said. Hansen is a partner at Washington, D.C.-based firm Kellogg, Huber, Hansen, Todd, Evans & Figel.

In his testimony, Perelman portrayed Coleman as a robust company with a bright future. He testified that he had not been informed of any "red flags" about Sunbeam and that he never read a much-talked about article, "High Noon at Sunbeam," in Barron's that detailed the company's problems. Instead, Perelman insisted he relied on publicly filed documents provided by Morgan Stanley that later turned out to be fraudulent. 

The claim was refuted by Jerry Levin, former executive vice president of MacAndrews & Forbes, Perelman's holding company which owned and sold Coleman to Sunbeam. Levin was hired as chief executive of Coleman in 1997 and said the company was saddled by too much debt.

Levin said he repeatedly told Perelman "in the strongest possible terms not to take any stock in [Sunbeam]," but Perelman ignored the advice.

If "the Dunlap effect" were the real reason behind the deal, it would not have mattered what Morgan Stanley purported about Sunbeam and would underscore the firm's claim that Perelman did not rely on Morgan Stanley in the deal.

"Price, that's the end of the reliance case," Hansen said. "What caused Mr. Perelman to act was price."

Attorneys for Morgan Stanley also point to the firm's own losses in the deal as proof it would not have knowingly defrauded Coleman and Perelman. Morgan Stanley lost an estimated $300 million in the transaction.

"Mr. Perelman is a smart guy who went in with his eyes open," Hansen said.

On March 23, 2004, Judge Elizabeth Maass issued a punitive ruling that instructed jurors to accept that Morgan Stanley aided in defrauding Sunbeam shareholders, which included Perelman.

The default judgment prevents Morgan Stanley from refuting or arguing the claim that it committed fraud.  Maass issued the ruling after Morgan Stanley failed to turn over e-mail evidence in the case.

The trial is being streamed live on Court TV Extra.