Morgan Stanley led a three-year campaign to "blacken the image" of French luxury goods giant LVMH Moet Hennessy Louis Vuitton, while hiding its business relationship with rival Gucci, a Paris court was told on Monday.
The claims were made as lawyers for the US investment bank and LVMH faced off for the last time before a verdict is due on Jan. 12 in the French group's US$118 million lawsuit against Morgan Stanley.
Investment advice published over three years by Morgan Stanley luxury analyst Claire Kent "contained systematically erroneous and biased information" designed to denigrate the French group and boost Gucci's share price, LVMH's lead counsel Georges Terrier told the Paris Commercial Court.
Philippe Nouel, a lawyer for the bank, dismissed LVMH's six-point charge sheet as "a pure invention," motivated by lasting enmity over Morgan Stanley's 1999 role in helping Gucci evade a planned LVMH takeover.
The suit is the latest twist in a long-running global scandal over conflicts of interest between research and investment banking departments operating under one roof.
Wall Street's biggest brokerages including Morgan Stanley have already paid out US$1.4 billion in a related settlement with US state and federal regulators.
All are now closely watching the LVMH case for signs that more private suits could follow from disgruntled rivals of their investment banking clients.
"LVMH is the victim of the same practices seen in the United States," Terrier told the panel of three judges hearing the case.
"They tried to blacken the name of LVMH," he added.
Over two hours, Terrier catalogued some of the examples of Morgan Stanley investment advice included in 1,900 pages of evidence submitted to the court soon after the suit was filed last year.
Among these was an e-mail from July 17 last year, in which Morgan Stanley warned investors that LVMH's credit rating was likely to be downgraded in coming months, harming its share price.
Court documents say the e-mail was based on an April 26 decision by ratings agency Standard and Poor's to attach a negative outlook to its BBB+ credit rating for LVMH.
The French group says the bank ignored its positive indicators since the April ratings decision, instead taking advantage of the three-month-old information to stoke fears for the stock at a time when markets were already spooked by a string of more recent downgrades.
Two weeks later Morgan Stanley warned that core LVMH brand Louis Vuitton was approaching "maturity" and wiped 10 percent off its LVMH valuation without further explanation, according to the evidence submitted.
The French group also maintains that Morgan Stanley repeatedly lied to investors that LVMH was one of its clients, to lend credibility to its negative stance on its stock.
"However, during this period there was no mention of any relationship whatsoever with Gucci," Terrier said.
A Morgan Stanley official rejected the allegations.
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