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LVMH v. Morgan Stanley: Luxe Group Out to Show Major Damages in Case

LVMH’s war with investment bank Morgan Stanley could reach a new level this fall, according to the firm’s 2003 annual report.

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PARIS — LVMH Moët Hennessy Louis Vuitton’s war with investment bank Morgan Stanley could reach a high point this fall.

The French luxury goods giant vows to soon bring forth supporting evidence of “extremely substantial” damages caused by the investment firm, already ordered by a Paris court last January to pay 30 million euros, or $36.5 million, for “gross misconduct” related to its investment research.

That’s just one of the juicier nuggets that can be gleaned from LVMH’s recently released 2003 annual report and its accompanying legal and financial information. Other revelations include the fact that chairman Bernard Arnault was not the most compensated executive at the 11.96 billion euro, or $14.56 billion, firm and that LVMH lost a tidy sum — 139 million euros, or $169.2 million — to rid itself of underperforming and nonstrategic brands last year.

The Morgan Stanley case is discussed in the “litigation and exceptional events” section. As reported, the Paris commercial court appointed an expert, Didier Kling, to quantify material damages for what LVMH described as a premeditated and systematic effort to denigrate LVMH while favoring rival Gucci, which receives financial advice from Morgan Stanley.

Kling is expected to submit his findings this fall. The nature and content of LVMH’s supporting evidence could not immediately be learned.

Morgan Stanley is appealing the decision, denying any wrongdoing and standing by its equity research by luxury analyst Claire Kent. The appeal, set in motion last June, is now in a period of submissions and rebuttals that is sure to take the case into 2005.

Meanwhile, the report outlines details of the group’s executive compensation. Just over 1.2 million stock options were granted last year, more than half of them to Arnault at an exercise price of 37 euros, or $45. Group managing director Antonio Belloni, Arnault adviser Pierre Gode and vice president and special adviser Nicolas Bazire each were granted 200,000 options. Gilles Hennessy, a member of the board of directors, was granted 20,000 options.

Only two company officers exercised options last year, with Gode pocketing 1.22 million euros, or $1.49 million, and Hennessy gaining 140,000 euros, or $170,380.

Last year, Belloni and Gode were the most compensated executives at LVMH, with fixed and variable compensation and director’s fees totaling 2.2 million euros, or $2.68 million, for Belloni and 2.4 million euros, or $2.9 million, for Gode.
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