Karches' nest egg yields $28m

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Peter Karches, the former global head of the institutional securities and investment banking division at Morgan Stanley Dean Witter who retired in August, earned an additional nest egg of over $28m (€32m) by exercising options on nearly 500,000 Morgan Stanley shares on the day before he retired.

The $28m paper gain he made on the shares adds to his already considerable fortune tied up in Morgan Stanley stock, which he built up during his 25-year career at the firm. According to SEC filings, he exercised the options on August 28, the day before his retirement was publicly announced by the firm. As a result, Karches owned 3.18 million shares in Morgan Stanley, which were worth over $336m at the time, based on a share price of $105.88.

Karches may be kicking himself now that he has yet to sell more of his stock. Since reaching a high of over $109 in early September, Morgan Stanley's share price has fallen sharply after it missed analyst expectations in its latest earnings report. On Friday, it was trading around $85.5 a share, more than 19% down from its peak, wiping over $64m from the value of Karches' personal holding.

It is understood that only John Mack, president and chief operating officer at Morgan Stanley, and Philip Purcell, chairman and chief executive, own more shares than Karches.

He joined the firm in 1976 and was made a managing director in 1985. Seven years later, he was appointed the head of fixed income, before being made president and chief operating officer of the institutional securities and investment banking division in 1997.

Karches has done significantly better out of his retirement than two other high-profile departures from investment banks in the past few months. Peter Hancock, the former finance director of JP Morgan, has just $35,000 of JP Morgan stock according to the same filings, while Neal Garonzik, the former vice chairman of Chase Manhattan, owns $2.9m of Chase stock.