The lawsuit by Anderson Ranch Arts Center against Morgan Stanley will continue after an Aspen judge earlier this month denied the financial services firm’s efforts to have the case dismissed.
The nonprofit organization in Snowmass Village sued the conglomerate last year for negligence and breach of contract, alleging that Morgan Stanley’s actions helped Anderson Ranch’s former accountant embezzle more than $711,000 in 2007 and 2008.
Anderson Ranch had an account with Morgan Stanley to deposit donated stocks and other securities for immediate sale, according to court documents.
The nonprofit’s former accountant, Marlana Howell, was charged with managing and protecting the funds. She was arrested in 2009 after Anderson Ranch officials found 30 transfers from two of the nonprofit’s accounts into her personal bank account.
According to court records, Howell took the money because she was upset about a housing allowance, and used it to buy a camper, two motorcycles and a pick-up truck, among other items. She is on parole after serving about 17 months of a four-year prison sentence for felony theft.
Morgan Stanley 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.
The financial firm sought to have the lawsuit dismissed. Among Morgan Stanley’s arguments were that the statute of limitations had run out on Anderson Ranch’s claims and that Howell was authorized by the nonprofit to make transactions involving the account.
Judge Gail Nichols of Pitkin County District Court on Dec. 10 denied all of Morgan Stanley’s motions to dismiss.
Regarding the statute of limitations claim, Nichols wrote in her ruling that Howell’s actions took place between Feb. 2, 2007, and Jan. 24, 2008, and that Anderson Ranch sued Morgan Stanley on Aug. 5, 2011. That time frame is outside both the three-year statute of limitations window for breach of contract claims and the two-year window for negligence claims.
But Anderson Ranch claimed in its responses to the dismissal motions that it did not know of the transactions until 2009, putting both claims within the statute of limitations, Nichols’ ruling says.
On the issue of whether Howell had “express” authorization to withdraw funds from the account, Morgan Stanley’s attorney, David Goldberg, pointed to a statement by former Anderson Ranch controller John Redmond, who is now Pitkin County’s finance director.
Redmond told a Morgan Stanley representative “to deal with the new controller for Anderson Ranch, Marlana Howell, after his resignation,” court documents show.
“Even assuming that Redmond had authority to withdraw funds from the plaintiff’s Morgan Stanley account, his oral statement to ‘deal with’ the new controller does not, on its face, grant the new controller authority to withdraw funds from [the] account,” Nichols wrote.
There also is the issue of the authorization form, the ruling says.
According to the form, Anderson Ranch designated Howell as its representative with authority to write checks and withdraw funds from the account.
“At the end of the document is an illegible signature, under which is written, ‘President, Anderson Ranch Arts Center,’” Nichols wrote. “Morgan Stanley asserts — without verification — that this signature belongs to Hunter O’Hanian, the then-president of the plaintiff.”
But in an affidavit, O’Hanian stated that he does not recall ever seeing the form and he “cannot authenticate whether or not the signature ... is actually [his] signature or a forgery,” Nichols wrote. He “never authorized Marlana Howell to withdraw funds from the Morgan Stanley account. Only the board of directors and the finance committee had such authority.”