Morgan Stanley must pay $8.01 million in deferred compensation to an energy trader the firm fired for not meeting with government investigators in 2009, a Financial Industry Regulatory Authority arbitration panel ruled.
Amit Gupta was awarded $4.7 million of stock units he was promised from 2006 to 2008 and a deferred-cash award of $1.84 million from 2008, plus interest, according to the panel’s Aug. 29 ruling. Gupta, who earned more than $64 million in pay during his time at Morgan Stanley, also sought as much as $14.2 million in lost earnings from 2010 to 2012, the ruling shows.
Morgan Stanley didn’t consider “mitigating circumstances” and follow contractual obligations when it chose to fire Gupta for cause after he refused to meet in 2009 with the Manhattan District Attorney’s office, which was investigating a trade, arbitrators wrote without elaborating on the probe. No charges were ultimately brought against Gupta.
“Mr. Gupta received no fair, reasoned, fully-informed. individualized consideration of his circumstances,” arbitrators wrote in the ruling. “The decision to terminate him ‘for cause’ was so flawed that it does not constitute valid action by Morgan Stanley.”
Morgan Stanley is among Wall Street firms that have increased pay deferrals and strengthened clawback provisions to recoup compensation from employees fired for cause in the wake of the financial crisis. Morgan Stanley last year expanded the list of misconduct that might trigger such penalties.
One of the three arbitrators dissented. Gupta’s decision was on the advice of his lawyers after an assistant district attorney said he believed Gupta had committed “a pretty clear violation” of criminal law, wrote John Martin, the dissenting arbitrator. Gupta knew at the time that Morgan Stanley policy required he cooperate with the inquiry, Martin wrote.
Mark Lake, a spokesman for New York-based Morgan Stanley, declined to comment. Eric Seiler, an attorney for Gupta, said he was pleased with the ruling and that it speaks for itself. Reuters reported the decision earlier today.