Morgan Stanley Sued Over eBay and Amazon Dealings

After filing shareholder class-action lawsuits against closed dot-coms such as Webvan and eToys, a firm of lawyers specializing in investor litigation have announced the filing of two new lawsuits — on behalf of shareholders of eBay (Nasdaq: EBAY) and Amazon (Nasdaq: AMZN) — against Morgan Stanley Dean Witter (NYSE: MWD) and the firm’s Internet stock analyst, Mary Meeker.

Both shareholder suits were filed in the Manhattan federal court by the law firm Schiffrin & Barroway, LLP on behalf of those who invested in eBay or Amazon between August 1, 1998 through January 22, 2001. Neither Amazon and eBay, nor their employees, are named as defendants.

According to the complaints, Morgan Stanley improperly provided investment banking services to Amazon and eBay, as well as research analysis and recommendations to investors about the two Internet giants, without maintaining separate operations for each function.

The lawsuits state that as a matter of custom, stock brokerage firms that perform both investment banking and research analysis services maintain a strict dividing line between the two functions, to ensure that their research and recommendations are objective and not influenced by the brokerage’s investment banking interests.

Double Duty?

The lawsuits maintain that because that dividing line between the investment banking and research analysis departments was not maintained, the shareholders who purchased eBay and Amazon stock during the time period were damaged.

Specifically, the complaints charge Morgan Stanley and Meeker with issuing false and misleading statements and failing to disclose material information concerning Meeker’s true relationship with eBay and Amazon during the class-action time period.

Alleged Wrongdoing

Among other things, the complaints allege that contrary to Morgan Stanley’s public representations, Meeker’s main job at Morgan Stanley was attracting and retaining investment banking clients for Morgan Stanley, and that her ratings, recommendations and positive statements regarding eBay and Amazon were not based on objective analyses, but rather on the desire to attract and retain eBay and Amazon as Morgan Stanley banking clients.

The complaints also assert that Meeker personally benefited from her allegedly improper conduct, which allowed her to earn US$15 million in 1999, largely based on her ability to attract and retain investment banking business for Morgan Stanley.

Morgan Stanley was not available to comment on the lawsuits.

Target Practice

Schiffrin & Barroway has filed nearly 100 lawsuits alleging violations of federal securities laws by scores of high-tech and dot-com companies.

The firm’s Web site has an interactive page for investors to join the various class-action suits, including a dial box of defendant names that investors can click through to select which litigation they want to participate in.

Blue Martini (Nasdaq: BLUE), Drugstore.com (Nasdaq: DSCM), Expedia (Nasdaq: EXPE) and Tickets.com (Nasdaq: TIXXD) are just a few of the other companies that have been sued by the Schiffrin firm on behalf of investors.

Aiming High

Though the shares of many of the companies Schiffrin & Barroway has targeted with its lawsuits lost most or all of their value during the dot-com shakeout, eBay closed Wednesday at $61.62, not too far below its 52-week high of $77.56.

eBay spokesperson Kevin Pursglove told the E-Commerce Times that the Internet auctioneer has not yet seen the complaint.

Amazon stock closed Wednesday at $12.50, off a 52-week high of $49.62.