(Bloomberg) -- Ex-Morgan Stanley fund manager Joseph “Chip” Skowron, who’s serving a five-year prison term for insider trading, must pay back $31 million in compensation for failing to fulfill his duties to the bank, a judge ruled.
U.S. District Judge Shira Scheindlin today agreed with Morgan Stanley that Skowron was a “faithless servant” and must forfeit salary and incentive pay from April 2007 to November 2010.
Skowron, 44, managed Morgan Stanley’s FrontPoint Partners LLC until he was charged in 2011 with using inside information to avoid $30 million in losses. The bank sued Skowron after he pleaded guilty to conspiring to commit securities fraud and obstruct justice.
“Insider trading is the ultimate abuse of a portfolio manager’s position and privileges because it goes to the heart of his primary areas of responsibility,” Scheindlin said in her opinion. “In addition to exposing Morgan Stanley to government investigations and direct financial losses, Skowron’s behavior damaged the firm’s reputation, a valuable corporate asset.”
Morgan Stanley today dropped a claim for punitive damages against Skowron.
Joshua Epstein, a lawyer for Skowron, didn’t immediately respond to a phone message after regular business hours seeking comment on the ruling.
In August 2011, Skowron admitted using secret tips he got from a French physician to help FrontPoint avoid more than $30 million in trading losses on Human Genome Sciences Inc., a Rockville, Maryland, pharmaceutical firm that was acquired by GlaxoSmithKline Plc.
Skowron, a Yale University and Harvard University-trained doctor who quit medicine for Wall Street, is serving his term at McKean Federal Correction Institution in northwestern Pennsylvania, according to the Federal Bureau of Prisons website.
The case is Morgan Stanley v. Skowron, 12-cv-08016, U.S. District Court, Southern District of New York (Manhattan).