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The New York
Smear Campaign

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The Intent

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. Their intent was to make it impossible for Mr. Young to reemerge in the CMBS industry, 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 cultivated by Warren Friend and John Westerfield, and eventually supported by others in the "inner sanctum" of Morgan Stanley, particularly when this matter began to take on a life of its own, as the stakes continued to increase substantially. 

The Analysis

Evaluated below are five of the 97 "Big Fat Lies" Morgan Stanley included in their submitted "Answer" (to Mr. Young's filed claim for compensatory damages) to the NASD, which effectively memorialized the pervasive smears propagated by word of mouth throughout the CMBS industry.  Each Big Fat Lie is exposed as such and dispelled by "The Truth", proven by Morgan Stanley's own records, quoted throughout this analysis, and the details of which are accessible by hyper-link, denoted as blue underlined text. Morgan Stanley also sponsored an especially malicious smear campaign in North Carolina, and attempted a smear campaign that was national in scope.

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Big Fat Lie # 1

Young’s claim that he made substantial improvements
to the Morgan Stanley Conduit and 
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 a remarkable accomplishment by Mr. Young, especially since: (1) he accomplished this 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 starkly this CONTRADICTS the official personnel evaluations Mr. Westerfield submitted on Mr. Young, which were also consistent with the evaluations of others, as noted below.

"The Truth" is this:  Spencer C. Young was "the straw that stirred the CMBS Conduit drink" at Morgan Stanley, and was, without question, the driving force behind making Morgan Stanley a market leader in this area -- and the empirical evidence is overwhelming -- For prior to Mr. Young's arrival in 1997, Morgan Stanley had a sequential array of people attempt to run the Morgan Stanley CMBS Conduit.   Among them were: Arvid Bajaj (he failed); Russ Rahbany (he failed so miserably, clients demanded he be relieved of his responsibilities); Liz Haberkorn (although she had good marketing skills, she failed because her management skills were lacking); and George Kok (brought strong credit management skills, but failed to generate sufficient business volume).  Shortly upon his arrival, Mr. Young conducted a detailed assessment and formulated an extensive list of recommended changes, which he successfully implemented as evidenced in the performance evaluations reflected below. 

Performance Evaluations of Mr. Young
When He Was Running Morgan Stanley's CMBS Conduit
Evaluations Submitted By:

 John Westerfield -- Managing Director of Morgan Stanley's Real Estate Debt Capital Markets Group
  "Spencer has . . . . . . helped to bring management organization to the group"
. . . pushed and implemented many of the key changes in the business approach and direction
. . . permitted the group to substantially increase business volume”
. . . been able to use his goal orientation and management skills to really deliver and get results"
. . . instituted thoughtful business planning"
. . . set clear goals, kept track of them and achieved real results"
. . . been able to reach the goals set for him 
Bill Smith -- Global Head of Morgan Stanley's Real Estate Investment Banking Business
“Spencer has . . . 
. . . had a major impact on the management of the Morgan Stanley Conduit”
Jon Groesbeck -- Executive Director – Morgan Stanley Fixed Income Sales – West Region
“Spencer has . . .
. . . built a credible commercial conduit business"
. . . always been perceived highly for his knowledge and integrity”
. . . distinguished himself and is in a class of his own"

Important Note:  Morgan Stanley's 1998 Fiscal Year-End Conduit Production Report confirms: 


Big Fat Lie # 2  

“He washed out of the Principal Group 
because of his repeated errors  . . . 
he often failed as a team player and . . . 
he often failed to keep his peers informed.

Let's analyze the three elements of this BOMBASTIC LIE
  "repeated errors" -- This is a boilerplate ad hominem used in all Morgan Stanley smear campaigns against former employees; no instances were included in their filed response to the NASD -- enough said;  
  "failed as a team player"  -- The submitted evaluations (see below) fully contradict this, including the two people who concocted this apostasy (John Westerfield and Tony Tufariello)
  "failed to keep his peers informed" -- As evidenced by the below evaluations, this one is patently absurd for Mr. Young was said to be the best in the business in this regard

"The Truth" is this:  Spencer C. Young requested a transfer out of Morgan Stanley's Principal Transactions Group ("PTG"), co-headed at the time by Messrs. Westerfield and Tufariello.  He did so because of their significant managerial shortcomings evidenced by a failure to address 11 critical business strategy issues.  In fact, Mr. Young’s colleague, George Kok (Chief Credit Officer), quit for the same reasons shortly after Mr. Young's transfer.  Moreover, Mr. Young was concerned about their cavalier management of business risks for the PTG, which later proved prophetic, as Messrs. Westerfield and Tufariello were found to be responsible for causing BILLIONS in losses and forced to "retire" (i.e, fired)nearly bringing an end to Morgan Stanley, and playing a direct role in nearly bringing the U.S. economy to its knees in 2008.

