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A federal judge in New York dismissed a derivative lawsuit against Morgan Stanley that charged the bank and its directors with failing to supervise the allocation of shares in hot initial public offerings during 1999 and 2000. U.S. District Judge Laura Taylor Swain on Oct. 12 dismissed the suit filed in the Southern District of New York by A. Richard Albrecht, a Morgan Stanley shareholder who lives in Michigan. Albrecht alleged that officers of Morgan Stanley, including chief executive officer Phil Purcell, failed to block certain employees from taking part in tie-in schemes, excessive commissions, and other illegal methods of allocating shares in the IPOs. “By 1999, the Individual Defendants … knew or should have known that [Morgan Stanley] was participating in the illegal conduct … and should have taken steps to ensure that [Morgan Stanley] ceased such conduct,” Albrecht’s complaint stated. Still, Morgan Stanley and other banks remain as named defendants in approximately 840 other civil lawsuits that sue the issuers and underwriters directly, unlike Albrecht’s derivative suit. Two weeks ago Morgan Stanley refused to participate in an effort launched by several investment banks to remove federal Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York, who is presiding over the cases. The civil lawsuits are a result of reported probes by the U.S. Attorney’s Office, the Securities and Exchange Commission and others into the allocation of shares of highly coveted IPOs by the issuers and their underwriters. In a statement about the dismissed suit, Morgan Stanley chief legal officer Donald Kempf said, “We are confident that, ultimately, the remaining actions also will be resolved in favor of the company.” Also, on Monday, Credit Suisse First Boston, which has seen the most personnel changes allegedly related to the IPO probes, hired Stuart Breslow from Morgan Stanley and appointed him global compliance chief.

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