in the analyst training program at Morgan Stanley Dean Witter &

Company. Oh, what a lucky–or is that fortunate ?–bunch they

will be. There, in the Times Square headquarters of the bluest of the

blue-chip investment banks, they will be trained in the art of making

money, for their clients and themselves. They will learn to keep their

dealings secret and their relationships lucrative and warm. They will learn

how to work hard, perform menial tasks, keep grueling hours. But if they

are any good, they will learn quickly enough that there is a dividend. If

you work hard, remain discreet, nurture those connections–the world is

yours.

In other words, they will have to be everything that Christian Curry was

not. A little over a year ago, Mr. Curry, then a 24-year-old renegade

analyst from a good school and a better family, got fired for his workplace

indiscretions: namely, allegedly padding his corporate expense account with

purchases like $300 worth of designer shoes (if not for appearing naked and

aroused in a gay pornographic magazine).

No sooner had Mr. Curry's cubicle been cleared than an old

frat-house acquaintance, a student of big-business etiquette with a knack

for finding stuff out, began burrowing his way into Morgan Stanley's

inner circles. The burrower was Charles Joseph Luethke, a 29-year-old man

with an uncertain past and a penchant for scandal. By ingratiating himself

with business associates, police and even Mr. Curry, Mr. Luethke scored

himself $10,000 for getting his old friend arrested on charges of computer

hacking. The Manhattan District Attorney's office has dropped the

charges, and Mr. Curry has filed a $1.35 billion wrongful-termination suit

against his former employer, charging discrimination.

And, in an ironic twist, it's Mr. Luethke and Morgan Stanley who

are now being investigated by the District Attorney. And, The

Observer has learned, the New York Police Department has launched an

internal probe into its dealings with Mr. Curry and Mr. Luethke, too.

It's a tale of manners, really. Morgan Stanley is all about

discretion and connection. Mr. Luethke mastered the art of making–or

pretending to make–connections. He got in. Mr. Curry, on the other

hand, either did not know how to be, or chose not to be, discreet, both in

his expense account filings and in his appearance in the gay porn magazine.

He got kicked out. He violated the code: In exchange for money and power,

you protect that of others. You don't embarrass the firm, even

inadvertently. You don't talk to the press about the firm. (Remember

Phil Potter, the Yalie who got himself fired in 1997, and upbraided by

Morgan Stanley president John Mack, for telling The New York Times

what he was buying with his bonus.) And you don't try to steal from

the firm.

Of course, everyone bends the rules a little bit. In the training

program at Morgan Stanley, analysts often take liberties in their expenses.

According to several former Morgan Stanley trainees, the analysts are often

forced to cover expenses on business trips for their superiors. Sometimes

the analysts, who are making, say, $70,000, have to carry tens of thousands

of dollars on their credit card, paying the interest on the float until the

back-office bureaucrats reimburse them months later. So maybe you charge a

couple more bucks for a cab, or take a friend out to dinner and write it

off. It's a way to keep things fair, in an old prep-school

honor-system kind of way.

But if Morgan Stanley's reply to Mr. Curry's suit is to be

believed, Mr. Curry went much further than that. According to Morgan

Stanley's answering court papers, filed in Manhattan's U.S.

District Court for the Southern District on June 7, he filed more than 150

fraudulent expense claims, seeking "hundreds of dollars of

reimbursements" for such personal purchases as Cole-Hahn shoes, liquor

and car washes. They also allege that he fabricated expenses on a stolen

pad of receipts and offered a Morgan Stanley employee a $100,000 bribe to

plant racist e-mails.

Mr. Curry's attorney, Benedict P. Morelli, scoffs at Morgan

Stanley's explanation. "I think it's ridiculous to say that

there were 150 abuses of the expense account … But let's assume

for a moment that there's 150 of these, and in their own answer, they

say there's 150 and it amounts to hundreds of dollars! … So each

one was what, a buck? Maybe down there in the ivory tower where they sit,

these things sound plausible. But to a jury, these sound

ridiculous."

Ridiculous or not, the point Morgan Stanley is trying to make is, it

wasn't race. The firm says 20 percent of its U.S.-based employees are

minorities, including some managing directors like Bill Lewis, who helped

Mr. Curry get his job, according to Morgan Stanley's papers. But when

asked how many people have been fired for expense account abuse, a

spokesman for Morgan Stanley said he couldn't comment.

In fact, in the eyes of many observers, it had nothing to do with

expenses or race. Before the response was filed on June 7, people all over

Wall Street were snickering at Morgan Stanley's response to the suit.

Expenses? Yeah, right. It was the cock shots! But now that

they've seen Morgan's explanation for the expense account

violations, they get it. They're buying the allegations, and what the

firm says this guy was doing you just don't do. He wouldn't

play the game.

The Blue-Chip Thing

Despite Mr. Curry's allegations of racial

discrimination–and his depiction of a plantation atmosphere at

Morgan–some say the fallout of the District Attorney's

investigation is part of a larger picture, that of Morgan Stanley's

1997 merger with Dean Witter Discover & Company. "There is sort of

an internal battle at Morgan Stanley between [their] people and the Dean

Witter people," said a source familiar with the firm's inner

workings. "You can imagine the two different cultures, I suppose:

Morgan Stanley, being this old-line investment bank, and Dean Witter up

until recently being Sears–a retail investment service."

