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Important Investment Banking Company declared accountable in fist instance, for intentional misadvise of a client

In first instance, Morgan Stanley was condemned to pay USD 604 MM for compensatory damages, and it could he ordered to pay an additional USD 2 billion more as punitive damages 10 . The will-known billionaire Ron Perelman, chairman of the cosmetics company Revlon Inc, won in a Florida Court the amount of USD 604.3 million in compensatory damages, in a dispute stemming from the collapse of Sunbeam. The jury found that Morgan Stanley misled Perelman about Sunbeams financial situation when it advised him to sell the majority of his stake in Coleman Inc, - a company dedicated to the production of camping gear to Sunbeam, for USD 1.5 billion in Sunbeams shares. When Sunbeams stock collapsed in a late 1990s in an accounting scandal, Perelmans 14.1 million shares of the companys stock became worthless 11 . However the trial may not be over. The same jury must still decide Whether Perelman is entitled to any punitive damages, that as usual surpass by far the compensatory damages condemn. Morgan Stanleys defense, has focused their strategy against Judge Elizabeth Mass, who in an unusual ruling, instructed the jury to assume that Morgan Stanley had defrauded Perelman, after it was discovered the firm had violated a court to turn over documents that might have been relevant to the case 12 .


Perelman Winds $604.3M from Morgan Stanley. CBS news , Ma 16th, 2005. 11 SEC asks for more information on Morgan Stanley, Sunbeam Case NYSSCPA April 22, 2005 12 Morgan Stanley in crisis Forbes, May 17, 2005.

Shortly after the verdict was announced, Morgan Stanley issued a press release saying it will appeal the verdict. The analysts consider that the appeal has multiple legal grounds. The verdict, while disappointing, is not surprising, given the unprecedented and highly prejudicial ruling imposed by the trial judge the company said in a statement, pointing out that Morgan was denied a fair trial 13 . In recent days press comments have pointed out that Morgan Stanley is studying as a proposal for splitting the company in two, considering the serious damage caused tot the Morgans reputation 14 .

Colombia and Spain an agreement for avoiding double taxation

On March 31st, the governments of Colombia and Spain signed an agreement that, after the Congress ratification, will prevent the double taxation regarding income and patrimony taxes 15 The Colombia Embassy in Spain has informed recently, the existence of a new international agreement signed as a consequence of the visit of the Spaniard President, Jos Rodriguez Zapatero, and the Spaniard Ministry of Exterior Issues, Miguel Angel Morantinos, to Colombian territory. countries, regarding income and patrimony taxes. The agreemenss main objective is the avoidance of international double taxation between these


Morgan Stanley to reassess legal reserves alter Perelman verdict International Herald Tribune. May 18, 2005. 14 Morgan Stanley to reassess legal reserves alter Perelman verdict International Herald Tribune. May 18, 2005. 15 From Press release of March 31












internationalization of Spain economy and Spaniard companies, considering that the Latin American area, and specially Colombia, is one of the most important receptors of such investment. The Embassys press release establishes: The agreement signed between Spain and Colombia seeks to guarantee the contributors the elimination of international double taxation. Also, the existence of this kind of agreement will promote the commercial and economic relations between signing Countries, reducing the fiscal costs in the respective receptor country, and reinforcing a stable legal background for the contributors. On the other hand, it will constitute a great advance in the efforts against the fiscal fraud, as includes clauses of fiscal information exchange, and assistance in collecting taxes in both States.

Financial Law Reform Under Study

The Colombian Government is studying carefully, at several, a financial reform that seeks to correct some deficiencies in this field: The proposed reform pretends to have a deeper impact inside the market, continuing the adaptation of the financial sector to the globalization process, and studying the integration of Superintendencies. Also, this initiative analyzes the roll of public Banking in the field. The Colombian Government is studying several law reform projects that pretend to correct the diverse deficiencies existing inside the financial field. Some projects are already under discussion inside the Colombia Congress. One of the objectives is to reduce the costs of the use of capital in Colombia. According to the Minister of Treasury, Alberto Carrasquilla, the financial system

conserves the same coverage for the last 30 years, something that must be improved by means of widening the financial vehicles available for the business activity 16

On this matter, the Banking Superintendent has expressed that even though this matter has not been studied extensively, it is necessary at this point, to understand that we need a strong banking system, and a mature capitals market, and that the former is a condition for the latter 17 . In the evaluation process, it is critical the analysis of the influencing legal and fiscal elements. On this purpose, the Colombian Congress is currently discussing a law project to modernize the securities market, a project that is expected to be approved within the present year. Also, the process of merging the Securities Superintendency and the Banking Superintendency is still progressing, by means of a new General Manager who is supposed to lead and accelerate the merge. In the past days the Manager has been evaluating the working documents of both entities, having its support to take the best decisions, as reiterated Banking Superintendent, Jorge Pinzn. Regarding the roll of the public banking, the Minister of Treasury included in the Colombian Development Plan (Plan Nacional de Desarrollo) a structure by which a national public bank is in charge of correcting deficiencies of the market that cannot be corrected by the supervisors and the rest of the administrative authorities.

Reforma financiera sera para corregir las fallas que presenta el sistema La Republica, May 31, 2005. 17 Reforma financiera no debe ser apresurada. May 13, 2002


Finally, according to the Banking Superintendent, regardless of the free-trade agreement discussed with Unite States, its a fact that in the past years the financial field has experienced an accelerated process of globalization. Therefore, its necessary to bear in mind the need of adaptation of our system in any law reform. Indeed, any international standard adopted as part of the Colombian legislation, as the Basel Accord, has been evaluated previously. The reform project implies modifications in several levels, in issues of special sensibility in the Colombian financial field. informing you of the most relevant changes. Therefore, we will follow it,

Participating in this issue: Sergio Rodriguez Azuero Julio Cesar Quintero Camilo Gantiva Hidalgo

This bulletin was made by the Editorial Board of Rodrguez-Azuero Asociados S.A. for an informative and academic value; therefore its content does not constitute legal advice. The publication of this bulletin is only authorized quoting the source.