Morgan Stanley, which borrowed more than $107 billion from the Federal Reserve in 2008 — more than any other bank during the recessionary crisis that year — contends a longtime Snowmass Village art institution is after the international financial-services firm’s “deep pocket.”
The conglomerate denies any wrongdoing in an embezzlement case that sparked a lawsuit in Pitkin County District Court by Anderson Ranch Arts Center in which Morgan Stanley is a defendant. The bank in March filed a motion to dismiss the case.
The nonprofit arts center sued the firm in August 2011, along with the center’s former accountant, Marlana Howell, to try to recoup more than $736,000 that she embezzled from Anderson Ranch. She is on parole after serving about 17 months of a four-year prison sentence for felony theft.
The arts center’s claims against Morgan Stanley include negligence and breach of contract. The firm is accused of failing to inquire about Howell’s authority to withdraw Anderson Ranch funds; and relying on an authorized individuals form she provided “that was defective on its face,” and which had no force or effect in granting Howell authority to withdraw money, according to Anderson Ranch’s lawsuit.
Morgan Stanley’s attorney, David Goldberg of Denver, wrote in the motion to dismiss that the company held a securities investment account for Anderson Ranch and that the ranch’s controller was authorized to give orders on the account. When Howell was hired for that job, Anderson Ranch instructed Morgan Stanley “to deal with” her, the motion says.
According to Anderson Ranch, Howell transferred more than $321,000 from the Morgan Stanley account into her personal bank account in 2007 and then fraudulently withdrew another $415,000 from a separate investment account held by Bessamer Trust. Howell, who according to court records took the money because she was upset about a housing allowance, used the money to buy a camper, two motorcycles and a pick-up truck, among other items.
As an agent of the ranch, Howell was “authorized to transact in the plaintiff’s account with Morgan Stanley ...,” says the motion to dismiss. “Each of the plaintiff’s three claims against Morgan Stanley rely upon the theory that [the company] should not have permitted Howell to make certain transactions in the plaintiff’s account with Morgan Stanley.
“None of these claims are legally cognizable, though, because Howell was in fact authorized to order transactions for the plaintiff.”
Goldberg wrote that the transfers from the Morgan Stanley account did not go into Howell’s personal account, as Anderson Ranch alleges, but went either directly to the arts center or into a ranch account with another financial institution. It was the $415,000 from the Bessamer Trust account that went directly to Howell, Goldberg’s motion says.
Because Morgan Stanley mailed regular statements to Anderson Ranch, and ranch officials also had electronic access to the account, the plaintiff “knew or should have known of the allegedly unauthorized activity in its account with Morgan Stanley no later than the date it received its statement for the prior month,” the motion says.
The lawsuit also should be dismissed because it was filed after the two-year statute of limitations for such alleged offenses, Goldberg wrote.
In late April, Anderson Ranch’s attorney, David Lenyo of Aspen’s Garfield and Hecht law firm, filed a motion opposing dismissal of the lawsuit. The financial company violated “ordinary standards of care and commercial reasonableness in the banking industry by wrongfully disbursing Anderson Ranch funds to [Howell] because she was never authorized through a duly adopted corporate resolution to withdraw funds from” the Morgan Stanley account, Lenyo wrote.
The statute of limitations is not a factor because Anderson Ranch officials did not discover Howell’s actions until Aug. 27, 2009. The lawsuit was filed Aug. 5, 2011.
And the court also must weigh in on when Anderson Ranch should have discovered the fraudulent withdrawals and if the ranch “exercised reasonable diligence in discovering the wrongful withdrawals by Aug. 27, 2009,” the opposition motion says. Because of those factors, Morgan Stanley’s motion to dismiss should be denied, Lenyo wrote.
A status conference in the case is scheduled for today.