Missouri Department Sues Morgan Stanley Over General Americans Demise
The Missouri Department of Insurance has filed a $4 billion lawsuit in state circuit court against Morgan Stanley & Co. Inc. for alleged fraud, which, the DOI says, caused the demise in 2000 of General American Mutual Holding Company.
Morgan Stanley contracted to provide fiscal advice to GenAmerican, St. Louis, around the same time that another company Morgan Stanley controlled developed a financial product that led to GenAmericans undoing, the lawsuit alleges. Morgan Stanley also was to be the investment banker to GenAmerican for a planned demutualization and stock offering.
GenAmerican was liquidated in 2000 when it was acquired by Metropolitan Life Insurance Company, New York, for $1.2 billion.
The lawsuit against Morgan Stanley was brought by Missouri DOI Director Scott Lakin, as liquidator for GenAmerican. It also named Leonard Rubenstein, a GenAmerican executive, for failing to report the dangers of the GIC products to a company oversight committee.
GenAmerican was forced into administrative supervision in August 1999. It sought the DOIs protection to prevent a run on the bank from institutional investors that had bought funding agreements from the insurer.