Of the Morgan Stanley Dean Witter in-house lawyers who were involved

with Mr. Luethke, the two who have been suspended with pay, Monroe

Sonnenborn and Carol Bernheim, hail from the Morgan Stanley side of the

bank. Christine Edwards, the general counsel whose roots are strictly Dean

Witter, has not yet been censured for her dealing with Mr. Luethke, which,

according to the firm, consisted of not disapproving the $10,000 payment

when she learned of it just before it was wired.

But some of the shrapnel is beginning to clip Ms. Edwards, a University

of Maryland at Baltimore law graduate and former Sears Roebuck clerk, who

lacks the blue-chip corporate-law-firm pedigree typical of a general

counsel at a bulge bracket investment bank. When news accounts reported

that she approved the payment, people inside Morgan Stanley have grumbled

among themselves and to The Observer about how she came to be

general counsel. After the merger, she beat out Jonathan Clark, Morgan

Stanley's general counsel and an accomplished corporate lawyer from

Davis Polk & Wardwell (and, of course, Yale). A Davis Polk guy,

the grumbling goes, would not have allowed this kind of thing to happen.

He'd have known how to handle it. He was one of us .

Now the whole Curry affair shows signs of becoming a cudgel that can be

wielded by the Morgan Stanley and Dean Witter factions in their continuing

but very quiet battle for turf at the merged firm. When it comes to company

politics, any leverage will do, even if exercising it hurts the firm

publicly."People on the Morgan side have been waiting for someone on

the Dean Witter side to make a mistake," said one banker familiar with

the firm. "So now the shitstorm is bigger than the kid who started it

[Mr. Curry]."

In a cryptic statement given to The Observer on June 7 and

apparently in response to Morgan Stanley's court papers, Mr. Luethke

alluded to such an intrafirm dispute. "Obviously this issue is now

being used to oust the Dean Witter people and has nothing to do with

me," he said.

Wesley McDade, a spokesman for the firm, would only say, "Morgan

Stanley's answer, as filed in Federal court, speaks for

itself."

It's Who You Know

But even amid the turmoil, some things never change. The oldest game

in town, making connections and dropping names, still gets you places.

That's how Mr. Luethke managed to work simultaneously with Morgan

Stanley, the Police Department and Mr. Curry, without tipping his hand

significantly to any of the parties–and in the process make a $10,000

profit. To set up Mr. Curry in the sting last August, Mr. Luethke played

the name game. Through a series of personal acquaintances, ranging from Mr.

Curry to partners at one of the city's largest employment law firms,

Mr. Luethke schmoozed his way into the confidence of top in-house lawyers

at Morgan Stanley.

Mr. Luethke did not return calls for this story by press time and did

not appear for a scheduled June 8 meeting.

One of Mr. Luethke's key conduits into the firm was his

acquaintance with a number of attorneys at Epstein, Becker & Green, the

employment-law firm where Carol Bernheim, one of the suspended Morgan

Stanley lawyers, was a partner until 1997. A source close to the firm said

that Mr. Luethke met George Sape, a partner at Epstein Becker, and several

other firm attorneys at a Manhattan cigar bar, sometime before Mr.

Curry's arrest last year. The source said Mr. Luethke approached the

lawyers in a friendly way, using his knowledge of fine wine–an

interest shared by Mr. Sape–to make conversation. "Luethke seemed

quite normal," said the source. "There was nothing unusual about

him."

At some point, Mr. Luethke began playing softball for the firm's

team–an informal collection of lawyers and their friends–and may

have been introduced to founding partner Ronald Green in that way. (Neither

Mr. Sape nor Mr. Green has publicly admitted knowing Mr. Luethke.)

A spokesman for Epstein Becker confirmed Mr. Luethke's acquaintance

with the firm's lawyers. "Luethke was known to many attorneys at

the firm, just through social acquaintance," said the spokesman.

"At some point, he came to an attorney at the firm with information

that was potentially damaging to a client of the firm, Morgan Stanley, and

Epstein Becker transmitted that information to Morgan Stanley, as I believe

is their professional responsibility to a client when that information

comes forward."

Meanwhile, Mr. Luethke had been making some calls of his own to the

legal department of Morgan Stanley, ostensibly to warn officials directly

about Mr. Curry's alleged plan. Sources close to the investigation

said that in so doing, Mr. Luethke presented himself as a patriot and a

good Samaritan, someone who had stumbled upon a situation potentially

damaging to Morgan Stanley who wanted to set things right. But officials

soon became suspicious of his motives.

Court documents say that at the time of Mr. Curry's arrest, Morgan

Stanley's in-house lawyers were unaware that Mr. Luethke was a witness

being interviewed by the District Attorney's office–thus making a

so-called reward payment of $10,000 "entirely legal." The papers

add, "The payment was a token of [Morgan Stanley's] appreciation

for what Morgan Stanley then perceived as a valuable service of providing

information that prevented the perpetration of a fraud on the

firm."

