California AG Hits Morgan Stanley With Lawsuit

California Attorney General Kamala D. Harris has filed a lawsuit against Morgan Stanley, charging the financial institution with violating the False Claims Act, the California Securities Law and other state laws by misrepresenting the quality of its residential mortgage-backed securities (RMBS) and through its involvement in the failed Cheyne structured investment vehicle. The lawsuit covers the company’s actions between 2004 and 2007.

In filing the lawsuit, Harris charged that Morgan Stanley’s actions wreaked financial havoc on California public servants, citing losses of hundreds of millions of dollars through investments in Morgan Stanley by the California Public Employees Retirement System and the California State Teachers Retirement System.  

“Morgan Stanley’s conduct in this case evidenced a culture of greed and deception that helped create a devastating economic crisis and crippled California’s budget,” said Harris. “This lawsuit is necessary in order to hold Morgan Stanley accountable for the destruction it caused to California, our people, and our pension funds.”