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July 13, 2004
Morgan Stanley Settles Landmark Discrimination Case for $54M

The Wall Street investment house Morgan Stanley agreed Monday to a whopping $54 million settlement of a sex discrimination lawsuit brought against it by the U.S. Equal Employment Opportunity Commission (EEOC) on behalf of female employees who believed they had been illegally passed over for pay raises and promotion in the firm's Institutional Equity Division.

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Morgan Stanley agreed to the settlement just as opening arguments were set to begin in what would have been the first trial in which a major Wall Street brokerage defended itself against sex discrimination claims. Instead, the firm agreed to a settlement that ranks among the largest ever negotiated by the EEOC. It also marks the first time that the terms of a sexual harassment settlement against a Wall Street brokerage have become public.

While the settlement applies only to Morgan Stanley, EEOC lawyer Elizabeth Grossman said the agency hopes it "sends a message to other firms on Wall Street to take claims seriously," the Long Island-based newspaper Newsday reports.

Critics have long complained that sexual discrimination pervades Wall Street culture, according to Newsday, which notes that fewer than one in five top-level managing director jobs are held by women.

The lead plaintiff in the case was Allison Schieffelin, a former Morgan Stanley broker who in 1998 filed a complaint with the EEOC alleging pay and promotion disparities. She also claimed that male brokers held key client meetings in strip clubs and barred their female colleagues from the venues, Newsday reports.

Schieffelin's attorney, Wayne Outten, said she is expected to receive $12 million for wrongful termination under the settlement.

The EEOC said another $40 million will go into a fund for other female employees of the IED--past and present--who believe they were discriminated against at any time since January 1, 1995.

Any money leftover in the fund will be used for scholarship programs for female students pursuing careers in the financial services industry.

Under the agreement, Morgan Stanley neither admits nor denies guilt. In a statement issued through the EEOC, the firm maintained that it has, at all times, treated its women employees fairly and equitably. Still, the settlement requires Morgan Stanley to provide at least $2 million for diversity programs designed to enhance the compensation and promotional opportunities for female employees.

"We are proud of our commitment to diversity, and would like to thank the EEOC staff for working with us to conclude this matter in such a positive way," Chairman and CEP Philip J. Purcell said. "We look forward to working with the EEOC in accomplishing our common goals."

Morgan Stanley has agreed to appoint an internal ombudperson and an outside monitor; implement management training on the federal anti-discrimination laws; perform promotion and compensation analyses; maintain a complaint data base; and implement programs to address the promotion and retention of women.

Newsday reports that after a year of failed settlement talks, the agreement came together over the weekend, after the seating on Friday of a mostly female jury for the trial.

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