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NAME: Donald G. Kempf Jr. TITLE: Executive vice president, secretary, managing director and general counsel. AGE: 64 THE COMPANY: New York-based Morgan Stanley Dean Witter & Co., the world’s biggest investment bank in terms of market capitalization, was created in May 1997 with the merger of Dean Witter, Discover & Co. and Morgan Stanley. The firm has leading franchises in securities, asset management and credit card services (Discover Card). But the struggling economy and troubled stock market have taken their toll on Morgan Stanley with profits falling in five consecutive quarters. The firm eliminated about 2,000 of its more than 60,000 employees in 2001. The firm was also the largest tenant in the World Trade Center. It had 3,007 people working on 22 floors in the south tower and three floors in 5 World Trade Center. Seven employees died as a result of the Sept. 11 attacks. What’s more, in the past year, regulators have put full-service broker-dealers such as Morgan Stanley under the microscope for the way hot new stock issues were parceled out to customers during the frenzy for initial public offerings. The Securities and Exchange Commission has also been investigating possible conflicts of interest among analysts at Morgan Stanley and other banking companies who made stock recommendations on companies whose offerings were underwritten by their investment banking firms. TO THE RESCUE: Kempf, who spent 35 years with Kirkland & Ellis in Chicago and was one of Morgan Stanley’s chief outside counsel, was asked to throw his name in the hat when Morgan Stanley went looking for a new general counsel in 1999 after an embarrassing time for Morgan Stanley’s legal department. The department had just gone through a tabloid scandal involving a former junior research analyst, Christian L. Curry, whose nude photo appeared in a magazine for gay men. He was fired from Morgan Stanley in 1998 for allegedly submitting bogus expense accounts. Curry, who is black, sued the firm for $1.3 billion, alleging racial and perceived sexual-orientation discrimination. The case drew considerable attention after prosecutors learned that Morgan Stanley had paid $10,000 to an informant in an attempt to catch Curry committing a crime. General Counsel Christine A. Edwards resigned soon after, and Kempf came on board. Besides tackling the Curry case, Kempf spent the first nine months studying the legal department before he went ahead with a first, then a second, restructuring, ending up with a 700-person legal division, which includes roughly 300 lawyers and is organized into five broad categories covering retail, investment management, credit services, securities and international law. One legal unit handles compliance matters, which includes making sure Morgan Stanley follows rules and guidelines set by the exchanges, self-regulatory organizations and government authorities. A second oversees litigation, a unit that did not exist before Kempf took the helm. LITIGATION: One of Kempf’s first acts in the job was to settle the Curry case personally, with Curry dropping his lawsuit. Despite reports that Morgan Stanley paid Curry $20 million, Kempf said Curry “didn’t get a nickel.” He says that Morgan Stanley agreed to make a $1 million contribution to the National Urban League. With two years of declines in the stock market, Morgan Stanley has seen a double-digit increase in the number of lawsuits filed against it, Kempf says. One set involves the IPO allocation matter. Investors allege that Morgan Stanley, along with roughly half a dozen other underwriters, conspired to get a piece of the IPO profits by requiring big customers (such as hedge funds) to pay exorbitant commissions. The firms also allegedly required that these buyers purchase shares in the aftermarket at prices higher than the IPO, thereby inflating share prices. Plaintiffs charge violations of federal antitrust and securities laws. Kempf said he is encouraged that securities regulators settled an IPO allocations matter with Credit Suisse First Boston in late January. Although First Boston paid $100 million to settle the matter, it is considered a significant win for the investment bank. Morgan Stanley’s celebrity analyst, Mary Meeker, who Barron’s christened the Queen of the Internet in 1998, was hit with a number of lawsuits from investors for allegedly hyping stocks to bring in investment banking business, which, in turn, boosted her compensation. This litigation is going well for Morgan Stanley, Kempf said. In October, a federal judge dismissed with prejudice eight class actions filed against Morgan Stanley and Meeker, saying the complaint had pleading improprieties that were “gross and unrestrained.” In September, the Equal Employment Opportunity Commission filed a discrimination suit in federal court against Morgan Stanley alleging the firm shortchanged as many as 100 women in the institutional equity division. The firm also limited the women’s opportunity for professional advancement, the lawsuit alleges. The suit grew out of the firing of a bond saleswoman in 2000 after she spoke out about alleged discrimination. It is said to be the first time the EEOC has moved against a Wall Street securities firm. “The EEOC seeks to send a message that discrimination will not be tolerated in this or any other industry,” Spencer H. Lewis Jr., director of the New York district office, said in a statement. The firm has said the bond saleswoman was fired for “an outrageous act of personal hostility” toward her supervisor. Kempf said the firm is defending the case and exploring settlement options. HANDS ON: Kempf has loved the law since he was 16 and played a defense lawyer in a murder trial in an Ayn Rand play in high school. His actress mother saw his passion and encouraged it. “I love a tough lawsuit,” said Kempf, who served as a lieutenant in the U.S. Marine Corps. “I like challenges; they’re fun. They bring out the best in people on both sides. There’s no higher high or lower low than a jury verdict.” Indeed, Kempf argued a motion on behalf of Morgan Stanley to intervene in the landmark lawsuit brought by the Justice Department in 1998 against Visa and MasterCard over its practice of prohibiting member banks from issuing other brands, such as the Discover Card. “Our outside counsel was in France, so I went up and did it myself,” said Kempf. In a major win for Discover and American Express, a federal judge ruled in October that banks that have relationships with Visa and MasterCard are also free to have relationships with other card issuers. Kempf says he tries to keep from micromanaging, but he will read key briefs and occasionally do heavy edits of the first few paragraphs. “I always have to be careful not to fall into the trap of too much lawyering.” BIGGEST CRISIS: The attacks on the World Trade Center rank as Kempf’s biggest crisis. All 200 members of the legal division who worked in the World Trade Center survived. Lawyers have had to double up in the firm’s offices in midtown Manhattan, which has been a logistical challenge, Kempf said. OUTSIDE COUNSEL: Firms that handle a variety of matters include Chicago-based Kirkland & Ellis; and New York-based firms Cravath, Swaine & Moore; Davis Polk & Wardwell; Paul, Weiss, Rifkind, Wharton & Garrison; and Clifford Chance Rogers & Wells. ROUTE TO THE TOP: Kempf graduated from Villanova University in 1959, and then went on to Harvard Law School, where he graduated in 1965. Kempf also has a master’s in business administration from the University of Chicago. He spent his entire pre-Morgan Stanley career at Kirkland & Ellis, becoming senior partner in the firm’s litigation practice. Kempf is a fellow of the American College of Trial Lawyers. FAMILY: He and his wife, Nancy, have homes in New York and Chicago. The couple have three grown sons. LAST BOOK READ: “Theodore Rex,” by Edmund Morris.

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