Veleron Holding, BV v. BNP Paribas SA et al.
A New York federal jury found Analysis Group client Morgan Stanley not liable for insider trading in the stock of an auto parts maker during the 2008 financial crisis, rejecting claims filed by plaintiff Veleron Holding BV. In this dispute, Veleron – a Dutch company created to invest in auto parts maker Magna International Inc. – accused Morgan Stanley of short-selling shares of Magna during the financial crisis based on inside information obtained from Veleron's lender, BNP Paribas SA. At issue was Veleron's $1.5 billion investment in Magna. The investment was financed largely by BNP, which entered into a credit-default swap arrangement with Morgan Stanley at the time to hedge its exposure to the loan. In September 2008, Morgan Stanley began short-selling Magna shares after learning from BNP that Veleron was unlikely to meet a margin call on the loan and could be forced to liquidate its Magna stock.
An Analysis Group team – including CEO and Chairman Martha Samuelson, Managing Principals Andrew Wong, Samuel Weglein, and Ted Davis, and Vice President Michael Cliff – was retained by Weil, Gotshal & Manges LLP, counsel for Morgan Stanley, to support affiliate Charles Jones of Columbia Business School in this matter. Professor Jones testified at trial to explain risk management and hedging practices, and also reviewed and refuted the plaintiff's expert's report, finding that there was no evidence shown to conclude that Morgan Stanley's alleged actions had impacted Magna stock prices.
The jury found that Morgan Stanley had traded Magna shares legally and without fraudulent intent.