A complaint filed by Morgan Stanley & Co. against former managing director Steven Yamane two years ago backfired in September, when an NASD arbitration panel awarded Yamane stock and options worth more than $3.5 million.
The panel also ordered Morgan Stanley Dean Witter to file a corrected U-5 form stating that Yamane, formerly the firm's Tokyo-based director of Asian equity operations, resigned voluntarily. The original U-5, filed in November 1996, stated that Yamane had been terminated for "Breach of internal obligations to the Firm, not involving client interests. The breach became known to the Firm and the Firm terminated Mr. Yamane for cause, during the required 2-week notice period following the tender of Mr. Yamane's resignation."
In a written response at the time, Yamane confirmed that he had resigned on Aug. 27, 1996, but claimed he had not disclosed proprietary information to his new employer as Morgan Stanley officials apparently thought.
Morgan Stanley filed its complaint against Yamane on Sept. 6, 1996, accusing him of using proprietary information to recruit Morgan Stanley employees to competitor NatWest. The firm alleged that Yamane used confidential salary information about his employees to limit their raises, presumably so NatWest could recruit them more easily.
The firm asked for a restraining order prohibiting Yamane from recruiting Morgan Stanley employees or soliciting customers, using proprietary employee information or the firm's risk-analysis programs, and asked for reimbursement of "all profits wrongfully derived by him. ... "
In his counterclaim, Yamane denied all the charges and insisted that the firm and his supervisor in the Tokyo office fabricated the story in an attempt to avoid paying him $4.1 million worth of stock and options that Yamane had earned under an incentive plan.
The panel agreed and awarded Yamane 69,775 shares of MSDW stock and another 29,363 options. The shares traded in the low 50s at the time, and changed hands around 65 at press time in early December. The value of the options was unknown.
"While my client and I were obviously interested in the monetary award, in lots of ways I viewed that U-5 portion of the award as even more significant," says John Cambria, an attorney with the New York law firm of Christy & Viener, which represented Yamane. "What that says is that the panel obviously concluded that my client had done nothing wrong or improper."
Calls to Morgan Stanley Dean Witter were not returned.
Cambria says the firm has complied with all of the terms of the decision and has filed the amended U-5.