Morgan Stanley charged with using '9/11 smokescreen' to hide e-mails

Ron BrynaertPublished: Wednesday December 20, 2006

In a disciplinary complaint, the National Association of Securities Dealers (NASD) alleges that Morgan Stanley used a "9/11 smokescreen" to hide e-mails sought by angry claimants in numerous arbitration proceedings from October 2001 through March 2005.

The securities industry's self-regulating arm accuses Morgan Stanley of "falsely claiming that millions of emails it possessed had been lost in the Sept. 11, 2001 terrorist attacks on the World Trade Center in New York, where its email servers were housed."

"In fact, according to the complaint, Morgan Stanley possessed millions of pre-September 11 emails that had been restored to its system shortly after September 11 using back-up tapes," stated an NASD press release obtained by RAW STORY. "Many other emails were maintained on individual users’ computers and were therefore never affected by the attacks, yet Morgan Stanley often failed to search those computers when responding to requests."

According to NASD, "Morgan Stanley later destroyed many of the emails it did possess, in two ways – by overwriting backup tapes that had been used to restore the emails to the firm’s system and by allowing users of the firm’s email system to permanently delete the emails over an extended period of time."

The complaint alleges that "millions of the emails were destroyed" between September 2001 and March 2005.

The security firm is further accused of failing to implement procedures providing for the retention of email, and failing to adopt adequate procedures governing searches for email in response to requests by regulators and in arbitration proceedings.

"Morgan Stanley responded that it has tried to reach a 'fair and appropriate' settlement of the NASD complaint, but the regulator made 'disproportionate and unprecedented demands,'" CNN reports. "As a result, it will litigate the matter, Morgan Stanley said."

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