updated 4/13/2005 1:08:27 PM ET 2005-04-13T17:08:27

Morgan Stanley’s top investment banker joined the ranks of high-level executives departing the embattled investment firm Wednesday, while the company’s board of directors told a group of dissident shareholders it has full confidence in Chief Executive Phil Purcell.

Joseph Perella, a star of Wall Street investment banking for more than two decades, is resigning in an “orderly transition” as head of Morgan Stanley’s investment banking operations, according to his personal spokesman, Tim Metz. Metz would not comment on Perella’s reasons for leaving.

Perella, 63, is the latest in a string of high-level executives to leave Morgan Stanley amid a controversy over its lackluster performance under Purcell. Terry Meguid, 49, Perella’s deputy, was also expected to step down as early as Wednesday, a person close to the matter told The Associated Press.

Meanwhile, in a letter to the eight leaders of the dissident group, the 10 non-executive members of Morgan Stanley’s board urged the group to stop its attacks on the company.

“The Board of Directors has considered each of your communications,” the board wrote in the letter, made available by the company. “We have full confidence in Phil Purcell and the strategy that management is pursuing. We are carefully monitoring the performance of Morgan Stanley.

“It is clear to us that your ill-considered, professionally-directed attacks on Morgan Stanley and our people are damaging the firm and our shareholders,” the letter continued. “We ask you to desist.”

A spokesman for the dissident group did not immediately return a call seeking comment.

Shares of Morgan Stanley fell 66 cents, or 1.21 percent, to $53.82 in midday trading on the New York Stock Exchange. The stock has traded between $46.54 and $60.51 over the past 52 weeks, but has dropped nearly 8 percent since April 4.

The latest resignations, first reported in The Wall Street Journal, come as Morgan Stanley wrestles with the departure of other top executives, including former President Stephan Newhouse, and top investment executives Vikram Pandit and John Havens. The latter three resigned after Purcell removed Newhouse as president, replacing him on March 28 with co-presidents Zoe Cruz and Stephen Crawford, both of whom also have been added to Morgan Stanley’s board.

With the departure of Perella and Meguid, five of the 14 members of the company’s management committee have resigned within the last three weeks. The others are Newhouse, Pandit and Havens.

A Morgan Stanley spokesman had no comment on the departures of Perella and Meguid.

The latest departures will likely lend credence to the dissidents who have called for Purcell to be fired or resign, saying his policies are causing a “brain drain” as top people leave the firm in protest. The dissidents have claimed Purcell has rewarded his loyalists at the expense of more qualified executives.

The group seeks to supplant Purcell with former President Robert Scott as CEO and an unnamed non-executive chairman.

The departures also have highlighted the continuing rift between former Dean Witter employees, who came with Purcell to Morgan Stanley in the 1997 merger, and long-time Morgan Stanley workers. The dissidents — all of whom have roots in the pre-merger Morgan Stanley — said Purcell has used this division in the ranks to shore up his position as chairman and CEO.

The continuing drama has created concern among the company’s shareholders. On Tuesday, the Council of Institutional Investors, a group of big public and corporate pension funds, asked for meetings with the board of Morgan Stanley and the dissidents so they could ask questions of them.

Individual pension funds, including the California Public Employees’ Retirement Fund and the American Federation of State, County and Municipal Employees, have already expressed concerns about Morgan Stanley’s direction, performance and stock price.

Perella, has been with Morgan Stanley since 1993. He and Bruce Wasserstein built the merger practice at Credit Suisse First Boston in the 1980s, then left in 1988 to form Wasserstein, Perella & Co.

Metz said Perella is not retiring and hopes to continue working on Wall Street in some capacity.

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