State-Boston Retirement System is the court-appointed lead plaintiff in a federal class action filed in the Southern District of New York, alleging securities fraud involving Morgan Stanley, once one of America’s most prestigious and profitable financial services companies. Labaton Sucharow was appointed lead counsel, representing State-Boston and the investor class.

This case is about the largest loss arising from a single position in Wall Street history. All told, during its fiscal year 2007, Morgan Stanley recognized $9.3 billion in losses on its position in the subprime mortgage market.

On November 7, 2007, Morgan Stanley for the first time revealed that it had a $13.2 billion long position in subprime collaterialized debt obligations, which, unknown to investors, had been written down $1.9 billion in the third quarter of 2007 and $3.4 billion in the first two months of the fourth quarter. While large, these amounts allowed Morgan Stanley to meet Wall Street’s expectations exactly. Morgan Stanley was required, pursuant to GAAP and SEC regulations, to disclose the nature and size of this position no later than the second quarter of 2007. Further, Plaintiffs allege that Morgan Stanley understated the fair value decline of the position in the third quarter by $2.5 billion—i.e., the write-down should have been $4.4 billion, not $1.9 billion. Had Morgan Stanley done so, the bank would have reported a devastating loss—the first in its long history.

Labaton Sucharow filed a second amended class action complaint on June 9, 2011. Currently, the case is filed under the caption, McClure v. Morgan Stanley et al.