By Bruce Kelly of Investment News
Morgan Keegan & Co Inc. has lost another arbitration case stemming from a blow up of its bond funds to a former professional athlete, this time liable to a former NBA all-star for $1.45 million in damages.
On Friday, three arbitrators in a Financial Industry Regulatory Authority Inc. hearing in Los Angeles awarded Horace Grant compensatory damages from a claim that made a variety of allegations, including breach of fiduciary duty and fraudulent misrepresentation.
In his lawsuit filed in March 2008, Mr. Grant asked for $1.5 million in compensatory damages, as well as punitive damages, which the panel did not give.
Mr. Grant’s attorney, Andrew Stoltmann, said that this was the largest award by far against Morgan Keegan.
The firm, a Memphis, Tenn., based broker-dealer subsidiary of Regions Financial Corp. of Birmingham, Ala., faces hundreds of arbitration claims from investors who bought the company’s bond funds and have seen as much as 95% of the funds’ value evaporate since mid-2007.
“The funds lost 90% of their value in about 16 months,” Mr. Stoltmann said. “This case shows arbitrators are taking very seriously claims involving investors who have sustained huge losses in toxic waste derivatives like [collateralized debt obligations] and [collateralized mortgage obligations].”
Mr. Grant’s career spanned from 1987 to 2004, and he played forward and center for the Chicago Bulls, the Orlando Magic, the Seattle Supersonics and the Los Angeles Lakers.
Mr. Grant is not the first professional athlete who has sued Morgan Keegan over losses from the bond funds. Jerome Woods, who played for the Kansas City Chiefs, won a $950,000 award against Morgan Keegan in April.
National broadcaster and former baseball player Tim McCarver won a claim of $100,000 in February.
In an e-mail, a Morgan Keegan spokeswoman, Kathy Ridley, said: “The panel did not provide any reasons for their finding in the Grant case and any explanation offered by the claimants attorney is just speculation. These cases turn on their individual facts and we don’t agree with the outcome here. To put this award in context, approximately half of the arbitration cases heard to date have been dismissed in their entirety and awards overall total approximately 28% of the damages claimed.”
Source: Investment News