Disgraced FrontPoint Manager Fights $10.8M Morgan Stanley Bill

Jan 15 2013 | 12:06pm ET

Former FrontPoint Partners hedge fund manager and convicted insider-trader Joseph Skowron's lawyers have asked a federal appeals court to cancel most if not all of the $10.8 million he was ordered to pay Morgan Stanley.

The bank sought and won the order against Skowron after he pleaded guilty to using confidential information he received from a doctor to help FrontPoint avoid $30 million in losses. Skowron led the formerly high-profile hedge fund's healthcare portfolios.

But his lawyers yesterday told the U.S. Second Circuit Court of Appeals that the money never belonged to Morgan Stanley, which bought FrontPoint in 2006, and that Skowron did not obtain his position by fraud.

"Skowron's compensation, his right to it, was due to an employment agreement," lawyer Joshua Epstein told the Manhattan court, and not proceeds of his fraud. The trial court judge ordered Skowron to repay Morgan Stanley 20% of his compensation from 2007 through 2010, or $6.4 million. He was also ordered to pay $3.8 million to cover the bank's legal fees.

"The reality is, had he not lied, he would have been fired immediately," Kevin Marino, a lawyer for Morgan Stanley, said, citing Skowron's alleged deception of Morgan Stanley during its own probe into his insider-trading.

Morgan Stanley had sought $44.9 million from Skowron, and is currently suing him for more than $65 million. Skowron is serving a five-year prison sentence.

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