Financial Exposure

Shortly after Easter 1998 a funny thing happened at the offices of one of Wall Street's great investment-banking firms. In the gleaming tower that's home to Morgan Stanley Dean Witter, amid the spreadsheets and debentures that only an M.B.A. could love, there appeared another, very different kind of reading material--the June issue of Playguy. Nobody's saying who brought in Morgan Stanley's first widely disseminated piece of gay porn, but it was clear why. On the cover of the glossy magazine: Morgan Stanley's own Christian Leigh Curry, a black 24-year-old analyst. The headline: SPECIAL DELIVERY: OUR MESSENGER BRINGS BOOTY RIGHT TO YOUR DOORSTEP! The inside pages were even spicier. Along with ads for sex toys and Dial-a-Hunks were eight pages of the 6-foot-2 Curry in various states of undress and, er, prominent arousal. What would old J. Pierpont have thought?

Probably something like, "Fire the guy." And that's exactly what happened--except Morgan Stanley says Curry was let go shortly thereafter because of extensive expense-account fraud. The magazine spread, according to this version, had nothing to do with it. Curry says otherwise, claiming racial discrimination and homophobia (even though he says he's not gay). He makes these charges in the most eye-catching document of all--a billion-dollar lawsuit filed last month that has had the New York financial and legal establishments abuzz. The tabloids have had their usual fun, and even the more sedate New York Times and Wall Street Journal have given Case No. 99-4035 repeated play.

It's easy to see why: Morgan Stanley is a bulwark of American capitalism, brokering deals for the most powerful corporations in the world. It prides itself on discretion, secrecy, mystique. So it was the least likely setting for a tale of sex and money, intrigue and treachery--one that involves a $10,000 payment by Morgan Stanley to an informant who was friends with Curry, a sting operation, the Manhattan D.A.'s office and a criminal investigation of Morgan Stanley itself in connection with the $10,000 payment. Last week the firm's top lawyer, Christine Edwards, resigned her position in the fallout from the growing controversy. Another senior lawyer quit under pressure. Morgan's chairman, Philip Purcell, was forced late last week to acknowledge the firm had made serious mistakes. The stakes are high: Curry risks more public humiliation. Morgan Stanley could lose a truckload of money and faces courtroom dissection of its club-by culture. It is a case where nobody's going to come out a winner.

Curry had a perfect pedigree for Morgan Stanley. Raised in an upper-class New York family, the son of a prominent Manhattan surgeon, he went to an array of elite schools and was primed for the kind of professional life that Wall Street offered. Columbia varsity basketball player, violinist and pianist--Curry seemed golden, and comfortable in different racial settings. His family summered on eastern Long Island, where the rich and famous gather to flaunt their wealth. When the Shinnecock Hills Country Club wanted to admit black members, Curry's father got one of the calls. So it was hardly surprising that Christian Curry, fresh out of college, started in Morgan Stanley's real-estate department in the summer of 1997. He remembers his first day. "I couldn't wait to get to work," he told NEWSWEEK.

But Curry had done something three years earlier that would come back to haunt him. He was interested in modeling and decided to get a portfolio; it was partly vanity and partly a desire to have some of his own money. A photographer agreed to waive his $1,000 fee if Curry posed nude. "The photographer put on a video of a guy and a girl having sex," Curry says. "He wanted me to have erections. I am an idiot. I'm never going to justify those pictures." Still, he signed a consent form that gave up control of the photos.

According to Doug McClemont, editor of Playguy (circulation: 80,000) and other gay-porn magazines, Curry's release made it clear the photos might end up anywhere. McClemont says Curry even filled out the part of the release that asked for an alias, choosing to use his middle name, Leigh. "I had 300 slides of him naked," McClemont told NEWSWEEK. "It's not as if [the photographer] said, 'Can I take a fast roll of film?' " McClemont bought publication rights for three magazine spreads--one in Inches in September 1996, another in Black Inches six months later and then the Playguy package. Curry says these photos were a youthful indiscretion. But that may turn out to be slightly disingenuous. McClemont says Curry posed another time for a new photographer. McClemont turned the shots down, telling the photographer, "Oh, I'm sorry. I have too many on this guy." Curry's lawyer, Benedict Morelli, says he's not aware of these other photographs.