Mr. Morelli, Mr. Curry's lawyer, said that explanation is

"preposterous … If they thought it was so prim and proper, why

did they keep it from the D.A.? … All this stuff doesn't

wash."

In fact, it wasn't long after Mr. Curry's successful setup and

ensuing arrest that Mr. Luethke attempted to extort money from the firm,

according to court papers. "[A]fter that payment, the informant made

vigorous and extensive efforts to extort larger sums from Morgan

Stanley," reads Morgan Stanley's June 7 answer. "That

extortion campaign has involved threatening telephone calls, an extensive

letter-writing campaign to numerous executives of the firm … [and]

extensive efforts to promote and encourage press attention to the

informant's gross mischaracterization of the $10,000 payment."

According to a police source with knowledge of the District

Attorney's current investigation, the criminal charges against Mr.

Curry were dropped largely because of prosecutors' frustration with

Morgan Stanley and its initial failure to inform them about the $10,000.

Daniel Castleman, the District Attorney's chief of investigations, did

not return calls for comment.

Still, another source close to the investigation countered that the

firm's officials had come clean shortly after Mr. Curry's arrest.

"They said at the time of the arrest, the D.A. did not know about the

payment," said the source, "but in early October, they were told

about it." That was about the time Mr. Luethke was turning up the heat

on his demands for compensation, according to Morgan Stanley's court

papers.

The police source added that the Police Department is conducting an

internal investigation based on allegations in Mr. Curry's civil

complaint that at least two detectives or officers received bribes for

setting him up. Police Department spokesman Marilyn Mode confirmed the

investigation.

A Youthful Indiscretion

In an industry where a trip with clients to a strip joint is often

described in expense reports as "the ballet," the alleged padding

of Mr. Curry's expense account may seem a rather innocuous

transgression. But Mr. Curry's 10 months at Morgan

Stanley–indeed, his years as an undergraduate at Columbia–paint a

picture of a hotheaded young man who continually made enemies among peers

and superiors alike.

Case in point: his nude, eight-page photo spread in Playguy , a

pornographic men's magazine. Though identified in the magazine only as

"Leigh," Mr. Curry's middle name, one picture after another

displays the former banker in a state of arousal, cupping his genitals as

he mugs for the camera–not the sort of exposure one would expect for a

young man whose parents, a respected surgeon and his wife, were the first

black members of Southampton's exclusive Shinnecock Hills Country

Club. In past conversations with The Observer , even Mr. Curry

has described the photographs as humiliating. His explanation has been that

it was a youthful indiscretion done to save him the $1,000 cost of a shoot

for his fledgling modeling career, launched years before his employment at

Morgan Stanley. He admits to signing a waiver for the pictures' use,

but never thought they would come back to haunt him in this manner.

In fact, Mr. Curry was so concerned about the photos, he claimed, that

his initial contact with Mr. Luethke during the summer after his firing was

motivated by fear that Mr. Luethke would show the Playguy pictures

to Mr. Curry's family.

Why would Mr. Luethke do that? The relationship between the two has been

confusing, varying between outright hostile and downright friendly. That

they are friends at all is testimony to Mr. Luethke's social skills

and a mutual fear based on bizarre and convoluted allegations they have

made against each other.

Despite hailing from the upper-middle-class suburb of Haworth, N.J., it

is unclear whether Mr. Luethke, whose parents teach at the local high

school, was to the manner born. (Called for comment, his stepmother, Penny

Luethke, said, "There's really nothing I can tell you.") But

his machinations reveal a savvy when it comes to schmoozing that suggests

years of careful study.

"Luethke is a prime character in this entire enterprise," said

Milton Allimadi, editor of the weekly Black Star News , which has

covered Morgan Stanley's involvement in Mr. Curry's arrest.

"He seems to know a lot of information, or have a lot of information

on everyone: the D.A.'s office, the N.Y.P.D., Morgan Stanley and

Christian Curry. He talks in riddles, and sometimes grand fantasies. But if

you listen carefully, he has a lot of solid information and facts and,

apparently, tape-recordings. And that's why Morgan Stanley and the

D.A., Curry and the N.Y.P.D. listened to him originally."

With additional reporting by Christopher R. Tennant and Sam

Charap.

Sitting to Mr. Curry's right was his fiancée, 22-year-old Marisa Wheeler, who had graduated just hours earlier from Columbia College. To Mr. Curry's left sat his attorney, Benedict P. Morelli, 52, a bushy-eyebrowed litigator who asserted into multiple microphones that his client's enormous damages claim was "the only punishment Morgan Stanley would understand."

Strikingly absent from the May 19 press conference was the man who has become a key player in Mr. Curry's last year and the final impetus for his suit against the securities firm: a self-described financial consultant named Charles Joseph Luethke. Sources in the Manhattan District Attorney's office said he is the man who was paid $10,000 by Morgan Stanley to set Mr. Curry up to be arrested in August 1998.

