Angry Arkansans Battle Morgan Keegan Over Lost Millions

by Jamie Walden  on Monday, Jun. 15, 2009 12:00 am  

Walter Morris, chairman of H&M Lumber Co. of West Helena and a veteran of the 1945 Battle of Okinawa, is now fighting Morgan Keegan over $70,000 lost in one of the company?s funds.

Arkansas investors who lost more than $2.5 million after investing in Regions Morgan Keegan high-yield bond funds are fighting, with varying degrees of success, to recover their losses.

Among the investors who claim they were deceived are a Boy Scouts council, a church and an 87-year-old veteran of the Battle of Okinawa. But Memphis-based Morgan Keegan staunchly denies the common claim that the funds were misrepresented as "conservative."

At least seven Arkansans have already dragged Morgan Keegan into arbitration over investments in several Morgan Keegan funds, according to documents made public by the Financial Industry Regulatory Authority. FINRA, based in Washington, D.C., is an independent regulatory organization created in 2007 through the consolidation of the National Association of Securities Dealers and the regulation, enforcement and arbitration functions of the New York Stock Exchange.

One particular group of Arkansas investors in the RMK funds was, as of last week, ironing out the details of its impending arbitration. The group will claim a collective $1.5 million in losses from the funds.

The group includes the Ouachita Area Council Boy Scouts of America of Hot Springs, Westminster Presbyterian Church of Hot Springs and a Hot Springs engineering firm that declined to reveal its identity before arbitration. The group also included a family trust, some retirement accounts and a few other Arkansans who didn't want to be named before the arbitration request was filed.

Several state residents have already won awards, some are still in arbitration limbo, and some have walked away empty-handed:

  • Little Rock gastroenterologist Dr. Louis Velez of St. Vincent Family Clinic went to bat against Morgan Keegan, claiming losses of $533,900. FINRA awarded him $75,000. His case was resolved last month.
  • Hot Springs Village resident Walter Drissel filed his claim in September, claiming more than $300,000 in compensatory damages. Drissel's case has yet to be resolved.
  • Walter Morris, 87, of West Helena - a U.S. Navy veteran who fought in the 1945 Battle of Okinawa during World War II - has also filed a claim for about $70,000 that he lost from his mother's trust in a Morgan Keegan fund. Morris' case is still pending.
  • Harold and Georgia Sweet, two Maumelle retirees, claimed losses of $135,000 from the RMK funds. The Sweets received an $85,000 award, and their case was resolved in November.
  • Gertrude and Robert McLean, whose suit stretches back to October 2007, claimed a little over $25,000 in compensatory damages. When their case was resolved in October, the McLeans received no award.

Andrew Stoltmann, attorney for Harold and Georgia Sweet and head of Stoltmann Law Offices PC of Chicago, said these RMK cases are so complex that some attorneys require a learning curve. After two to four cases, he said, they begin winning arbitrations. Unfortunately, arbitration appeals are incredibly rare, he added.

Some attorneys representing investors say they don't blame their clients' individual Morgan Keegan brokers, who may well have been in the dark about the risks associated with the funds.

"We've got about 120 cases. And we've not sued a single broker," said Dale Ledbetter, head of Ledbetter & Associates PA of Fort Lauderdale, Fla, and attorney for Morris, Drissel and the group case. "We think the brokers were victims of the higher-ups at Morgan Keegan."

Ledbetter said his firm is even representing a few brokers in suits against Morgan Keegan, because they too had money in the funds.

Knowing that his own broker, Ryan Ehrhart, had invested in the funds helped persuade Drissel, of Hot Springs Village, to buy.

"The broker that I dealt with told me, 'I'm keeping my money in it.' He volunteered and said, 'I'm keeping my family's money in it,'" Drissel said.



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