Days after the June issue of Playguy started circulating in the offices of Morgan Stanley, Curry was dismissed. His complaint, now in federal court, alleges he was fired because of discrimination based on perceived sexual orientation--a violation of New York law. Curry says in his complaint that his colleagues called him a "monkey" and a "faggot," and that one manager said he had "never seen someone laugh so hard as when I showed the magazine of that faggot" to another member of the firm. Curry's complaint also alleges racial discrimination. He says, for example, that a senior white member of his department one day saw him wearing a Shinnecock Hills tie and remarked: "That club is very exclusive. Are you a caddie?" Curry told NEWSWEEK he was also asked to "put on an Afro" wig and fake oversize lips in front of Bill Lewis, who is black and a member of Morgan's real-estate department, at a company Christmas party (Curry refused).

Confronting that barrage of accusations, Morgan Stanley filed the legal equivalent of a shrug last week. "Launched with press conferences and continuous attempts to attract media attention to plaintiff's sensationalist charges," its court reply says, "this action is nothing more than a well-orchestrated extortion scheme cloaked with a caption and a docket number." The gist of Morgan's defense: Curry was terminated after 10 months for being a thief. His alleged expense-account violations--there are more than 150 examples--Morgan says, were "willful and brazenly premeditated." The firm says Curry would submit "dining" expense bills for purchases at stores like F.A.O. Schwarz and Blockbuster Video, and expense claims from such establishments as Flashdancers, a Manhattan strip club. Morgan Stanley insists it had decided to fire Curry before Playguy came out. Curry's lawyer, who hasn't seen the expense reports, says Morgan's allegations are untrue. "Mr. Curry was not stealing from them," Morelli says. But he adds that expense-account abuses are common at Morgan and that his client is being singled out.

The story gets even stranger. Two months after his dismissal, Curry hooked up with an old Columbia chum named Charles Joseph Luethke. What happened when they got together back in June 1998 depends on who's telling the story. Curry says Luethke approached him; Luethke supposedly had information that Morgan's computers contained racist and homophobic e-mail. But Luethke says Curry wanted to break into the computers to plant the incriminating e-mail evidence; Luethke reportedly taped Curry laying out the alleged plot. Working with Morgan Stanley and Luethke, the NYPD entered the case and ran a sting against Curry, who was arrested and charged with paying $200 to an undercover cop to get into Morgan's computers. Morgan Stanley then paid Luethke $10,000. (Luethke would not agree to an interview with NEWSWEEK.) In court documents, the firm later described the payment as a "reward" to a "whistle-blower informant"--one that its lawyers called "entirely legal."

Morgan Stanley's payment to Luethke created a set of legal and public-relations nightmares more damaging than any collection of nude photographs. The firm failed to keep the Manhattan D.A.'s office fully informed of its investigation into Curry, which has led the D.A. to decide to investigate Morgan Stanley itself. And because the $10,000 payment called Luethke's credibility into question, prosecutors decided last month to drop criminal charges against Curry. Curry and Luethke now call each other liars, and Curry says Luethke harassed his fiancee. Meanwhile Morgan Stanley faces the possibility of prosecution for such possible offenses as falsifying business records in this case. In stepping down last week, the firm's lawyers seemed to take the fall for their role in overseeing Morgan's payment to Luethke. The outside law firm now handling the Curry suit did its own review of Morgan's conduct and last week issued a critical report (though it declared Morgan hadn't violated any laws). A fuss over expense accounts and nude pictures has bought Morgan Stanley a lot more exposure than it ever banked on.

Career in Brief Christian Curry had it all going for him when he got that first high-powered job. Then the trouble started...

7/7/97 Curry hired as a real-estate analyst at Morgan Stanley

11/97 Curry expenses a trip to Flashdancers, a strip club near Morgan Stanley headquarters. It is rejected.

4/98 Curry appears on the cover of Playguy magazine, and copies make their way to the firm

4/22/98 Morgan Stanley fires Curry, citing expense violations

7/98 Charles Luethke informs the firm Curry is planning to plant false e-mails, and sets up a sting with police

7/20/98 Police arrest Curry on at least five felony charges. Five days later Morgan Stanley lawyers pay Luethke $10,000 with chief legal officer Chris-tine Edwards's knowledge. The district attorney isn't informed.

5/18/99 The D.A. drops charges against Curry because of the payment. One day later, Curry files $1.35 billion lawsuit.

5/27/99 Morgan Stanley suspends two lawyers

6/10/99 Christine Edwards, their boss, steps down