By Bo Susan Rosser
Court TV
WEST PALM BEACH, Fla. — After less than two days of deliberations, a jury awarded billionaire Ron Perelman $604 million from Morgan Stanley, finding that he relied on fraudulent statements from the investment firm when making a business deal that turned sour. The panel will return Tuesday to decide whether the billionaire and his holding company deserve punitive damages, which could push Perelman's total award to $2.7 billion. Perelman sued Morgan Stanley over its advisory role in the sale of Coleman to small-appliance maker Sunbeam for $1.5 billion in March 1998. Morgan Stanley acted as Sunbeam's sole investment banker in the deal. Perelman's attorney John Scarola told the jury Thursday that Morgan Stanley had a $33 million motive to complete the sale, even if it meant fraudulently concealing information about Sunbeam's financial health.
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 claimed Morgan Stanley knew of the accounting trouble but hid the truth to collect its investment banking fees. 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 was pivotal to the case. If Morgan Stanley's attorneys had convinced jurors that Perelman acted on his own when he decided to sell Coleman, instead of relying on information the firm provided, the firm would have been released from liability. Mark Hansen, an attorney for Morgan Stanley, told jurors Thursday Perelman made an independent decision when he ignored the advice of his team and moved ahead with the Sunbeam deal. 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. The firm lost an estimated $300 million in the transaction. Morgan Stanley began the trial with a severe handicap leveled by the judge. On March 23, 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 prevented the company from refuting the claim that it committed fraud. Maass issued the ruling after Morgan Stanley failed to turn over e-mail evidence in the case. Morgan Stanley is expected to appeal the case. Court TV Extra is showing the trial live. | 
