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E-Mail Evidence: Questionable Behavior at Morgan Stanley

New internal e-mails filed as evidence in a wrongful dismissal suit apparently show IT executives receiving hard-to-find sports tickets and other favors from vendors, trying to use IT spending to lure customers for Morgan Stanley's banking business, and trying to electronically wall off top executives from being contacted by whistle-blowers. Morgan Stanley says the allegations are rubbish.

The plaintiff in a 2-month-old wrongful dismissal lawsuit against Morgan Stanley provided new evidence in court papers filed Monday. The new E-mails, introduced in federal court in New York, present a picture of potentially unethical and illegal activities by current and former IT and business executives.

The dubious conduct ranges from CTO Guy Chiarello receiving hard-to-get sports tickets and other favors from tech vendors that do business with the firm, to Morgan Stanley investment bankers pressuring the firm's IT department to buy from vendors as a way to win their banking business.

The plaintiff in the suit--Arthur Riel, a former Morgan IT manager who set up the company's E-mail archive--also introduced into evidence an E-mail that portrays former CFO Stephen Crawford trying to wall himself off from all E-mail communications coming from outside his inner circle. The reason, according to Riel's complaint: to make it virtually impossible for whistle-blowers to contact him.

In the Jan. 21, 2004, E-mail, CTO Chiarello wrote that Crawford's "main issue is that he gets sent too many E-mails that put him in a disadvantaged regulatory position. He does not get to read most of it yet he has no deniability that he received it."

After that E-mail, Riel says in his complaint, Chiarello and his team set about reconfiguring the company's E-mail systems so that Crawford, as well as then-CEO Phil Purcell, would receive E-mails from only their direct reports and Morgan Stanley board members.

Whether cordoning off E-mail access in this way is a breach of Sarbanes-Oxley financial transparency rules is unclear. SOX does require executives to thoroughly investigate reports of internal misconduct. Additionally, Morgan Stanley's own code of conduct requires employees to report improper or illegal conduct to their managers or "if appropriate or necessary, to senior management." Morgan Stanley effectively eliminated E-mail as a channel that whistle-blowers could use to contact Crawford or Purcell.

Morgan Stanley interprets the Chiarello E-mail on the subject very differently. In a written statement, the firm says the IT staff was merely asked to limit the volume of messages the executives received, helping them "meet regulatory requirements by ensuring that information is not missed." Morgan Stanley also notes that the company "had and has in place multiple avenues for employees to raise regulatory and other issues."

Riel, who managed the IT systems that support Morgan Stanley's legal department, first claimed in January that he was fired last year after uncovering E-mails that revealed misconduct at the firm. Copies of the E-mails were filed as supporting evidence in Riel's wrongful dismissal suit, where he's seeking at least $1 million from Morgan Stanley.

Morgan Stanley says Riel was fired for snooping around his superiors' E-mail logs without good reason, and for copying and redistributing some of that E-mail, and calls the latest Riel allegations "a smokescreen for his own highly unprofessional conduct." On Sept. 27, 2005, Morgan Stanley's executive director of human resources, Joanne Ceriello, overnighted a letter to Riel informing him of his termination. "A thorough investigation of your conduct revealed--not withstanding your initial denials--that you had engaged in a deliberate, extensive and surreptitious review of other employees' emails. This was a serious abuse of your position as the senior technologist entrusted with responsibility for the email archive," the letter reads, in part.

The E-mails filed in court appear to show a pattern at Morgan Stanley in which the IT department was encouraged to use its multimillion-dollar budget to cultivate relationships for the investment banking side of the house. In September 2003, Morgan Stanley banking exec Roger Hoit wrote to IT operations officer Jonathan Teplitz touting a vendor owned by a major Morgan Stanley client, private equity firm Welsh, Carson, Anderson & Stowe. Hoit noted that the vendor, Headstrong, had just acquired IT services firm Techspan. "It is quite important to Welsh Carson that we communicate to you the financial firepower that comes to Techspan through this acquisition and Welsh Carson's desire to strengthen the Techspan-Morgan Stanley relationship," Hoit wrote.

Paul McDougall is a former editor for InformationWeek. View Full Bio

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