Morgan Stanley's Smear Campaign

Morgan Stanley sought to destroy Mr. Young’s reputation on Wall Street in the Commercial Mortgage Backed Securities ("CMBS") industry by persistent fabricated attacks on his character, calling into question his professional skills and managerial competence.  This way, it would be impossible for Mr. Young to obtain comparable employment, thereby preserving the value of Morgan Stanley's CMBS franchise generally . . . and the IQ® brand, specifically.  In addition, their efforts served to cover-up the fraud hatched by Warren Friend and John Westerfield, and supported by others in the "inner sanctum" of Morgan Stanley.  Evaluated below are five of the 97 "Big Fat Lies" Morgan Stanley included in their submitted "Answer" (to Mr. Young's claim) to the NASD, which memorialized the pervasive smears propagated by word of mouth throughout the CMBS industry.  Each Big Fat Lie is thoroughly dispelled by "The Truth", and corroborated by Morgan Stanley's own records, which are accessible by hyperlink -- just click on the blue underlined text below:

Big Fat Lie # 1 “Young’s claim that he made substantial improvements [to the Morgan Stanley Conduit] that increased production five-fold to $2.5 billion . . . is unsupportable . . . a misrepresentation  . . . and an instance of taking credit for something he had nothing to do with” This statement by Morgan Stanley was intended to discredit an especially remarkable accomplishment of Mr. Young's, especially since: (1) he did so in his second year with the firm; (2) the CMBS Market was shut down for the last four months of 1998, (triggered by the Russian Sovereign Debt default); and (3) historically 40% of annual business volumes were realized in the fourth quarter.  In other words, had the global debt markets not turned upside down, the annual business volume would have likely been $5.0 billion, representing a ten-fold increase.  Morgan Stanley's mendacious statement also called into question Mr. Young's personal integrity, and is what Mr. Young often heard attributed to Morgan Stanley from others in the CMBS industry.  The person principally responsible for circulating these salacious lies is John Westerfield, and what makes this so noteworthy is how obvious his fraud is in comparison with the official personnel evaluations he himself submitted on behalf of Mr. Young, along with other respected senior executives, as summarized below:   John Westerfield (Managing Director of Real Estate Debt Capital Markets) in his 1997 Performance Evaluation of Mr. Young: “[Spencer] has had very significant influence in the organization . . . Helped to bring management organization to the group . . .  pushed and implemented many of the key changes in the conduit, which has permitted the group to increase volume to $1.3 Billion [vs. $0.5 Billion last year]” John Westerfield (Managing Director of Real Estate Debt Capital Markets) in his 1998 Performance Evaluation of  Mr. Young: “[Spencer has made numerous positive organizational changes . . . and was able to use his goal orientation and management skills to really deliver and get results . . . Spencer's thoughtful planning are the reasons he is able to reach the goals set for him . . . he sets goals, keeps track of them and achieves results” Bill Smith, (Global Head of Morgan Stanley Real Estate Investment Banking) in his 1998 Performance Evaluation of Mr. Young: “Spencer has had a major impact on the organization and management of the [Morgan Stanley Conduit].” Jon Groesbeck (Executive Director – Fixed Income Sales – West Region) in his 1998 Performance Evaluation of Mr. Young: “Spencer has done an incredible job bringing all the resources together to build a credible commercial conduit business . . . he is perceived highly for his knowledge and integrity” The 1998 fiscal year-end conduit production report reflecting all production under his purview (e.g., “Large Loan” transactions or otherwise), supports the following facts:  1998 Loans Closed = $2,457,532,994  (or $2.5 billion); and 1998 Loans Securitized = $2,715,593,407 (or $2.7 billion).

