By DAVID MOON, Moon Capital
November 17, 2002
Everyone has a favorite crazy lawsuit story. I have shared a couple in
these pages over the years. Suits like the New Brunswick (Canada) father
who is suing the local youth sports organization for not awarding his son the
annual Most Valuable Player award. Sixteen-year-old Steven Croteau was so
hurt and humiliated at not winning the trophy, he retreated home from the awards
banquet, shoved his hockey equipment in the corner, and proclaimed he had no
interest in playing the sport again. Croteau's father says of his son, "he
was so sure of himself he took $50 of his own money to buy a nice shirt and tie
to look good that night. He was so embarrassed."
There is no word yet if Tanya Harding is involved in this sordid case of
hockey rink hostility.
It's bad enough to lose $50 after you think you're a lock for MVP of the New
Brunswick junior hockey league. But imagine losing $250,000 in your stock
portfolio because you relied on your broker's recommendation to invest all of
your money in a single stock. These days, in many cases like this,
investors are quick to sue their brokers, claiming they never understood the
risks involved. This would be a bit hard for John Tripi; he is a broker
for Morgan Stanley in New York. Or, at least he was, before losing a pile
of money investing in a stock recommended by a Morgan Stanley analyst. He was so
upset and damaged by the losses caused by his own employer's analyst, he filed a
$1 million suit against the firm. He couldn't sue the broker; he WAS the
Tripi is no longer employed by Morgan Stanley.
As a rookie broker in 2000, Tripi bought more than 3,000 shares of Copper
Mountain Networks, a California telecommunications company. He claims he
based his purchase on a strong 'buy' recommendation by Morgan Stanley analyst
Alkesh Shah. Tripi spoke with Shah almost weekly and was encouraged by the
analyst's constant bullish recommendation on the company - even after the shares
began a precipitous decline. Only after the stock had declined 80 percent
did Shah ever reduce his recommendation from "outperform" to "neutral." (I
have always assumed that a "neutral" recommendation meant that a stock had
declined so much from where an analyst initially recommended it that surely it
couldn't do any worse than the overall market from its current prices.)
John Tripi wants Morgan Stanley to pay him a million dollars because the
company couldn't protect him from himself. I wonder about the poor clients
of Mr. Tripi. Do you think he did any better job with their investments
than he did his own?
According to the Wall Street Journal, Mr. Tripi's attorney claims the only
training Tripi received was in how to sell to his clients; he relied solely on
the Morgan Stanley analysts for research and investment advice.
If Tripi was so incompetent or ill-trained, why did he take his own
advice? If anyone should have known John Tripi couldn't pick stocks, it
should have been John Tripi. Morgan Stanley has dozens of analysts with
recommendations on hundreds of stocks. Tripi chose this one.
Tripi is now working in a profession where he is often gives advice but is
unlikely to ever be sued for poor consultation. He is a
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).