The battle between the world´s leading luxury goods group and one of Wall Street´s most powerful investment banks intensified on Monday as Morgan Stanley launched a â⬠10 mln ($ 11.9 mln) countersuit against Moet-Hennessy Louis Vuitton. LVMH has alleged the bank´s equity research has been systematically biased against it.
LVMH has produced 41 pieces of evidence that it claims prove bias in the work of Claire Kent, Morgan Stanley´s luxury goods analyst. These include a CD-Rom containing 1,900 pages of her research going back to 1999.
Stephan Newhouse, chairman of Morgan Stanley International, said: 'These proceedings are an attempt to damage the reputation of Morgan Stanley and to undermine the reputation of Claire Kent.' The bank said LVMH had taken Ms Kent´s words out of context, often truncating and manipulating them.
In its defence, it claimed all of its comments about LVMH were justified. 'For research analysts to engage in self-censorship, by focusing on a company´s strengths while ignoring its weaknesses, would undermine the whole purpose of their research.'
Investment banks are anxious to limit exposure to civil suits following their $ 1.4 bn settlement with Eliot Spitzer, the New York state attorney-general who argued that equity analysts puffed shares and slanted research to help colleagues win banking business.
LVMH is seeking â⬠100 mln damages from Morgan Stanley. However, many have supported Ms Kent, ranked the sector´s leading analyst by Institutional Investor.
The French group claimed Ms Kent systematically denigrated it in order to make Gucci, a long-standing Morgan Stanley client, appear relatively attractive. 'Morgan Stanley did not hesitate to publish deliberately inaccurate information about LVMH,' it said in its court filing.
LVMH claims Morgan Stanley deliberately exaggerated the risk of a credit rating downgrade and pushed up its cost of borrowing. On July 17 2002, Ms Kent wrote that LVMH was at risk of a credit rating downgrade. Morgan Stanley said this was only a reflection of Standard & Poor´s 'negative outlook' on LVMH´s rating.
Morgan Stanley rejected accusations that it failed to disclose a conflict of interest. It said: 'There is no reason whatsoever why an investment bank should stop publishing research about a company simply because that company is in dispute with one of the bank´s other clients.' The court has asked both sides to present conclusions on September 15.
Source: Financial Times
