By Basil Katz
NEW YORK, Nov 9 (Reuters) - Morgan Stanley is suing a former
employee who was convicted of insider trading in order to
recover $33 million it said it paid U.S. regulators to settle
civil claims relating to the crimes, court papers showed.
In a complaint filed in Manhattan federal court on Oct. 31,
Morgan Stanley sued ex-FrontPoint Partners hedge fund manager
Joseph "Chip" Skowron over the funds the bank paid to the U.S.
Securities and Exchange Commission. The lawsuit also called for
unspecified compensatory and punitive damages.
Doctor-turned-stock picker Skowron pleaded guilty in August
to trading stock of Human Genome Sciences Inc in 2008 based on
non-public information he admitted to having received from a
consultant for the biotech company, who also pleaded guilty to
insider trading charges.
Skowron was sentenced to five years in prison and ordered to
forfeit $5 million.
"Beyond the harm attendant to having one of its managing
directors plead guilty to serious criminal conduct, the firm
expended its own reputational capital by defending Skowron
during the years it believed, based entirely on his
misrepresentation, that he had not violated the law," the
complaint said.
Morgan Stanley - which acquired FrontPoint in 2006 - had
sought nearly $45 million from Skowron over his fraud, but a
U.S. judge in March said the bank was not entitled to recoup the
$33 million SEC payment.
Manhattan federal court judge Denise Cote instead ordered
Skowron to pay $10.2 million in restitution to his former
employer. Skowron has appealed that order.
Lawyers for Morgan Stanley and for Skowron did not
immediately return calls seeking comment.
The case is Morgan Stanley v. Joseph "Chip" Skowron, U.S.
District Court for the Southern District of New York, No.
12-cv-8016.
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