In an agreement hailed by a judge as a ``watershed'' for women on Wall Street, brokerage Morgan Stanley has agreed to pay $54 million to settle allegations of rampant sex discrimination.
The settlement announced Monday heads off a federal trial that promised ugly publicity for Morgan Stanley, with testimony from former employees about groping, lewd comments and men-only strip club outings for clients.
The deal was struck after weekend negotiations that involved the CEO of Morgan Stanley and the chairwoman of the Equal Employment Opportunity Commission, which brought the suit Sept. 10, 2001.
Under the settlement, $40 million will be earmarked for claims filed by women at the firm's institutional-equities division who say they have been discriminated against since 1995.
Separately, lead plaintiff Allison Schieffelin, a former Morgan Stanley bond seller who claimed she was denied promotions at the firm because she is a woman, will be paid $12 million.
Morgan Stanley will also set aside $2 million to pay for diversity training and anti-discrimination programs.
``The consent decree is a watershed in safeguarding and protecting the rights of women on Wall Street,'' said U.S. District Judge Richard M. Berman, who was to hear the trial beginning Monday.
The EEOC represented hundreds of women who claimed men at Morgan Stanley invited clients on male-only strip club outings and golf trips, groped women and made sexually charged comments.
In addition, the EEOC claimed women were passed over for promotions because of their gender. Morgan Stanley acknowledged that few women were promoted to the highest levels of the firm but denied discrimination.
Schieffelin, 42, who made $1.35 million in 1998, was fired in 2000 after claiming she was passed over for a promotion to managing director. She has said Morgan Stanley ``destroyed my career.''
She hugged her parents and supporters in court Monday after the settlement was announced.
``I have one comment: What I want to say is that I am so happy that there is a great settlement that's good for everybody,'' Schieffelin told reporters outside court.
She declined to say whether she would return to work in the financial services industry.
The case was to be the EEOC's first sex-discrimination trial against a Wall Street firm. Most similar cases end in settlements, but talks in the Morgan Stanley matter collapsed last year.
Berman said lengthy weekend negotiations had resulted in the last-minute settlement. He said EEOC chairwoman Cari M. Dominguez and Morgan Stanley CEO Philip J. Purcell were personally involved in the talks.
``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,'' Purcell said in a statement.
The claims fund, covering women who have worked in Morgan Stanley's institutional equities division since 1995, will be overseen by Abner J. Mikva, a former Illinois congressman and federal appeals court judge.
``We hope this sends a message to other employers on Wall Street to take discrimination complaints seriously,'' said Elizabeth Grossman, the EEOC's supervisory trial lawyer.
The training programs will be presented at Morgan Stanley offices in New York and London, with other employees participating by videoconference or by viewing tapes.
The settlement does not cover attorney fees, except to provide $1,000 to cover legal fees for any Morgan Stanley woman receiving a claim from the fund.
The judge stressed that he was not ruling on the merits of the case by approving the settlement. In fact, settlement papers say Morgan Stanley denies violating any anti-discrimination law.