Archive for the “Morgan Keegan Bond Funds” Category

Investors with a Morgan Keegan lawsuit are finally getting their day in court. Recent decisions handed down by Financial Institution Regulatory Authority (FINRA) panels are ruling in favor of investors for their losses in several RMK bond funds that plummeted in value after Memphis based Morgan Keegan secretly gambled and lost with bets on subprime mortgage securities, collateral debt obligations (CDOs) and other risky debt instruments. 

During the past two months, FINRA has awarded investors more than $1.6 million for their claims against the embattled investment bank. The most recent award of $950,000 went to Jerome Woods, a former football player for the Kansas City Chiefs.

Woods’ win is the sixth consecutive win for investors. Moving forward, Morgan Keegan faces hundreds of additional claims from investors who collectively lost $2 billion between March 31, 2007 and March 31, 2008. Some of the Morgan Keegan bond funds in question have plummeted in value by as much as 95%.

At the center of investors’ claims are charges of misrepresentation and negligence on the part of Morgan Keegan. Specifically, the RMK funds that stumbled did so because of investments in high risk subprime mortgages and collateralized debt obligations, a fact that investors contend Morgan Keegan never disclosed to them.

Moreover, recent documents and testimony involving investor claims with FINRA show that Morgan Keegan apparently gave advanced notice to institutional clients and large retail clients to get out of the troubled funds ahead of small retail investors.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

In addition to ballooning budget deficits and rising unemployment, many Tennessee cities and counties also are facing massive interest payments on bonds, largely because they were ill advised by investment bank Morgan Keegan to use a complex financing arrangement involving derivatives. Already strapped for cash, places such as Lewisburg and Mount Juliet now must either come up with the money to pay the bonds’ higher interest payments, which in some cases has quadrupled, or terminate the interest rate swaps, yet another costly measure.

Tennessee’s derivative debacle has become even more controversial following a recent story in the New York Times that reported on Morgan Keegan’s lengthy and questionable role in selling interest-rate swaps to local government officials in Tennessee.

Since 2001, Memphis based Morgan Keegan has sold $2 billion worth of derivative instruments to 38 cities and counties in Tennessee, according to state records. In addition to acting as an advisor and underwriter of derivative instruments, Morgan Keegan also resided over state sponsored seminars on interest rate swaps in which bankers from Morgan Keegan taught representatives from various Tennessee cities and counties about derivative financing.

That apparent conflict of interest now has the attention of Tennessee Governor Phil Bredesen. On April 9, in a story in the New York Times, Bredesen publicly questioned the appropriateness of Morgan Keegan’s multiple roles as teacher, adviser and underwriter. The governor also had harsh words for state officials, whom he said failed to do enough to protect cities and counties that ultimately used municipal bond derivatives.

Tennessee comptroller Justin P. Wilson has since put a freeze on all applications for interest rate swaps. On May 4, the Tennessee State Board will begin reviewing the guidelines that oversee derivatives, as well as the appropriateness of allowing investment banks like Morgan Keegan to teach state mandated seminars to area officials.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime 

Investors keep scoring big in arbitration claims involving Morgan Keegan fraud. The latest win is by Jerome Woods, a former professional football player for the Kansas City Chiefs who just cinched a $950,000 arbitration award as a result of his claim with the Financial Industry Regulatory Authority (FINRA) against Memphis-based Morgan Keegan.

The decision in favor of Woods is FINRA’s largest award to date related to claims by investors for the financial losses they suffered in a group of Regions Morgan Keegan (RMK) mutual bond funds.

As in the majority of arbitration claims against Morgan Keegan, the basis of Woods’ complaint focused on the bank’s mismanagement of his investments, as well as Morgan Keegan’s failure to disclose the risks associated with various RMK bond funds. Specifically, the funds contained a high concentration of securities linked to risky subprime mortgages, loans and other speculative debt, a fact that investors say fund managers intentionally kept hidden. 