On May 18, the District Attorney dropped all five felony counts against Mr. Curry, saying the involvement of a confidential informant tainted the allegations that Mr. Curry attempted to hack into Morgan Stanley's e-mail system and plant racist and homophobic messages. Executives at Morgan Stanley are now under investigation by the District Attorney for the alleged payments to Mr. Luethke and for failing to disclose their relationship with him to prosecutors.

Mr. Luethke's involvement with Mr. Curry, however, runs deeper than this single incident. They have described one another to reporters as "frauds" and leveled harsh charges, including allegations involving prostitution and extortion, against each other.

Mr. Luethke, too, has suffered legal repercussions from his involvement with Mr. Curry: On Sept. 22, a month after Mr. Curry's arrest, Mr. Luethke was arrested by the Police Department for the aggravated harassment of Ms. Wheeler, Mr. Curry's girlfriend, a misdemeanor, and for possessing a forged military ID, a felony.

Yet even as Mr. Curry was insisting to both prosecutors and reporters that he had been set up, he had maintained his relationship with Mr. Luethke. As recently as April, the two were drinking together, horsing around and laughing. Together they called The Observer , which has a taped record of the conversation. And, in interviews, Mr. Luethke has told The Observer that he is in frequent contact with Mr. Curry, although he claims it's because Mr. Curry needs him to help cover up some forbidden secret.

Their continued relationship is one of the more baffling elements in a case that is so bizarre it has dominated the dialogue in New York's most buttoned-up industry–even spurring heated debate in Vault Reports.com, an Internet chat room usually devoted to more mundane goings-on in the business world.

And the wildly shifting interactions between the two men may offer clues to why the District Attorney dropped the charges against Mr. Curry, after nine months of intense scrutiny.

These days, Mr. Curry appears to be focusing his energy on his civil suit against Morgan Stanley, a 26-page document filed on May 19 in State Supreme Court that names 13 individuals from the firm as defendants, including John Mack, the firm's president and chief operating officer; Philip Purcell, chief executive, and Carol Bernheim, the in-house counsel. The suit alleges that Mr. Curry was fired from Morgan Stanley because he was black and because his bosses believed he was a homosexual.

The seeds for the suit were sown back in Mr. Curry's college years, when he posed nude for a photographer. In April 1998, the shots were published in a gay pornographic magazine, Playguy . Two weeks later, Mr. Curry was fired from his position as a first-year analyst in the real estate department of Morgan Stanley.

Morgan Stanley officials insist he was fired for filing false expense accounts. Mr. Curry claims he was the victim of a homophobic, racist harassment campaign.

It was an abrupt ending to a promising career. Mr. Curry grew up in Chappaqua, N.Y., the son of Dr. William Curry, a surgeon at New York Presbyterian Hospital. Christian Curry matriculated at the U.S. Naval Academy in Annapolis, Md., in the fall of 1992, but didn't stay a midshipman for long. In January 1994, he restarted college as a sophomore at Columbia University. He quickly became involved in extracurricular activities: basketball, Greek life, music and, according to numerous classmates, picking up women.

Students who knew Mr. Curry at the time said he left a mixed impression. "He was charming and charismatic when I first met him," said a Columbia graduate who lived in Mr. Curry's dormitory one year, "but it quickly became apparent that his charm was just bullshit."

Mr. Curry has said that his fellow students were just jealous of his modeling career and his success with pretty girls. "I was a black guy, in college, making money," he told The Observer in one of several interviews since his arrest last August. "I drove this car [a green BMW], I dated the prettiest girls in school, I never did these fraternity things, and people were resentful of that fact–even my coaches." (Asked for comment on Mr. Curry's brief stint on Columbia's junior varsity basketball team, coach Armond Hill said, "He was on the bench a lot. I'm sure he played … but he didn't start.")

Mr. Morelli said it was Mr. Curry's character that convinced him to take the case. "I was actually impressed that he was a straightforward guy," Mr. Morelli said. "But I also think that, you know, he could be immature sometimes because he's a young man. He's 25."

Mr. Curry spent the summer of 1994 on campus, in his fraternity house, Kappa Delta Rho, on West 114th Street near Broadway. It was then, Mr. Curry told The Observer , that he first became acquainted with Mr. Luethke.

A Military Career

Mr. Luethke's past is more difficult to pin down. In conversations with The Observer , the slight, balding 29-year-old man with blue eyes and strawberry-blond hair provided only fragmented information. He did, however, confirm that he was a native of Haworth, N.J., who played basketball and football at nearby Demarest High School.

Mr. Luethke has told The Observer that he was honorably discharged after serving in the military in the early 1990's, in Panama, and attended a prep school for West Point. He told others he performed intelligence work in the military, for which he had been decorated. He also told The Observer that he was ordained as a Presbyterian minister during the summer of 1998 in a Korean church in Queens whose name he could not recall. Further, he has claimed that he is a member of a Missouri-based organization for retired Army chaplains, founded by a retired three-star general named Herman Keck.

A spokesman at the National Personnel Records Center for the U.S. Armed Forces in St. Louis said, "We are unable to identify a record of military service for Mr. Luethke on file." However, the spokesman stipulated that the center kept records only of discharged, retired, and deceased veterans.

