Friday, February 09, 2007, 2/09/2007 07:34:00 AM

Trade Secrets and Morgan Stanley Hedge Funds

From a news release from the U.S. Attorney's Office for the Southern District of New York on Media Newswire, the United States Attorney announced that a former employee of Morgan Stanley, Ira Chilowitz, pleaded guilty in Manhattan federal court to charges relating to the theft of proprietary information regarding Morgan Stanley's hedge funds.

Chilowitz worked for Morgan Stanley's Prime Brokerage Division which provides financial and administrative services to numerous hedge funds. As a consultant to Morgan Stanley in its Information Technology Department, Chilowitz was responsible for establishing secure computer connections between Morgan Stanley and its Prime Brokerage clients. In that position, Chilowitz had access to numerous confidential and proprietary documents belonging to Morgan Stanley, including a list of all of Morgan's Prime Brokerage hedge fund clients ( the "Client Rate List" ) and the formulas used to calculate rates paid by clients to Morgan for certain prime brokerage services. Data in the Client Rate List is not generally known to the public and is valuable to competitors of Morgan.

The criminal information to which Chilowitz pleaded contains a reference to a co-conspirator 1 to whom the information was passed. That individual was not named and the U.S. Attorney says the investigation is on-going.

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