My brother passes along this bizarre/alarming New York Times article[Update: here it is in the IHT; the Times link costs money now.]about a French court ruling that a stock analyst who predicted an increase in the price of a particular company's stock owes the company money because her predicted increase wasn't as large as the company wanted it to be.

IN the fall of 2002, Morgan Stanley's luxury goods analyst, Claire Kent, issued a report saying that LVMH Moët Hennessy Louis Vuitton's financial results had been surprisingly good and predicting that the company's share price would rise 24 percent within 18 months.

The report became a crucial part of the evidence that persuaded a French court this week to order Morgan Stanley to pay LVMH at least 30 million euros, or $38 million.

How could that be? Ms. Kent's valuation models called for a higher stock price, but she reduced it by 10 percent because "management has destroyed value'' in the past.

Still, she forecast a big gain. But that essential fact was ignored. Since LVMH's market value was 27 billion euros, the judges found, "the discount of 10 percent recommended by Morgan Stanley represents 2.7 billion euros.''

The judgment for 30 million euros is only the beginning. The court appointed an examiner to recommend further damages and told him to determine what part of LVMH's spending from 1999 through 2002 - on everything from advertising to borrowing - was paid "to maintain its image and to thwart the denigration of which it was the victim because of the actions'' of Morgan Stanley.

[Insert grumbling about the idiotic French here.] Punishing financial analysts for negative predictions is totally absurd, and certainly going to do no good for France's ailing economy.

This should also serve as an example of why no sane person would ever want America to be a part of the International Criminal Court.

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