Chaplain Philip Hil, executive officer to Chief of Chaplains for the U.S. Army, said a thorough search of military records, done months ago in response to an inquiry from New York police, had turned up no evidence of a Chaplain Charles Joseph Luethke in any branch of the military. Further, he said he has no record the chaplain's association claimed by Mr. Luethke exists.

A major at the General Officer Management Office for the U.S. Army and a deputy chief in the U.S. Army Reserves said they had no record of a Gen. Herman Keck serving as a chaplain in either their active or retired rosters. A Herman Keck, reached by The Observer in Springfield, Mo., said he was too ill to answer any questions.

Chaplain Hugh Dukes, from the chief of chaplains office, said no three-star general chaplains exist, and that the current Chief of Chaplains is a two-star general.

Spokesmen at the Presbyterian national headquarters in Louisville were unable to corroborate Mr. Luethke's assertion that he was ordained as a minister.

Mr. Luethke's business card, which bears his name and his 44th Street address, lists a "merchant banking & corporate finance" firm called PFI Capital Partners Inc. & Affiliated Companies, located in the Fred French Building at 551 Fifth Avenue.

A visit to the office found it had been a financial consulting firm that consisted of Mr. Luethke and a Douglas Castle. It is now out of business. A sign taped to the door directs deliveries to Positive Mortgage Inc., an unrelated firm that had shared office space with Messrs. Luethke and Castle, but moved to a separate floor shortly before PFI folded. An employee at Positive claimed no knowledge of PFI's business, and Mr. Castle could not be reached for comment. Mr. Luethke acknowledged the firm had gone out of business. He also says he now works for two foundations, neither of which The Observer could locate.

Back in the summer of 1994, Mr. Luethke appeared at Mr. Curry's frat house, saying he was a KDR brother from another fraternity chapter, according to Mr. Curry and several other frat members. "That's a lie," Mr. Luethke said. "We met during the school year of 1993-4. Through people." (A staff member at the KDR national headquarters in Greensburg, Pa., was unable to confirm that either Mr. Curry or Mr. Luethke is a member.

Mr. Luethke had attended Columbia's School of General Studies for one semester, fall 1993, as a part-time student, a spokesman for Columbia University confirmed. At the frat house, according to other frat members and Columbia students, Mr. Luethke and Mr. Curry hit it off right away–so much so, Mr. Curry said, that he invited the supposed fraternity brother to use his room on weekends or when he was out of town. "Yeah, we actually shared a room in the KDR house and I paid him rent," Mr. Luethke said.

Mr. Luethke began spending time with the fraternity brothers, telling them over drinks in the local hangouts about his Army career, according to Mr. Curry and several friends from that summer.

Mr. Curry alleges that his relations with Mr. Luethke began unraveling when the latter started running up expensive phone bills and taking money from him. Mr. Curry said that unsavory characters appeared at the fraternity house one day, asserting that Mr. Luethke owed them money and threatening violence to Mr. Curry and his friends, who happened to be at home. Shaken by the strange visitors, Mr. Curry decided to take matters into his own hands: When Mr. Luethke returned to the house, Mr. Curry said, he "beat him up and threw him in a ditch," terminating the friendship.

Mr. Luethke counters that it was Mr. Curry who had the unsavory friends, and denies he took money or ran up big phone bills. Further, he said the fight never took place.

In any case, a frat brother confirmed the falling out and said fraternity members saw little of Mr. Luethke after that. But several Columbia women said they saw plenty of him–too much.

Four women interviewed by The Observer claim that between 1993 and 1996, they endured some sort of verbal harassment or unwanted attention from Mr. Luethke. The women, all of whom requested anonymity, claim that Mr. Luethke met them during classes or on campus, then called them incessantly, attempting to spend time with them and interfering with their other relationships. Several of these women were interviewed by Mary Porter, an assistant district attorney who was handling both Mr. Curry's and Mr. Luethke's charges last fall.

"He just sort of followed me everywhere, even though I was obviously not interested in having anything to do with him," said one woman who graduated from Columbia in 1994, who said she met Mr. Luethke when he sat down with her in the college cafeteria in the fall of 1993. Mr. Luethke vehemently denies harassing any women and counters that Mr. Curry put the women up to spreading stories about him, in return for a cut of any settlement he might get from Morgan Stanley.

An Offer Not Refused

Mr. Curry has said he did not hear from Mr. Luethke again until June 1998–after his graduation from Columbia and his firing from Morgan Stanley. It was then, according to Mr. Curry, that Mr. Luethke ran into Ms. Wheeler, not far from the Riverside Drive apartment in which Mr. Curry and Ms. Wheeler were living for the summer.

"He came up to my girlfriend looking for me," said Mr. Curry, "and he was like, 'It must suck for Christian and you that he was fired for this.' And then he goes, 'I have all these e-mails from people at Morgan Stanley, calling him faggot, nigger and all this stuff, and thought maybe you'd like to see them. He said he was a frat brother, and one of my best friends from KDR … so she gives him her number–which was mine, too."

