Morgan Stanley 2010 Annual Report Download - page 44

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under Illinois law. The complaint filed in California raises claims under the federal securities laws, Illinois law
and California law. Both complaints seek, among other things, to rescind the plaintiff’s purchase of such
certificates. The defendants removed both actions to federal court, on November 23, 2010 and November 24,
2010, respectively. On January 18, 2011, the United States District Court for the Northern District of Illinois
remanded the Illinois action to the state court. On December 23, 2010, the plaintiff filed a motion to remand the
California action from the United States District Court for the Central District of California to the state court.
On December 6, 2010, MBIA Insurance Corporation (“MBIA”) filed a complaint against the Company related to
MBIA’s contract to insure approximately $223 million of residential mortgage backed securities related to a
second lien residential mortgage backed securitization sponsored by the Company in June 2007. The complaint is
styled MBIA Insurance Corporation v. Morgan Stanley, et al. and is pending in New York Supreme Court,
Westchester County. The complaint asserts claims for fraud, breach of contract and unjust enrichment and
alleges, among other things, that the Company misled MBIA regarding the quality of the loans contained in the
securitization, that loans contained in the securitization breached various representations and warranties and that
the loans have been serviced inadequately. The complaint seeks, among other relief, compensatory and punitive
damages, an order requiring the Company to comply with the loan breach remedy procedures in the transaction
documents and/or to indemnify MBIA for losses resulting from the Company’s alleged breach of the transaction
documents, as well as costs, interests and fees. On February 2, 2011, the Company filed a motion to dismiss the
complaint.
China Matter.
As disclosed in February 2009, the Company uncovered actions initiated by an employee based in China in an
overseas real estate subsidiary that appear to have violated the Foreign Corrupt Practices Act. The Company
terminated the employee, reported the activity to appropriate authorities and is cooperating with investigations by
the United States Department of Justice and the SEC.
Item 4. [Removed and Reserved]
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