By Bobby Harrison
Daily Journal Jackson Bureau
JACKSON – Mississippi investors who lost millions of dollars due to action deemed to be improper by Tennessee-based Morgan Keegan are suing the federal government to recoup a portion of their funds.
On Thursday, Secretary of State Delbert Hosemann announced his office was joining the lawsuit by Mississippi investors against the federal Securities and Exchange Commission.
At issue is $100 million in funds the SEC is supposed to distribute to Morgan Keegan clients who lost more than $1 billion nationwide due to the Memphis company “overstating the value of certain mortgage-backed investments during the housing collapse.”
In 2010, Hosemann said investors in Mississippi revealed the improper Morgan Keegan action to his office. Soon, other states and the federal government were involved in an investigation of the investment company that led to Morgan Keegan agreeing to pay $200 million to investors nationwide.
As part of the settlement, the states were supposed to distribute $100 million to the Morgan Keegan customers and the federal SEC was supposed to distribute the other $100.
Hosemann said his office worked to locate Mississippians who were victimized by the Morgan Keegan actions and found more than 90 percent of them and provided them their share of the settlement. The Mississippi Morgan Keegan customers filed the lawsuit against the SEC because some of them said at a news conference Thursday in Hosemann’s capitol office that the SEC has not begun the process to distribute its share of the settlement.
Hosemann said the SEC is more than a year late in acting.
“It is unconscionable to have come this far to have a federal agency bottle neck millions of dollars owed to Mississippi investors,” Hosemann said in a news release. “As a last resort, I find this lawsuit necessary and support this action to order distribution.”
According to information provided by Hosemann’s office, various investigations by the Government Accountability Office have been critical of the SEC for the time it takes to distribute settlement funds in cases similar to the one against Morgan Keegan.
One study said on average it takes the SEC five years to distribute settlement funds. Hosemann said about 500 of the victims of the Morgan Keegan action already have died, including 82 Mississippians.
In total, more than 2,000 Mississippians lost more than $71 million. They received $6 million from the $100 million distributed by the states.
Investor John Pittman of Ridgeland, who is a party to the lawsuit, said, “This is a dysfunctional federal government, a perfect example of it. …It is outrageous we have to go to court to get our money.”
At the time of the settlement, Hosemann said the share of the $200 million settlement fund for Mississippi clients would be about 6 percent. Hosemann estimated that about 40 percent of the Mississippi clients – those making the smallest investments – would recoup all of their losses. But all Mississippi investors were supposed to be reimbursed for their losses up to a certain level before the settlement funds were exhausted.