UPDATE 1-Morgan Stanley cleared in Russian tycoon's insider trading lawsuit

Fri Nov 13, 2015 6:08pm EST
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(Adds detail on verdict, background on case)

By Brendan Pierson

NEW YORK Nov 13 (Reuters) - Morgan Stanley did not cheat a company controlled by Russian tycoon Oleg Deripaska by engaging in insider trading at the height of the financial crisis, a U.S. jury found on Friday.

The verdict by a federal jury in Manhattan came on the second day of deliberations in a case filed in 2012 by Veleron BV, a Dutch company controlled by Deripaska, owner of industrial group Basic Element.

The jury determined that although Morgan Stanley had acquired inside information and traded on it despite a duty to keep it confidential, the financial services firm did not have the intent to defraud Veleron.

Aaron Marks, who represented Veleron, said he was considering a motion to set aside the verdict, although U.S. District Judge Colleen McMahon said she would likely have set aside a jury finding against Morgan Stanley.

"The evidence made it crystal clear that our employees acted in good faith at all times," Morgan Stanley said in an emailed statement.

The dispute arose from Deripaska's 2007 investment, through Veleron, in Canadian auto parts maker Magna International . That investment was financed with a $1.2 billion loan from BNP Paribas, with Veleron's Magna shares as collateral.

Morgan Stanley agreed to act as BNP's agent to sell off Veleron's Magna stock if the borrower defaulted, and assumed some of the risk through a swap agreement. Morgan Stanley did not deal with Deripaska or Veleron directly.   Continued...