Big Fat Lie # 2   “He washed out of the Principal Group because of his repeated errors and lack of teamwork  . . . he often failed as a team player. . . He often failed to keep his peers informed.” "The Truth" is Spencer C. Young requested to be transferred out of Morgan Stanley's Principal Transactions Group because of Mr. Westerfield's significant managerial shortcomings.  In addition, Mr. Young’s colleague, George Kok, who was Chief Credit Officer, quit shortly after Mr. Young transferred out -- for the very same reasons.  And the notions of Mr. Young not being a team player and that he fails to communicate are so patently absurd, they are an apostasy -- for in Mr. Young’s case, the numerous performance evaluations of Mr. Young during his tenure at Morgan Stanley (1997 through 2002) directly refute such statements beyond all doubt.  This deliberately malicious fabricated personal attack was concocted by John Westerfield, and once again blatantly contradicts the very performance evaluations he submitted on Mr. Young, as noted below. John Westerfield (Managing Director of Real Estate Debt Capital Markets), in his 1997 Performance Evaluation of Mr. Young: “[Spencer Young] acted in a strong team player way and worked hard to make changes without being intrusive to others” Bill Smith (Group Head of Morgan Stanley Real Estate Investment Banking), in his 1998 Performance Evaluation of Mr. Young: “People like Spencer who has a pleasant personality  . . . he worked well with all the Dean Witter people and has been well received in the branches  . . . he is a Great team player” Tony Tufariello (Head of Morgan Stanley Securitized Product Group, Americas), in his 1999 Performance Evaluation of Mr. Young: "Spencer communicates very well with the entire group . . . a Great Guy to have on the team.” Jon Groesbeck, (Executive Director – Fixed Income Sales – Western Region), in his 1999 Performance Evaluation of Mr. Young: “Spencer is in a class of his own . . . he has the respect and confidence of both clients and peers . . . Spencer works well with others in the firm and is a total team player”. John Marzonie (Executive Director – Fixed Income Sales – Midwest Region), in his 2002 Performance Evaluation of Mr. Young: “By far, Spencer is one of the best at Morgan Stanley to communicate with the team at all levels.”  Jim Bowman (Executive Director – Fixed Income Sales – Midwest Region) in his 1998 Performance Evaluation of Mr. Young: “Spencer is a real pro . . . he articulates information clearly and effectively . . . he is an extremely valuable member of the team” Liz Haberkorn (Executive Director – Real Estate Debt Capital Markets), in her 1998 Performance Evaluation of Mr. Young: “Spencer has strong management skills and manages teams well to get the deal done.” Sanjeev Khanna (Executive Director – Securitized Products – Finance Group) in his 2002 Performance Evaluation of Mr. Young:   “Spencer is excellent at building consensus team goals” Jon Strain (Managing Director & Head of Morgan Stanley’s Securitized Products Trading Desk), in his 2002 Performance Evaluation of Mr. Young: “Spencer is very professional in his approach and . . .  has the best call report [communication] skills I have ever read . . . he is very diligent about communicating”. Various Analysts & Associates in their 2002 Performance Evaluations of Mr. Young: “One of Spencer’s greatest strengths is his willingness to connect with all members of the team, including junior members.” . . .  “[Spencer] by far makes the most effort to include and communicate with all members of the team” [Note:  The 2001 Performance Evaluation process was cancelled by Morgan Stanley due to the Sept. 11 attacks, and the integrity of the 2000 Performance Evaluation Process was compromised by the “mysterious disappearance” of more than ten submitted evaluations, which Morgan Stanley was unable to account for – notwithstanding the Performance Evaluations from 1997, 1998 1999 and 2002 present an accurate depiction of Mr. Young’s being the consummate team player with outstanding communication skills.]