Investors who purchased the Morgan Keegan bond funds in question initially thought they were getting a diversified portfolio of relatively conservative corporate bonds and preferred stocks. Later, however, a compendium of evidence would reveal that neither Morgan Keegan’s management nor the informational documents on the funds accurately portrayed the true level of credit risk investors had taken on. It was only after the RMK funds plummeted by more than 60% on average in value that investors finally learned that Morgan Keegan had purchased high-risk, low-priority tranches of toxic collateralized debt obligations (CDOs).

Ultimately, Morgan Keegan’s misguided decisions caused investors to lose $2 billion from March 31, 2007 to March 31, 2008.

The massive financial losses have since spurred a wave of investor lawsuits and arbitration claims against Morgan Keegan. In addition to FINRA’s $950,000 award to Woods, other recent investor arbitration wins include $100,000 to Memphis sports broadcaster Tim McCarver; $267,711 plus interest to two California brothers; $187,215 to an Alabama retired couple; and$18,000 to Jo L. Wright, an Indiana church secretary. Investors in the latter two cases were represented by Maddox Hargett & Caruso.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

When investment bank Morgan Keegan and its managing director, Joseph Ayres, teamed up with representatives from Nashville based Bass Berry and Sims to teach seminars on financial derivatives and interest rate swaps from 2001 to 2007, local commissioners in small towns like Lewisburg, Tennessee, became some of their “students.” What these students failed to realize, however, was that in addition to serving as a teacher and investment adviser of derivative instruments, Morgan Keegan also acted as an underwriter of the complex deals, a fact that is now being scrutinized by Tennessee officials.

The New York Times initially reported on the conflict of interest issue surrounding Morgan Keegan and its dual role of teacher, adviser and underwriter of financial derivatives for Tennessee cities and counties in an April 7 article. According to the story, Lewisburg’s saga into derivatives and interest rate swaps began in 2005, when Bob Phillips, the city’s part time mayor, attended a state sponsored seminar taught by Morgan Keegan to learn about municipal bond derivatives. Phillips wanted the information because Lewisburg needed a way to fund a new sewer bond. On the advice of Morgan Keegan, Lewisburg turned to municipal bond derivatives, and the deal eventually was underwritten by none other than the Memphis based bank.

By January 2009, the annual lower interest rates initially touted by Morgan Keegan in the 2005 seminar class had skyrocketed, quadrupling to $1 million. Making matters worse: The deadline to pay off the debt had shortened dramatically, to seven years from the original 20 years.

Claiborne County, Tennessee, faced a similar predicament. In 2007, Morgan Keegan advised county officials on an interest rate swap involving an existing $18 million bond. As in Lewisburg, the deal was underwritten by Morgan Keegan.

Once interest rates began to climb, however, Claiborne County found itself with only a few weeks to refinance the entire bond or make a quadrupled payment of $700,000.

Tennessee’s State Comptroller Justin Wilson is now calling for a possible overhaul of state rules overseeing municipal bond derivatives. On April 8, Wilson enacted a freeze on any applications for financial derivatives like interest rate swaps until the State Funding Board re-evaluates its guidelines this May.

As for Morgan Keegan, the company continues to maintain that Tennessee towns and counties were properly advised about the potential risks of derivatives and that the seminars its representatives taught on the subject were unbiased presentations.

Officials in Lewisburg, Claiborne County and many other municipalities might feel otherwise, as their governments face skyrocketing interest rates fees and little time to make good on the complex derivative arrangements advised and orchestrated by Morgan Keegan.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

Lewisburg, Tennessee, is a quaint, affable town known for rich farmland and friendly neighbors. Now, thanks to investment bank Morgan Keegan & Company, Lewisburg is becoming known for something else: municipal bond derivative deals gone bad.

The small city’s introduction to Morgan Keegan and the derivative instruments occurred five years ago, when Lewisburg was trying to lower the interest on a bond for a new sewer system. Bob Phillips, Lewisburg’s part-time mayor, approached Morgan Keegan for advice and quickly became immersed in the complex world of derivatives.

As reported April 7 by the New York Times, that world soon soured for Lewisburg an hundreds of small cities just like it. Municipalities that bought derivatives were much like homeowners, securing fixed-rate mortgages and then refinancing with lower interest, variable rate mortgages, says the New York Times article.

