Morgan Keegan’s legal problems show no signs of letting up. The latest troubles facing the Memphis-based investment firm include federal and state charges alleging Morgan Keegan and two employees – James Kelsoe and Thomas Weller – committed fraud when pricing several proprietary bond funds.
As reported April 12 by the Wall Street Journal, the federal and state charges are in addition to a slew of arbitration claims filed by investors who allegedly lost approximately $2 billion through fraudulent and reckless business practices on the part of Morgan Keegan. Class-action lawsuits also have been leveled against the company.
Mississippi, Alabama, Kentucky and South Carolina regulators joined the Financial Industry Regulatory Authority (FINRA) in filing fraud charges on April 7. The Securities and Exchange Commission (SEC) filed similar charges that same day.
The fraud charges are “a serious event,” said Chris Marinac, managing principal at FIG Partners, in the Wall Street Journal story. “The exposure” to eventual costs “could be all over the map,” he said. “There’s no telling what a judge and jury will do.”
Morgan Keegan may also have another legal problem on its plate. The SEC reportedly could force the company to buy back nearly $200 million in auction-rate securities – investments that became frozen when the credit markets seized up in February 2008.