It has been more than two years since the Securities and Exchange Commission (SEC) and other state regulators settled fraud allegations with Morgan Keegan involving certain inflated mortgage-backed securities. Morgan Keegan misrepresented and overstated the value of certain mortgage-backed investments during the housing collapse, resulting in more than 39,000 investors nationwide losing over $1 billion. Since then the states have distributed $100 million, their portion of the $200 million settlement, but it appears the federal government has failed to even approve a plan for disbursement. According to Mississippi Secretary of State Delbert Hosemann, many investors have died waiting to get the settlement money owed to them. He had this to say about the delay:
Many of these investors are elderly and on fixed incomes. It is inexcusable they have to wait over two years after the settlement agreement to receive their own money from their own government. It is unconscionable to have come this far to have a federal agency bottleneck millions of dollars owed to Mississippi investors. As a last resort, I find this lawsuit necessary and support this action to order distribution.
Secretary Hosemann had filed an Amicus Curiae in support of a lawsuit filed by several Morgan Keegan victims against the SEC to compel them to release the victim’s money. As Securities regulator for the State of Mississippi, Secretary Hosemann made repeated requests for payment in February of this year. All four Mississippi Congressmen – three Republicans and a Democrat – also requested distribution of these funds in February 2013. A demand for payment was made April 1st by Mississippi Attorney General Jim Hood. So far all of these requests have been ignored. Secretary Hosemann, at a news conference last month, said:
Injured Mississippi investors have been stopped from receiving their own money by their own government. What we have is yet another example of the federal government not following its own laws at the expense of hard working Mississippians. There is no reasonable excuse for this.
While all of the above might seem strange and totally illogical, it appears the settlement’s purpose – payment of legitimate claims – has not been achieved. In fact, many observed the settlement as a whole benefited Morgan Keegan more than it did the victims of the bank’s wrongdoing. Hopefully, this action by Secretary Horsemann will send a message to those who have control over the settlement.
Source: Memphis Business Journal
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