It has been quite rocky recently for the house that J. Pierpont Morgan built - slipping business, executive turnover and legal costs galore helped Morgan Stanley's pre-tax profits slip some 27%, with revenue dropping by more than $6 billion.

Last week embattled chief executive Phillip Purcell announced amid controversy that he would be stepping down from his position. Purcell, 61, cited plans to retire as his reason for leaving the firm. Purcell also alluded in a letter to his staff to "personal attacks" against him, which can be presumed to encompass the mounting pressure from irate shareholders as well as the rebuke of eight retired executives who complained that his poor management has resulted in years of lackluster performance at the firm.

This week a Florida judge declined Morgan Stanley's request to set aside the $600 million-plus in compensatory damages awarded to Ron Perleman. The Revlon executive claimed in a recent lawsuit against Morgan Stanley that the brokerage house had assisted client Sunbeam in artificially inflating the value of their stock, cheating Perelman our of more than a billion dollars in a stock-swap deal. There is also the quibbling matter of the additional $850 million in punitive damages awarded to Perelman by the jury that is left to resolve. Morgan Stanley expects to appeal the decision (wouldn't you?).

The Perelman suit isn't the only legal snarl on Morgan Stanley's radar. Just today, Parmalat announced that it had settled with the brokerage firm and that Morgan Stanley would be paying the bankrupt European agricultural giant some $242 million to settle "all existing and potential actions and claims, including compensation of damages." The lawsuit brought by Parmalat against Morgan Stanley was one of a number of suits filed by the company against third parties in an effort to reclaim damages from firms that contributed to the fraudulent activities that led toParmalat's bankruptcy.

One thing is for sure, whoever they bring in as the new Chief Exec. will have their hands full. And how...

-- MDT

Labels: Morgan Stanley, Parmalat