Witness: Sunbeam Deal Based on Morgan Advice

The man who served as billionaire Ronald Perelman’s chief negotiator in a corporate deal that soured testified Wednesday that he relied on Morgan Stanley’s advice during those talks.

Perelman is suing Morgan Stanley for $2.7 billion in damages, alleging that the investment bank knew of accounting irregularities at its client, appliance maker Sunbeam Products Inc., but concealed them so Sunbeam could buy Perelman’s stake in camping equipment company Coleman Inc.

Perelman sold his 82% stake in Coleman to Sunbeam in 1998 for $1.5 billion, part of it in stock. Shortly afterward, Sunbeam’s problems were exposed and the value of Perelman’s investment plummeted. Sunbeam sought bankruptcy protection in 2001.

James Maher, who held various executive positions from 1995 to 2000 at a holding company for Perelman, said material supplied by Morgan Stanley supported Sunbeam’s own presentation of a company that had been transformed and was in a position to take advantage of opportunities.

The Morgan Stanley material referred to Sunbeam as a company “that represents an attractive growth story and investment opportunity with tremendous intrinsic value ... and a strong management team,” Maher said.

“It was my view that it was reasonable for Coleman to accept Sunbeam shares, and I advised Perelman accordingly,” Maher said.

Morgan Stanley lawyers have denied that the company misled Perelman. In a blow to the defense, Florida Circuit Judge Elizabeth Maass in West Palm Beach ruled that Morgan Stanley knew of the fraud but that Perelman must prove to the jury that he relied on the firm’s word when he accepted the deal.