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Morgan Stanley in cross hairs of California fraud-based complaint

It's Morgan Stanley's turn.

J.P. Morgan Chase already had a litigation go-round with the California Mortgage Fraud Strike Force, and coughed up $300 million in settlement money for its role in allegedly fleecing California's public pension funds with inappropriate investments and related fraudulent activities.

Ditto Bank of America, which settled with state authorities to the tune of $300 million, as well. Make that a $200 million ballpark figure for Citigroup Inc.

State Attorney General Kamala D. Harris is the individual who is officially pulling the trigger that has targeted all those investment behemoths, and it is eminently clear from the state's latest lawsuit (filed just last Friday) that California wants Morgan Stanley to pay for alleged improprieties in a big way.

The attorney general's words render that clear enough.

Morgan Stanley, she noted in a statement last week, "evidenced a culture of greed and deception that helped create a devastating economic crisis and crippled California's budget."

At the heart of the state's complaint is its charge that the bank inappropriately steered California's huge public pension funds into highly inappropriate residential mortgage-backed securities from subprime lenders. The state contends that it did so pursuant to a number of material misrepresentations. The litigation filing cites Morgan Stanley's violation of myriad state and federal securities laws.

Unsurprisingly, bank officials contest the allegations, stating that the securities were "sold to sophisticated institutional investors" and that their performance "has been consistent with the sector as a whole."

Notwithstanding the bank's seeming willingness to push back on the matter, though, company officials are likely more than a bit concerned, given the above-noted settlement outcomes reached with other investment banks.

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