In the case of the municipalities, however, many officials now say they were never told or didn’t understand that interest rates on derivatives can go much higher if economic conditions turn sour.

When the inevitable happened and the economy, in fact, worsened, Lewisburg paid the price. The cost of interest paid on its sewer bonds has quadrupled to an astounding $1 million. As for Lewisburg residents, they face a 33% increase in water and sewer rates.

And the added costs couldn’t come at a worst time. Unemployment in Lewisburg currently stands at more than 10%, as a slew of established businesses close their doors. Even longtime employer Sanford Pencil, the Sharpie pen maker, is preparing to relocate to Mexico. 

At the time Lewisburg officials entered into their municipal derivative contract with Morgan Keegan, the Memphis based investment firm dominated nearly the municipal bond derivative business in Tennessee, both in terms of acting as an adviser and as an underwriter. According to the New York Times article, data compiled by Tennessee’s comptroller’s office show Morgan Keegan sold some $2 billion worth of municipal bond derivatives to 38 cities and counties since 2001.

Many of the deals orchestrated by Morgan Keegan have resulted in similar predicaments like happening in Lewisburg. In nearby Claiborne County, Tennessee, for instance, officials there are desperately trying to get out of a municipal bond derivative contract with Morgan Keegan. Doing so, however, will cost the county $3 million, money the county can ill afford.

The same is true in Mount Juliet. Located about 17 miles from downtown Nashville, city leaders recently learned that payments on their bonds had increased by 500% to $478,000, according to the New York Times story.

Meanwhile, as Lewisburg, Mount Juliet and many other Tennessee municipalities struggle to find a way out of their derivative messes, Morgan Keegan is counting the millions and millions of dollars in fees it’s collected by serving in the dual, and questionable, role of underwriter and adviser.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

On the heels of several arbitration awards by Financial Industry Regulatory Authority (FINRA) panels, more investors who lost money in a group of Regions Morgan Keegan bond funds are prepping for legal action. The common denominator in their claims: Memphis-based Regions Morgan Keegan (RMK) and its managers allegedly hid the credit risks of various RMK bond funds. It wasn’t until after the funds plummeted in value that the brokerage firm finally came clean with investors.

Some of the RMK funds at the center of investors’ claims have seen their value fall by more than 90% because of ties to high risk and toxic collateral debt obligations (CDOs). Ultimately, investors suffered losses of more than $2 billion.

At issue is the alleged deception displayed by Regions Morgan Keegan and its management. According to investor complaints, Regions Morgan Keegan marketed and sold the bond funds as “relatively conservative” investments. Investors never knew about the hidden risks of the funds or the fact that mortgage-backed securities and collateralized debt obligations comprised more than 50% of each fund’s portfolio.

So far, FINRA has returned awards totaling more than $600,000 for investor claims over losses suffered in the RMK bond funds. The most recent awards were decided in March 2009 by FINRA arbitration panels in Indiana and Alabama.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

Another victory has been scored for investors who lost money in Morgan Keegan & Co. bond funds. On March 12, a Financial Industry Regulatory Authority (FINRA) panel awarded Jo L. Wright, a church secretary from Whitestown, Indiana, $18,000 for losses she suffered in bond funds managed by Morgan Keegan.

For more than a year, Morgan Keegan has been the subject of numerous complaints and investigations regarding a group of open end and closed end bond funds that were invested heavily in high risk asset backed securities.

As reported in a March 19 article in the Indianapolis Star, during 2007, when the crash of the subprime mortgage market took hold, individuals who purchased shares of certain Morgan Keegan funds began to suffer big financial losses, losses that investors say could have been avoided if only Morgan Keegan had disclosed the inherent risks associated with their investments.

Wright, who lost $11,000 in the funds, served as the first Indiana case to go to an arbitration hearing, said her lawyer, Mark E. Maddox of Maddox Hargett & Caruso, in the Indianapolis Star article.

Memphis based Morgan Keegan is a division of Regions Financial Corp.

Wright’s introduction to Morgan Keegan occurred via her local Indiana Regions bank branch manager. At the time of the referral, Wright had her money in a certificate of deposit and a savings account.

