Morgan Stanley Settles Sex Bias Case

The settlement announced by U.S. District Judge Richard Berman allows the Wall Street powerhouse to avoid an embarrassing public showdown over claims by women they were groped, slapped on the buttocks and faced office antics such as stripteases and breast-shaped birthday cakes.

"This is a watershed in safeguarding and protecting the rights of women on Wall Street," said the judge, who announced the settlement just as opening statements were to begin in what would have been a landmark, and graphic, trial.

Based on claims of 340 women who worked in the company's institutional-equities division since 1995, it would have been the nation's first gender bias trial of a brokerage based on claims brought by the federal government's Equal Employment Opportunity Commission.

As part of the deal, Morgan Stanley denied any wrongdoing and said it had always treated women fairly and equitably.

"We are proud of our commitment to diversity," Philip Purcell, chairman of Morgan Stanley, said in a statement. "We look forward to working with the EEOC in accomplishing our common goals."

Steve Thel, a professor of securities law at New York's Fordham Law School, said, "A settlement will be viewed as an admission that they (Morgan Stanley) misbehaved."

The settlement represents about 2 percent of the $2.45 billion in profits Morgan Stanley made in the first half of this year.

Earlier this year, Merrill Lynch agreed to a $2.2 million settlement with a former financial consultant, one of about 900 women who filed gender discrimination suits against the firm between 1991 and 1997. The financial services firm has settled about 95 percent of those cases, paying out more than $100 million.

In 1992, State Farm Insurance paid the largest-ever sex discrimination settlement -- $240 million to more than 800 women.

SENDING A MESSAGE

Federal employment regulators hailed the significance of the Morgan Stanley case brought by the EEOC.

"It's the first settlement of its kind," said Elizabeth Grossman of the EEOC. "We hope this sends a message to other employers on Wall Street to take discrimination seriously."

The broad impact would be difficult to measure, said Carlin Meyer, a professor at New York Law School, who said change comes "at the margins."

"There will be a little cutting back on the strip club outings, a little more incremental power to human resource departments," she said, "but when it comes to core hiring and promotions, the change will be slower."

Under terms of the deal reached over the weekend, Morgan Stanley pays a total of $54 million, $40 million of which is earmarked in a fund to pay awards to claimants.

Twelve million dollars will go to resolve the claims of bond trader Allison Schieffelin, whose complaint filed in 1998 helped launch the case.

She accused the firm of refusing to promote her to the high-ranking post of managing director because of her gender. She also complained the company engaged in such discriminatory conduct as allowing men-only golf games and strip-club visits with clients.

Schieffelin, who was earning more than $1 million a year, alleged she was fired in 2000 in retaliation.

In a statement issued by Morgan Stanley, Schieffelin said, "I am happy that this case has been settled to the satisfaction of all the parties."

The balance of the settlement will be used to pay for antidiscrimination training programs.

Morgan Stanley shares closed up 34 cents to $50.34 on the New York Stock Exchange on Monday.