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Showing the distinction between its commercial banking services and its investment funds services, Morgan Stanley's bank apparently took it on the chin last week as the Ochs-Sulzberger family -- the control interest of The New York Times Co. -- pulled some or all of its funds from the bank.

The family's ire has been raised over the course of the last 18 months, as Hassan Elmasry, the managing director of London-based Morgan Stanley Investment Management -- which owns 7.6 percent of Times Co. stock -- has agitated to force the family to give up control of The Times Co.

The Times Co., like many publicly held media businesses, has a two-tiered stock system, where the controlling family owns a class of shares that elects a majority of the board of directors, while regular shareholders elect only a minority.

Elmasry believes that poor management -- specifically Arthur Sulzberger Jr., the company's chairman and publisher of the flagship New York Times -- is to blame for the company's share value drop. Over the last four years, shares have gone from a Feb. 11, 2004, high of $49.23 to a low of $21.25 on Aug. 17, 2006, off 56.8 percent (shares closed Friday at $24.17, up 5.5 percent week-over-week).

The family's response is that running the New York Times is a public trust and that without the structure, businessmen wouldn't maintain editorial quality.

In addition to public comments, last year Elmasry tried to get a resolution onto the proxy ballot calling for the dismantling of the two-tiered structure; The Times Co., with the blessing of the Securities and Exchange Commission, refused to include the resolution.

But apparently the family recently decided that enough was enough. "Custody of the majority of the assets of the Ochs-Sulzberger family are being moved from Morgan Stanley to another institution," said Catherine Mathis, a Times Co. spokeswoman, said on Friday. The company wouldn't provide a figure, but Fortune magazine, which broke the story on its web site, speculated that it could be as high as $640 million.

Top executives at Morgan Stanley apparently are so concerned about illustrating the independence of the investment fund management that they haven't stopped Elmasry, despite the company's cash loss. They have even gone so far as to retain a separate public relations firm to handle Elmasry's quest.

This is a fight Elmasry can't win and one would hope that now that there is no conflict of interest between the two Morgan Stanley divisions, somebody at the top will stop him.

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Date:Feb 5, 2007
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