On the recommendation of the bank manager and Morgan Keegan, Wright transferred her money into the Morgan Keegan Select Intermediate Bond Fund, which she believed was a safe, conservative but higher-yielding investment.

According to the FINRA complaint, Wright was never informed that the Morgan Keegan fund was considered a risky investment, nor did she ever receive a prospectus outlining any risks or details about the fund.

Wright is far from alone. Many investors contend Morgan Keegan intentionally withheld critical information about the Morgan Keegan Select Intermediate Bond Fund. Instead, management told them that any risk of principal loss was virtually non-existent and that investing in the Morgan Keegan Select Intermediate Bond Fund was appropriate for the “most conservative-minded investors.”

Ultimately, the Morgan Keegan Select Intermediate Bond Fund virtually collapsed in value because of its high concentration of holdings in collateralized debt obligations (CDOs) and other speculative investments. The losses in the fund, as well as other Morgan Keegan funds, have since spawned a wave of securities litigation and arbitration claims, with regulators continuing to look into the cause of the funds’ meltdown.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage related investment losses.

Long before the word “subprime” became a daily utterance on Wall Street, let alone on Main Street, savvy bond fund managers had the foresight to dump their toxic subprime securities before real damage could take hold. A few funds went the opposite direction, however, betting that the market would quickly return to normal. For those managers and the millions of investors who trusted them, the gamble backfired miserably.

One of those bond fund managers who tried to use the subprime crisis to his advantage was James Kelsoe. Kelsoe once headed up a group of ill-fated Morgan Keegan bond funds that were heavily invested in collateralized debt obligations (CDOs) and other risky structured financial products. Under Kelsoe’s management, the funds experienced average losses of 70% or more, far exceeding that of similar funds.

Investors who initially purchased the RMK funds thought they were investing in safe, income-producing investments. Eventually, losses from the funds surpassed the $2 billion mark.

A June 25, 2007, BusinessWeek article hammers home the obvious: The onset of subprime crisis left plenty of time for bond fund managers to perform their due diligence and re-evaluate the asset allocation of their funds. Managers who did their homework got out, or dramatically reduced their exposure to mortgage-related securities. Others, like Kelsoe of Morgan Keegan, simply looked the other way and continued to take on even more risk. In the end, those actions would cost investors dearly.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses. 

More investors are emerging victorious in their arbitration claims against Memphis-based Morgan Keegan & Co. and the collapse in value of some of the company’s mutual funds. Six-figure awards recently were announced in two arbitration decisions by the Financial Institution Regulatory Authority (FINRA). In one of the cases, the investor was awarded more than the damages he initially claimed.

“This is believed to be the largest arbitration award against Regions Financial Corp.’s Morgan Keegan division for the sale of bond funds that cost investors more than

$2 billion,” said attorney Mark E. Maddox of Maddox Hargett & Caruso, P.C. in Indianapolis, who represented the investor Philip Willingham. “It also is the first make whole award in favor of a Morgan Keegan bond fund investor.”

“This arbitration award affirms our view that Morgan Keegan engaged in a massive scheme to defraud many investors, including Philip Willingham, in the sale of its bond funds,” Maddox added in a March 13 article in the Memphis Commercial Appeal.

In the latest decision regarding Morgan Keegan, FINRA awarded Willingham, a retired cattle farmer from York, Alabama, and Melinda Oates $187,215. They asked for actual damages of $109,881, as well as unspecified “well managed damages had the account been properly invested.”

The six funds at the center of investors’ arbitration claims include open-end and closed-end funds. Among them: the Regions Morgan Keegan Select Intermediate Bond Fund A (MKIBX); Regions Morgan Keegan Select Intermediate Bond Fund C (RIBCX); Regions Morgan Keegan Select Intermediate Bond Fund I (RIBIX); Regions Morgan Keegan Select High Income Fund A (MKHIX); Regions Morgan Keegan Select High Income Fund C (RHICX); and the Regions Morgan Keegan Select High Income Fund I (RHIIX).

Morgan Keegan is owned by Regions Financial Corp. of Birmingham, Alabama.

