Washington state is reneging on a tentative settlement with Morgan Stanley that would have resolved accusations that the investment firm gave bad investment advice to Microsoft Corp. employees.
The settlement was initially reached between the national investment firm and the state’s top securities regulator, Deborah Bortner.
The Spokesman-Review reported Tuesday that Bortner was demoted as chief of the state’s securities division for political reasons.
According to a story in the Wall Street Journal Tuesday, Bortner’s reassignment followed several disagreements over the settlement with Helen Howell, the director of the Department of Financial Institutions.
Howell reportedly rejected Bortner’s pact with Morgan Stanley, which called for the company to pay $200,000 and change its practices, calling it too lenient. Morgan Stanley has said the initial deal was binding and plans to fight the state’s turnabout.
Bortner said that she and Howell have clashed since late 2002, when Gov. Gary Locke appointed Howell. Bortner had been with the securities division for 23 years, the last 10 as chief. She was a vocal critic of Spokane-based Metropolitan Mortgage & Securities Inc., which filed for bankruptcy three months ago.
The allegations against Morgan Stanley involve two brokers who talked Microsoft employees into risky investment strategies. The employees were urged to exercise their stock options, then sell the Microsoft stock to buy shares of other high-tech companies that disappeared when the tech bubble burst.
According to the Wall Street Journal, Howell determined that the $200,000 fine “was not tough enough” and might not be legally enforceable.
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