Excerpts: Morgan Stanley Misses Deal Harmony With Colm Kelleher – Paul Taubman Clash

  • Colm Kelleher and Paul J. Taubman, co-heads of Morgan Stanley’s biggest business, work on opposite sides of an ocean, disagree about strategy and share an enmity that has become the subject of company jokes.
  • Neither Kelleher, 54, a gregarious former fixed-income salesman, nor Taubman, 50, a reserved investment banker, responded to the taunt, said the people, who asked not to be identified because they weren’t authorized to speak. Kelleher has been more vocal offstage, insulting Taubman in front of colleagues, according to two former Morgan Stanley executives.
  • While the unit generated $8.78 billion of revenue and $1.7 billion of profit in the first half, accounting for 79 percent of the firm’s total earnings, the feud has led to an estrangement of investment-banking and trading operations at the sixth-largest U.S. bank by assets, some of them said.
  • The 76-year-old firm, which traces its roots to the financial empire built by J. Pierpont Morgan, was the world’s top adviser on mergers and acquisitions announced last year and runs the largest brokerage.
  • A chartered accountant, he has worked at Morgan Stanley for 22 years. He ran the firm’s capital-markets business and was chief financial officer during the 2008 financial crisis, when Morgan Stanley secretly borrowed $107 billion from the Federal Reserve, the most of any bank.
  • Taubman owns a Central Park West co-op that he bought from actor Robin Williams and which sustained $1 million in damages in a 2008 fire started by a candle in a neighboring penthouse, according to an insurance lawsuit filed in July. He contributed $35,400 to support Barack Obama’s presidential campaign, according to federal records, and arranged for the candidate to meet bank executives six weeks before the 2008 Iowa caucuses.
  • One current and two former colleagues called it an official acknowledgement of the lack of collaboration. A fourth, a former Morgan Stanley executive, likened the move to a schoolteacher separating squabbling children.
  • Two former executives who worked under the co-head structure said they heard Kelleher refer to Taubman in front of colleagues with a slur. One said Kelleher added that Gorman had asked for civility.
  • Both men have a lot riding on the bank’s success. Kelleher owns $5.74 million of the firm’s shares after selling 12 percent of his stock in February. Taubman bought 50,000 shares last month. His holdings are worth $17.4 million, making him the second-largest insider shareholder behind former CEO John Mack, who is stepping down as chairman at the end of the year.
  • Kelleher was awarded 137,072 shares for his 2010 performance, while Taubman received 137,170, according to regulatory filings. Each received $1.5 million worth of options.
  • Greg Fleming, a former colleague of Gorman’s at Merrill Lynch & Co., was brought in last year to run the firm’s asset-management unit and this year took on the role of leading the retail brokerage.

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