Performance Evaluations of Mr. Young
Throughout His 6-Year Tenure at Morgan Stanley
Evaluations Submitted on the Subjects of Teamwork and  Keeping Peers Informed By:

  John Westerfield -- Managing Director of Morgan Stanley's Real Estate Debt Capital Markets Group
  "Spencer has . . .
    . . . acted in a strong team player way"
. . . worked hard to make changes without being intrusive to others”

   Bill Smith -- Morgan Stanley's Global Head of Real Estate Investment Banking
  "Spencer . . . 
  . . . has worked well with all the Dean Witter people" 
[shortly after the merger of Morgan Stanley and Dean Witter]
. . . is a Great team player

  ⇨ Tony Tufariello -- Head of Morgan Stanley Securitized Product Group, Americas
"Spencer . . . 
. . . communicates very well with the entire group"
. . . is a Great Guy to have on the team

   Jon Groesbeck -- Executive Director – Morgan Stanley Fixed Income Sales – West Region
"Spencer . . .
. . . works well with others in the firm"
  . . . is a total team player”.

    John Marzonie -- Executive Director – Fixed Income Sales – Midwest Region 
  "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 
  “Spencer . . . 
  . . . is a real pro"
. . . articulates information clearly and effectively"
. . . is an extremely valuable member of the team

  ⇨ Liz Haberkorn -- Executive Director – Real Estate Debt Capital Markets
“Spencer has strong management skills and manages teams well to get the deal done.”

    Sanjeev Khanna -- Executive Director – Securitized Products – Finance Group
“Spencer is excellent at building consensus team goals

    Jon Strain -- Head of Morgan Stanley’s Securitized Products Trading Desk 
“Spencer . . .
. . . is very professional in his approach to communicating with others"
. . . has the best call report [communication] skills I have ever read"
. . . is very diligent about communicating

    Analysts & Associates at Morgan Stanley
"One of Spencer’s greatest strengths is his willingness to connect with all members of the team"
“Spencer by far makes the most effort to include and communicate with all members of the team



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Big Fat Lie # 3

“He made no contribution to the AXA Deal"
[Involving the monetization of
agribusiness loans for AXA Financial]

This statement by Morgan Stanley is also BOMBASTICALLY FALSE.

"The Truth" is this:  Spencer Young drove and oversaw EVERY aspect of this transaction, including: (1) developing the final recommendation; (2) bringing in the winning bidder (Farmer Mac); (3) negotiating the transaction terms with Henry Edelman, the CEO of Farmer Mac; (4) selecting and closely monitoring the work of the due diligence firm which Mr. Young brought in to do the the investigative underwriting analytics on the deal.  Univest is the firm Mr. Young engaged exclusively for underwriting and due diligence when he was Chief Operating Officer of JPMorgan's CMBS Conduit.  Without question, it was Mr. Young's direct involvement in EVERY aspect of this transaction, that made it the resounding success that it was, as noted below.

   Sanjeev Khanna -- Executive Director – Securitized Products – Finance Group
“Spencer . . .
. . . enabled us to complete the innovative AXA agricultural portfolio monetization"
. . . stuck with the opportunity and pushed the client through each phase of the execution
  Betsy Gibson -- Analyst -- Securitized Products - Finance Group
 Spencer did an excellent job during the AXA transaction in keeping the rest of the team involved"
 "As a junior member of the team it means a lot that Spencer took the time to make sure that 
     I was involved and not left out of any part of the process
  Henry Edelman - Chief Executive Officer -- Farmer Mac
Mr. Edelman can confirm Farmer Mac would not have purchased the $500,000,000 + pool of farm loans from
AXA Financial had Mr. Young not been intimately involved in the transaction.  Moreover the correspondence
Morgan Stanley and Kirkland & Ellis withheld during "Discovery" is another instance of obstruction of justice 
and will also prove this out.

