Earlier this week, I blogged about Morgan Stanley's litigation problems with Ronald Perelman. I notice now that the W$J is reporting that MS is warning investors that it may need to "increase the reserve" from $260 million. This was interesting:

Initially, some financial analysts felt the decision to take the $260 million charge was excessive. During the firm's first-quarter conference call on March 17, David Trone, an analyst at brokerage firm Fox-Pitt Kelton, a unit of Swiss Re, said that he thought it appeared that Morgan Stanley had "a very good position," and that he was surprised about the "magnitude" of the charge. He did not return a call yesterday seeking comment on the firm's announcement that it may have to increase the charge.

At this distance, it's hard to know what information was available to Mr. Trone, but recent reports of the judge's decision paint a very bleak picture for MS. I was about to write that this is another example of an MBA who should have spoken to a lawyer before making legal judgments, but then I noticed that earlier this week MS filed a motion in the Perelman litigation stating that it "has lost all confidence in any statement or representation made" by its lawyers at Kirkland & Ellis LLP. The motion also stated that MS had placed Kirkland on notice "of a potential malpractice claim" arising out of its representation. What a mess.

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