In an interview last October, with his girlfriend by his side, Mr. Curry said he flipped when Ms. Wheeler told him she had run into Mr. Luethke. He said Mr. Luethke began calling his apartment as often as 25 times a week, at first expressing concern over the former analyst's firing, then expressing interest in settlement monies he might get from Morgan Stanley. "There was a misconception around the Street that I had gotten a settlement [from the firm] already," said Mr. Curry, "and people were saying, 'Hey, I heard you got all this money,' and I was like, 'What are you talking about?' So Luethke thought I had all this money …"

Mr. Luethke said it was Mr. Curry who brought up the idea of profiting from his firing. "He offered that if I had gone along with his plan–to plant e-mails on the Morgan Stanley system–that just as he gave the offer to the undercover cop, he had offered to me [a cut of the settlement."

Mr. Curry counters that he ordered Mr. Luethke to go away. But then he changed his mind. "I was like, all right, I've gotta step in," he recalled. "I call Luethke and leave a message, saying, 'You call again and I'll kill you.'" Mr. Luethke confirms that he was threatened at the time by Mr. Curry and continues to be now. Mr. Curry's lawyer said that his client had spoken in anger and had no intention of following through on the threat.

Then, Mr. Curry said, Mr. Luethke requested a meeting–saying he had copies of incriminating e-mail messages from Morgan Stanley, in which staff members made racist or homophobic remarks directed at Mr. Curry.

"So then I played him for a day," said Mr. Curry. "I said, 'Just give me the e-mails.' And he said, 'If you want the e-mails you can have them, and I want 10 percent of the settlement,' and like a fool, I said, 'Fine, anything you want. Just give me the e-mails.'" Mr. Curry said Mr. Luethke stalled for weeks but finally had a friend–allegedly with copies of the e-mails–call Mr. Curry and dictate one of them to him over the phone. According to Mr. Curry, it was then that Mr. Luethke offered to fix him up with his hacker friend, an alleged Morgan Stanley employee who would be able to take the sample e-mail and look for similar messages in the system. Mr. Luethke said: "He wrote out in his own handwriting exactly what he wanted planted, which is irrefutable." He added that the note is in the District Attorney's hands.

On Aug. 17, Mr. Curry said, he and Mr. Luethke went together to a small park on East 43rd Street near Lexington Avenue, where they met with the alleged Morgan Stanley employee who was really a police officer. "I should've just walked away from this guy," said Mr. Curry. "I gave this guy this [sample e-mail] and a couple hundred dollars; I didn't even do any talking. And the cop kept trying to get me to say things, and I was like, 'I'm not quite sure what you wanna do here.' Joe was with me the first time. So he goes, 'You can get this?' and the guy's like, 'Oh, yeah.' So we left. And then the guy called me up again and left a message saying, can you meet me at the same place." Three days later, after a similar meeting at which Mr. Luethke was not present, Mr. Curry was arrested.

But, according to Mr. Curry, that was not the end of his relationship with Mr. Luethke. Mr. Curry said Ms. Wheeler was receiving threatening phone calls at their Riverside Drive apartment from Mr. Luethke. "He started gloating, calling my girlfriend, saying, 'How does this feel about Christian? Going to jail?' And he won't stop calling," said Mr. Curry. So Ms. Wheeler called the police, who went to Mr. Luethke's apartment on East 44th Street and arrested him. Mr. Luethke denies the account and has pleaded not guilty.

The two officers, one of whom was Detective Luis Serrano, booked him for harassing Ms. Wheeler–a misdemeanor–and also for having what they described in a police deposition as a fake military chaplain's ID, a charge Mr. Luethke has said arose because he asked Mr. Serrano "where the toilet plunger was" (an apparent reference to police officer Justin Volpe and his attack on Haitian immigrant Abner Louima).

The case has been overseen by at least three different prosecutors and is still pending. In a Nov. 16 letter to Assistant District Attorney John Ryan, who was handling both the Curry and the Luethke case for several months but has since left the District Attorney's office, Mr. Luethke articulated his complaints:

"I have never been arrested. I had a former high-ranking FBI agent vouch for me (my character) [sic] because law enforcement could find very little information. I am an Ordained Priest who was ordained by a retired three-star General from the US Army who is a world leader within the religious community. I have served my country honorably during war (one of the few chosen out of thousands during combat for USMAPS) … [I] received one of the first nominations of my class for West Point from a Congressman. Since then, I have worked extremely hard to become an Ambassador-at-large for two very prestigious foundations which emphasize integrity. You and Det. sEroneous [sic] speak to me as if I am a criminal. I guess you … have decided on your own that innocent until proven guilty is no longer the rule of law in the United States of America. I pity the both of you. If stupidity were a crime, you would both be on death row.

"You ended our last meeting because I would not speak about Morgan Stanley. If there was any evidence, even slightly unethical, or possibly illegal activity on MS's part that I could possibly provide, how could I tell you? You have failed to protect me and my girlfriend from Curry & Co."

New Allegations Raised

Mr. Luethke has claimed that Marisa Wheeler signed a confession that she lied to the police about his alleged harassment of her, and submitted the statement to officials at the F.B.I. Asked if she had signed such a confession, Ms. Wheeler replied: "Absolutely not." She added that, in a May 25 meeting with Assistant District Attorney Leroy Frazer, "I saw a copy of that confession … and it's obviously forged." A spokesman for the F.B.I. said that due to agency policy, he could not address Mr. Luethke's statement.

