Morgan Stanley will pay $604 million in damages to Ronald Perelman, chairman of cosmetics group Revlon Inc. who previously sought $2.7 billion from the investment bank, that, in his words, deceived him on the sale of his business Coleman Co. to appliance maker Sunbeam Corp. in 1998.

Morgan Stanley that received about $30 million in advisory fees for the transaction.

The stake in Sunbeam Corp. Perelman quickly lost its value after the buyer filed for bankruptcy protection in 2001 amid a massive accounting scandal. Perelman claims that the investment bank was aware of the problems with Sunbeam’s balances but covered them up so as to receive advisory fees.

The compensation the billionaire will receive is lower than what he initially sought, even though the Florida law permits to seek compensation that is triple amount of the actual damages. Perelman is unlikely to seek an increase in payouts, jeopardizing the verdict of the court.

Morgan Stanley has promised to appeal claiming that the trial from Circuit Court Judge Elizabeth Maass in West Palm Beach, Florida was not fair. The judge was exasperated by the failure of the company to deliver e-mail evidence and ordered it to prove its innocence.

"The judge ... became incensed by Morgan Stanley’s handling of e-mails during the discovery process, and sanctioned the firm for these failures with a presumption of fraud," said Fox-Pitt, Kelton analyst David Trone.
Analysts believe that the real legal fight will take place in the appeals process and think it likely that the ruling will be reversed.