For more than a year, Morgan Keegan has been the subject of hundreds of arbitration claims by investors who say the brokerage firm and several of its managers intentionally hid the risks of six RMK bond funds. Only after the funds began to plummet in value did investors become aware of the high concentration of subprime mortgages, loans and other speculative debt they had been exposed to.

Many of the individuals who invested in the RMK bonds funds were like Willingham, retired and living on a fixed income. Other investors in the Morgan Keegan funds include families saving for their children’s college education, pension funds, charities, foundations, small businesses and corporations.

All of the investors thought they were putting their money into safe, conservative investments when it came to the RMK funds. Instead, they unknowingly were going down a path of financial destruction, as RMK management exposed the bond funds’ assets to risky and toxic mortgage backed securities. 

“It’s becoming apparent through the evidence investors are now able to present about the scope of Morgan Keegan’s misconduct and the significant investigations that are being conducted by the Securities and Exchange Commission and state securities that regulators are catching up with Morgan Keegan, said Maddox on FINRA’s recent decision in favor of two investors in the RMK funds.

“This, in turn, is allowing arbitrators to better understand the scope of Morgan Keegan’s misconduct,” Maddox said.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

A champion it’s not. Investments in high-risk mortgage-backed securities and credit-default swaps have pummeled the Oppenheimer Champion Income Fund (OPCHX). OppenheimerFunds’ flagship junk-bond mutual fund recorded one of the worst performances among its bond-fund peers in 2008, with assets losing more than 80% of their value. Only the Regions Morgan Keegan Select High Income Fund fared worse.

Problems for Oppenheimer’s Champion Income Fund first came to light in 2006, when fund manager Angelo Manioudakis started to focus on a risky - and, some say questionable - investing strategy that involved total-return swaps. A total return swap is a financial contact that transfers both the credit risk and market risk of an underlying asset from one party to another.

In the case of the Champion Income Fund, the underlying assets were tied to securities on commercial mortgages. Following the burst of the housing bubble in the summer of 2007 and the subsequent onset of the subprime debacle, Manioudakis’ gamble that the securities would increase in value never saw the light of day.

Making matters even worse for the Champion Income Fund: credit-default swaps. Through at least September 2008, the fund sold credit-default swaps on companies that already were in deep financial trouble - companies like Lehman Brothers Holdings, which filed for bankruptcy protection on Sept. 15, and American International Group (AIG), which has required two emergency bailouts from the government in order to stay afloat.

The financial devastation caused by wrong-way bets placed on derivatives goes far beyond just investors of the Champion Income Fund. At least 10% or more of the fund is held by other Oppenheimer funds, as well.

Unfortunately, investors never realized the level of risks they were taking on with the Champion Income Fund. That’s because Oppenheimer’s financial advisors marketed the fund as a conservative, high-income bond fund, one that presented only minimal degrees of risk. Even the fund’s own prospectus - as well as a revised version that was created after the fund began to lose vast amounts of money - described the Champion Income Fund as an appropriate investment for retirees, with an overall investment strategy that focused on building a broad and diversified portfolio to help moderate the special risks of investing in high-yield debt instruments.

Investors who’ve lost millions of dollars because of Oppenheimer’s irresponsible gamble on some of the riskiest and most toxic derivatives possible know otherwise.

In related OppenheimerFunds news, thousands of Illinois families are up in arms over unexpected and dramatic losses in the state’s Bright Start College Savings program and what they say is the mismanagement of the Oppenheimer Core Plus Bond Fund (OPIGX).

The fund, which was supposed to be invested in conservative investment-grade bonds and U.S. government securities but instead took on assets in risky mortgage-backed securities, credit default swaps and other toxic investments, lost more than 40% of its market value last year. By comparison, similar funds managed by other investment firms posted positive returns of about 5%.

Illinois State Treasurer Alexi Giannoulias is preparing to sue OppenheimerFunds in an attempt to recover the $85 million that the Bright Start College Savings program has lost thus far.  

Like Oppenheimer’s Champion Income Fund, the Core Plus Bond Fund was managed under the not-so-watchful eye of Angelo Manioudakis.  Besides Illinois, the Oppenheimer Core Plus Fund is included in 529 college savings plans in Oregon, Texas, Maine, and New Mexico.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.