In an April 2 fax, Mr. Luethke again suggested that The Observer check out the alleged F.B.I. confession and other allegations of corruption involving Mr. Curry, the Police Department and the F.B.I. "If you are credible, normal and honest, you are more than welcome to break a much bigger story than you first reported," Mr. Luethke offered. He has since, in subsequent interviews, added to his allegations about Mr. Curry and Ms. Wheeler, all of which have been denied.

Meanwhile, Mr. Luethke has been trying to contact Mr. Curry's lawyer. "He's an interesting piece of work, Mr. Luethke …," said Mr. Morelli. "And actually he has been trying to contact me and I have not taken his calls, because I really don't think that it would be intelligent for me to do so."

Although both Mr. Curry and Mr. Luethke have expressed fear and loathing of each other in conversations with The Observer , they apparently have been spending time together recently. Sometime during the weekend of April 10 and 11, the two made phone calls to The Observer , saying that they were drinking together in the Merc Bar–a watering hole on Mercer Street in SoHo. Mr. Luethke later said they had called from a pizza joint."

"Hey, fat Kate, this is your drinking buddy," said Mr. Luethke amid background noise. "I'm out drinking with my other buddy. Give me a call, 'cause–I don't know–I thought there was gonna be a story this Wednesday. Umm, arright, hang on a second. My other drinking buddy wants to talk to you."

"Hey chubby little fatass Kate, what's up?" said Mr. Curry, with sounds of laughter behind him. "Fuckin' c–-. Why don't you come meet us?" He broke into laughter.

Mr. Luethke broke back in. "He didn't mean that. He's drunk. He's drunk, he doesn't know what he's saying. It was a ventriloquist, by some skinny girl who works at the Merc Bar. So, uh, give me a call. [He gave his number]."

Several messages later, Mr. Curry called back–apparently trying to establish some distance between himself and Mr. Luethke: "Kate, what's up, it's me. I'm calling to 100 percent apologize for messages that were left by either one of my associates, Luethke, anybody, much too much beer I was drinking [sic]. And no one meant any harm. I really apologize, a hundred percent … Any boys or girls who called you, whatever they said, I don't even know. I was told."

In another instance, a call placed by The Observer to Ms. Wheeler in early April regarding Mr. Luethke's statement about the F.B.I. confession was returned by Mr. Luethke. "Christian just called," he said, a few hours after a message was left on Ms. Wheeler's voice mail. "They're not going to call you back."

Meanwhile, Morgan Stanley, which has retained Paul, Weiss, Rifkind, Wharton & Garrison to defend them in Mr. Curry's suit, has less than a month to respond to his $1.35 billion complaint and summons. Spokesmen for the company would not comment for the record, other than to reiterate their initial reaction to Mr. Frazer's May 18 dropping of Mr. Curry's charges: dismay.

However, the firm distributed an interoffice e-mail shortly after the decision: "Some of you may have seen the press coverage on the lawsuit filed by an ex-employee of the firm. The lawsuit alleges discrimination and harassment in connection with the termination of an investment banking analyst. We believe that this suit is completely without merit, and plan to defend ourselves vigorously. The case is about employee honesty and integrity. Mr. Curry was dismissed for falsifying his expense reports. We are committed to ensuring a workplace free of harassment and employment discrimination. As always, refer any press inquiries to [chief spokesman] Jeanmarie McFadden."

Even an acquaintance of Mr. Curry's, who claims inside knowledge of his case, expressed some doubts. The acquaintance alleges that Mr. Curry has privately admitted to a mutual friend that he did not actually see the words "monkey" and "faggot" written on his desk at Morgan Stanley just days after he was fired–one of the major grounds for his suit. "And I think that's so wrong, you know. I'm sure there is a lot of racism in those old-school places, but that's totally crying wolf."

"I don't think he did make it up," said Mr. Morelli. "I really have strong reason to believe that that is true. At the end of the day, when the dust clears, you're gonna have certain people who are gonna be discredited, and other people who are not. And do I believe that he was discriminated against? The answer's Yes. Do I believe that he was called a monkey? The answer's Yes."

With additional reporting by Josh Benson and Sam Charap.

After a nine-month investigation, Assistant District Attorney Leroy Frazer moved on May 18 in Manhattan Criminal Court to have all charges against the former first-year analyst, 25-year-old Christian Curry, dismissed.

But while the criminal case against the former hotshot banker is over, the District Attorney's office is continuing its probe. "There is a continuing investigation into the conduct of both the confidential informant and the officials at Morgan Stanley," said Daniel Castleman, chief of investigations at the District Attorney's office.

Mr. Castleman declined to comment further, but said he was not aware of any similar cases in recent history.

The events leading up to the unusual case began with publication of nude photographs of Mr. Curry in a gay men's magazine, followed soon by his dismissal from Morgan Stanley and then his arrest on Aug. 20 in a small park on East 43rd Street.

