Morgan Keegan Fraud Investigations Causing Client Concerns
The Morgan Keegan fraud investigations may be creating concerns among current clients about the safety of their own accounts. In April, the Securities and Exchange Commission (SEC) filed a civil lawsuit against the Memphis-based broker, charging the company and top executives James Kelsoe and Thomas Weller of convincing staff members in Morgan Keegan’s accounting department of accepting 262 “price adjustments” in 2007 to hide the plummeting value of wrong-way bets on mortgage-backed securities and other risky investments.
The funds in question became such an impediment to Morgan Keegan that its asset management arm sold them in 2008 to Hyperion Brookfield Asset Management.
In addition to the SEC complaint, several states allege similar charges against Morgan Keegan. Meanwhile, thousands of investors have filed arbitration claims with the Financial Industry Regulatory Authority (FINRA) in an attempt to recoup their financial losses.
In a recent letter to clients, Morgan Keegan executive John Carson tried to assuage concerns about the ongoing state and federal investigations. As reported April 14 by the Wall Street Journal, the letter, in part, stated the following:
“First and foremost, I want to reassure you of the safety of your accounts held with Morgan Keegan. . . These charges, which relate to a mutual fund management business that was sold in 2008, should not be construed as claims against the business of the firm as a whole.”
Carson went on to tell investors that the charges being leveled against Morgan Keegan were civil charges, not criminal, and therefore entirely different from the criminal case involving Bernie Madoff.
For investors who’ve lost some $2 billion in their Morgan Keegan investments because of an alleged cover-up regarding the true state of the funds, those sentiments are of little comfort.
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