A global investment banking giant will write a check for $130 million to two of the biggest public pension systems in America as part of agreement settling allegations of knowingly selling bad investments.
California Democratic Attorney General Xavier Becerra announced the settlement with Morgan Stanley on Thursday. He said the bank will pay $122 million to the California Public Employees' Retirement System, another $8 million to the California State Teachers' Retirement System, and approximately $20 million to the Attorney General's office for a grand total of $150 million.
The bank was accused of selling to CalPERS and CalSTRS bundles of thousands of mortgage loans in the early 2000s, but did not adequately assess the loans in an effort remove those considered the too risky. Becerra clamed the bad investments cost the retirement systems more than $100 million.
"Morgan Stanley lied about the risk of its products and put profits over teachers and public employees who relied on its advice," said Becerra. "(Thursday's) settlement holds Morgan Stanley accountable for misleading Californians who were unfairly blindsided. Our office has recovered over $1 billion from cheaters on Wall Street since the financial crisis. Our work isn’t over."
Morgan Stanley is not admitting to any wrong-doing in the settlement agreement.