Mr. Curry was charged with five felony counts, including attempted computer trespass, tampering with physical evidence and fifth-degree conspiracy. Police alleged that he tried to bolster a wrongful-termination civil suit against the firm, which had fired him in April 1998, by planting racist and homophobic e-mails in Morgan Stanley's computer system.

Although Morgan Stanley executives had attributed the termination to abuse of his corporate expense account, Mr. Curry believes he was fired because nude photographs of him in a gay pornographic magazine, Playguy , had been published the previous week. Mr. Curry claimed the photographs, which had been taken during a modeling photo shoot, were published without his authorization.

The arrest followed meetings between Mr. Curry and an undercover cop. According to Mr. Frazer's court statement, those meetings were brokered by a "confidential informant." The Observer has learned that the informant was Charles Joseph Luethke, an old acquaintance of Mr. Curry's from his years as an undergraduate at Columbia College.

"The post-arrest investigation has revealed that while there was clearly probable cause for defendant's arrest, we do not believe we could sustain our burden of proof beyond a reasonable doubt at trial," said Mr. Frazer in his May 18 statement to the court. "It was learned after arrest that the confidential informant had met with officials at Morgan Stanley and informed them of defendant's alleged intent [to plant e-mails] … The investigation further revealed that there had been ongoing negotiations between officials at Morgan Stanley and the [confidential informant]."

Mr. Frazer added that the informant had been wired a $10,000 payment just days after Mr. Curry's arrest. Sources familiar with the case told The Observer that between two and five officials from the firm were involved in negotiations and payoffs to Mr. Luethke, a self-described financial consultant who lives in Manhattan.

Reached for comment, Mr. Luethke disputed the District Attorney's findings. "The firm's lack of ethics is only outweighed by Morgenthau's all-timers," he told The Observer . "There was a lot more money involved, it was intended for the cops, and Morgenthau and the Mayor knew what was going on. I am just waiting for the F.B.I. to make their move, and if anybody believes the stories coming out of any of those camps, I have a stadium to sell them in midtown Manhattan, tax-free."

Mr. Luethke at first refused to explain his statements further, then called back to say he had taped a conversation with Mr. Frazer that proved the District Attorney's office had prior knowledge of the confidential informant's meetings with Morgan Stanley before Mr. Curry's arrest-a direct contradiction of the statement from the District Attorney's office, which said they learned of these meetings after Mr. Curry's arrest.

Mr. Curry would not comment for this story, but his girlfriend, Marisa Wheeler, had previously told The Observer that he had first met Mr. Luethke in 1994 through his Columbia fraternity, Kappa Delta Rho. However, the two had a falling-out a few months after meeting, and did not speak again until shortly after Mr. Curry's firing from Morgan Stanley last summer. Then, according to Ms. Wheeler, his former friend approached him, expressing concern about the termination and offering to assist him with a wrongful-termination suit against the firm.

According to similar accounts from Ms. Wheeler and Robert Martin, deputy inspector of the New York Police Department, Mr. Curry unwittingly met with the undercover police officer on two occasions, Aug. 17 and Aug. 20, 1998. During the meetings, which were conducted in a small park near Grand Central Terminal, Mr. Curry and the officer discussed the notion of planting racist and homophobic e-mails in the Morgan Stanley e-mail system to bolster a possible wrongful-termination suit. At the second meeting, where Mr. Curry was arrested, he paid the cop $200 and offered him a sample e-mail message-allegedly to plant.

After the arrest, spokesmen for Morgan Stanley reiterated that they had fired Mr. Curry for abusing his expense account. Firm insiders painted him as a bad seed whose credibility had been crushed by his felony charges.

But over the next nine months, a different story emerged. According to the court statement from Mr. Frazer-who referred The Observer 's calls to Mr. Castleman for comment-the "informant" had presented himself to Morgan Stanley in the months before the arrest, stating that he had information about Mr. Curry's alleged plot to smear the company in a civil suit. The informant subsequently tipped off the police, setting up the negotiations that led to the arrest. However, when the police questioned Morgan Stanley officials, they did not admit to such discussions with the informant, much less to paying him $10,000. Mr. Frazer's statement adds that "subsequent facts have come to our attention concerning the confidential informant which … tend to undermine his credibility as a possible witness at trial."

At press time, spokesmen for Morgan Stanley had not returned several calls for comment from The Observer . Marilyn Mode, deputy commissioner for public information for the New York Police Department, refused to comment on the specifics of the case or Mr. Luethke's allegations that police had received money. But she said: "Ultimately, the decision to prosecute or not is made by the District Attorney's office."

For Mr. Curry, an Ivy League graduate who says he has spent his last year doing modeling work, the District Attorney's findings are a vindication. Still, neither he nor his criminal attorney, Earl Rawlins, would comment whether he planned to pursue his civil suit against Morgan Stanley.

Mr. Curry said he was at his girlfriend's graduation from Columbia College and couldn't talk. He added: "You think I will ever give you a fucking comment, you fat-assed bitch?"

"All I can say is that I think he's a perfect gentleman, and I didn't believe that he maliciously did anything from the start," said Mr. Rawlins. "The [District Attorney's office] took a lot of effort and they conducted an investigation, and they said we were right. They dismissed the case."