Big Fat Lie # 3 “He made no contribution to the AXA [Agribusiness Monetization] transaction [which was the largest transaction of its kind and largest single transaction fee earned by Morgan Stanley’s Securitized Products Group in 2002]” This statement by Morgan Stanley is so fallacious, it is beyond the pale – In reality, Spencer Young drove and oversaw every aspect of this transaction, including developing the final recommendation, bringing in the winning bidder (Farmer Mac), negotiating the final transaction terms with Henry Edelman, the CEO of Farmer Mac, selecting and closely monitoring the work of the due diligence firm (Univest, the same firm Mr. Young used exclusively at JPMorgan, when he was the Chief Operating Officer of JPMorgan’s Conduit), and overseeing every aspect of the transaction’s execution, so that it became the resounding success that it was, as noted below.   Sanjeev Khanna (Executive Director – Securitized Products – Finance Group) in his 2002 Performance Evaluation of Mr. Young  –   “We were able to complete the innovative AXA agricultural portfolio monetization because Spencer stuck with the opportunity . . . he continuously pushed the client through each phase of the execution” Betsy Gibson (Analyst), in her 2002 Performance Evaluation of Mr. Young:  “Spencer did an excellent job during the AXA transaction in getting and keeping the rest of the team involved . . . As a junior member of the team it means a lot that he took the time to make sure that I was involved and not left out of any part of the process” Peter Noris, Chief Investment Officer at AXA / Equitable Insurance would attest to Mr. Young’s direct and intimate involvement in this transaction, and said "I'll add my thanks,  I know it was much harder than it looked" Mike Vitale, Global Group Head of Real Estate at AXA / Equitable Insurance (and with whom Mr. Young worked when he was Treasurer and Controller of Citicorp Real Estate), would attest to Mr. Young’s direct and intimate involvement in this transaction, and said:  "Your professionalism and team effort made what in reality was a complex and unique undertaking look relatively easy." Nicki Livanos, Vice President of Real Estate at AXA / Equitable Insurance was the person heading up the transaction on the client end, who was so impressed with Mr. Young’s leadership on this transaction, she signed on to become of the seven Principals in Phase 1 of Project Atlas and submitted a detailed business plan for the large loan segment she was to handle. Gail McDonnell, Managing Director and Head of the "Sell Side" of Morgan Stanley's Securitization Products Group ("SPG") in response to Mr. Young posting her on completion of the deal, issued an email throughout Morgan Stanley stating: "Outstanding client feedback.  Congratulations on a great transaction and a strong client report card . . . Way to go." Tony Tufariello, Managing Director and Head of SPG acknowledged the transaction to be a "great job" when he advised him the transaction had been completed successfully.

Big Fat Lie # 4   “The IQ® program was [not] his idea” and he “overstated his role in the IQ transactions” The notion that the IQ® concept was not Spencer C. Young's idea is patently absurd  – for an overwhelming amount of evidence exists to corroborate his being the concept originator and the driving force behind bringing his vision for it to frution.  It began with his strategic business recommendations in April 1997, and continued through the closing of seminal transactions in 2001 and 2002.  Moreover the suggestions by others on the team to call the new product SPENCER® [an acronym for Special Purpose Entity No Credit Enhancement Required], so that the Shelf Registration with the Securities & Exchange Commission could be marketed as “Spencer for Hire” are especially elucidating.  In addition, Project Atlas Principals [further described in a separate section to this document], who were also real estate and capital markets group heads at the various firms participating in the IQ® deals would be able to testify as to Mr. Young’s innovative and leadership role in making this new brand a reality.  Importantly, numerous other emails which Morgan Stanley withheld from Discovery would certainly provide further proof that these statements by Morgan Stanley are nothing but Big Fat Lies intended to undermine Mr. Young’s credibility in the CMBS industry – for Mr. Young was the concept developer and architect of the IQ® (“Institutional Quality”) brand of CMBS, which was the most successful proprietary product of its kind, initially carrying an intrinsic shareholder value in excess of $250 million at the time of its development, and considerably more thereafter.

Big Fat Lie # 5 “From almost the beginning of his employment, Mr. Young got along poorly with his co-workers” This statement by Morgan Stanley is obviously false because it defies common sense, for if it were true, Mr. Young would never have: Been promoted to Executive Director; Received large bonuses and pay increases year-after-year Been put in charge of major initiatives of strategic importance [e.g., The Dean Witter “CreditSource® Commercial” Program]; Received glowing performance evaluations year-after-year along the lines of a “strong team player.”, “Great team player.”, and “total team player”, who is “a real pro” and “an extremely valuable member of the team”, who is “in a class of his own”. . . because “one of his greatest strengths is his willingness to connect with all members of the team” and who “by far makes the most effort to include and communicate with all members of the team”, such that he is “one of the best at Morgan Stanley to communicate with the team at all levels”.   Throughout all levels of the organization from Bill Smith (Head of Real Estate Investment Banking), who said "“People like Spencer" . . . that he has "a pleasant personality" and had "worked well with all the Dean Witter people in the more than 200 branches throughout the United Statesand has been well received in the branches  . . . he is a Great team player”