Morgan Stanley 2010 Annual Report Download - page 43

claims for common law fraud and aiding and abetting common law fraud and alleges, among other things, that
the ratings assigned to the securities issued by the SIV were false and misleading, including because the ratings
did not accurately reflect the risks associated with the subprime residential mortgage backed securities held by
the SIV. On July 15, 2010, the Company moved to dismiss the complaint. That motion was denied on
October 29, 2010. The case is pending before the same judge presiding over the litigation concerning the Cheyne
SIV, described above. While reserving their ability to act otherwise, plaintiffs have indicated that they do not
currently plan to file a motion for class certification. Plaintiffs have not alleged the amount of their alleged
investments, and are seeking, among other relief, unspecified compensatory and punitive damages.
On July 9, 2010, Cambridge Place Investment Management Inc. filed a complaint against the Company and other
defendants in the Superior Court of the Commonwealth of Massachusetts, styled Cambridge Place Investment
Management Inc. v. Morgan Stanley & Co., Inc., et al. The complaint asserts claims on behalf of certain of
plaintiff’s clients and alleges that defendants made untrue statements and material omissions in the sale of a
number of mortgage pass through certificates backed by securitization trusts containing residential mortgage
loans. The total amount of certificates allegedly issued by the Company or sold to plaintiff’s clients by the
Company was approximately $242 million. The complaint raises claims under the Massachusetts Uniform
Securities Act and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On
August 13, 2010, defendants removed this action to the United States District Court for the District
of Massachusetts and on September 13, 2010, plaintiff filed a motion to remand the case to the state court. On
December 28, 2010, the magistrate judge recommended that the district court grant the motion to remand. The
defendants objected to the magistrate’s report and recommendation on January 18, 2011.
On July 15, 2010, The Charles Schwab Corp. filed a complaint against the Company and other defendants in the
Superior Court of the State of California, styled The Charles Schwab Corp. v. BNP Paribas Securities Corp., et
al. The complaint alleges that defendants made untrue statements and material omissions in the sale to one of
plaintiff’s subsidiaries of a number of mortgage pass through certificates backed by securitization trusts
containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff’s subsidiary by
the Company was approximately $180 million. The complaint raises claims under both the federal securities laws
and California law and seeks, among other things, to rescind the plaintiff’s purchase of such
certificates. On September 8, 2010, defendants removed this action to the United States District Court for the
Northern District of California and on October 1, 2010, plaintiff filed a motion to remand the case to the state
court.
In July 15, 2010, China Industrial Development Bank (“CIDB”) filed a complaint against the Company, which is
styled China Industrial Development Bank v. Morgan Stanley & Co. Incorporated and is pending in the Supreme
Court of the State of New York, New York County. The Complaint relates to a $275 million credit default swap
referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law
fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks
of the STACK 2006-1 CDO to CIDB, and that the Company knew that the assets backing the CDO were of poor
quality when it entered into the credit default swap with CIDB. The complaint seeks compensatory damages
related to the approximately $228 million that CIDB alleges it has already lost under the credit default swap,
rescission of CIDB’s obligation to pay an additional $12 million, punitive damages, equitable relief, fees and
costs. On September 30, 2010, the Company filed a motion to dismiss the complaint.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed two complaints against the Company and
other defendants. One was filed in the Circuit Court of the State of Illinois and is styled Federal Home Loan
Bank of Chicago v. Bank of America Funding Corporation et al. The other was filed in the Superior Court of the
State of California and is styled Federal Home Loan Bank of Chicago v. Bank of America Securities LLC, et al.
The complaints allege that defendants made untrue statements and material omissions in the sale to plaintiff of a
number of mortgage pass through certificates backed by securitization trusts containing residential mortgage
loans. The total amount of certificates allegedly sold to plaintiff by the Company in the two actions
was approximately $203 million and $75 million respectively. The complaint filed in Illinois raises claims
37