Mike Vitale, Global Group Head of Real Estate at AXA / Equitable Insurance 
[Note:  Mr. Young worked with Mr. Vitale when he was Treasurer / Controller at Citicorp Real Estate.]  
Mr. Vitale will attest to Mr. Young’s intimate involvement in this deal.  In a post-transaction email, he said:
"Your professionalism and team effort made what in reality was a complex and unique undertaking
  look relatively easy."

   Peter Noris, Chief Investment Officer at AXA / Equitable Insurance
   Mr. Noris will attest to Mr. Young’s direct and intimate involvement in this transaction, and shared:
I'll add my thanks,  I know it was much harder than it looked"
 Nicki Livanos, Vice President of Real Estate at AXA / Equitable Insurance
Ms. Livanos headed up the transaction on the client end and was so impressed with Mr. Young’s leadership
  she signed on to become of the seven Principals in Phase 1 of Project Atlas to run the large loan 
business segment.  She can also attest to Mr. Young's involvement in EVERY aspect of this transaction.
 Gail McDonnell -- Managing Director and Head of Morgan Stanley's Securitized Products Finance Group
In response to Mr. Young posting her on completion of this seminal transaction and glowing client feedback,
she forwarded Mr. Young's email throughout Morgan Stanley adding:
"Outstanding client feedback.  Congratulations on a great transaction and 
a strong client report card . . . Way to go."
 Tony Tufariello, Managing Director and Head of the Securitized Products Group, Americas
Mr. Tufariello also acknowledged the transaction to be a "great job" when he was advised by Mr. Young 
the AXA Financial transaction had been completed successfully.

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Big Fat Lie # 4  

The IQ® program was not Spencer Young's idea . . . 
. . . and he's 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.

"The Truth" is This:  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 [the team of professionals who signed up to work for Mr. Young in a fully-integrated merchant banking operation] will corroborate Mr. Young’s leadership role and driving force in making this highly successful franchise a reality.  This group were also the real estate and capital markets group heads at the various firms participating in the IQ® deals.

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 altogether.

"The Truth" is this:  If there were any veracity to such a damning indictment, Morgan Stanley would NEVER have allowed such a liability to make it past their first year at the firm.  For anyone unable to get along with their co-workers is rooted out IMMEDIATELY . . . in fact, the culture is such that any "hiring mistakes" are run out of town well before their one-year anniversary.   Moreover, during Mr. Young's highly success-laden SIX years with the firm, Morgan Stanley would have NEVER:

⇨ Promoted Mr. Young to Executive Director after only 21 months with the firm;
⇨ Paid Mr. Young bonuses every year he was with the firm, at levels that are eye-popping to most Americans
⇨ Increased Mr. Young's base compensation year-after-year
⇨ Allowed Mr. Young to run their CMBS Conduit business for four years
⇨ Dispatched Mr. Young to frequently represent Morgan Stanley as a distinguished speaker at conferences or as a panelist at industry symposiums
⇨ Asked Mr. Young to represent Morgan Stanley in advertisements touting its #1 ranking as largest issuer and underwriter of CMBS 
⇨ Put Mr. Young in charge of major initiatives of strategic importance to the firm [e.g., The Dean Witter “CreditSource® Commercial” Program];

Asked Mr. Young to head up investment banking teams year-after-year and travel the country and lead the presentations to pitch Morgan Stanley's products and services to senior executives at scores of major financial institutions provided him with 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”.  

And it is because of Mr. Young's outstanding interpersonal skills that he was able to cultivate such a loyal client following that the most impressive group of financial institution clients in the CMBS industry transferred their CMBS business from JPMorgan to Morgan Stanley, when he made his move. As Bill Smith (Head of Morgan Stanley's Global Real Estate Investment Banking), said in his personnel evaluations of Mr. Young: People like Spencer" . . . because he has "a pleasant personality" and has "worked well with all the Dean Witter people" (note:  Morgan Stanley and Dean Witter merged in 1997) . . .  "and has been well received [in the more than 500 branches located throughout the United States]" . . . and making it a point to add "he is a Great team player”.

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