State official: US agency ignoring fraud victims
JACKSON, Mississippi (AP) — The U.S. Securities and Exchange Commission has failed to distribute $100 million to 39,000 investors nationwide who lost money because of fraud by a financial firm, a Mississippi official said Wednesday.
Mississippi Secretary of State Delbert Hosemann said Wednesday that the federal agency has ignored repeated inquiries about the money. The Republican said that he, the Democratic state attorney general and all four of Mississippi’s U.S. House members — three Republicans and a Democrat — have asked about it.
“There is no reasonable excuse for this,” Hosemann said at a news conference at the Mississippi Capitol.
Morgan Keegan & Co. and Morgan Asset Management, both based in Memphis, Tennessee, agreed in June 2011 to pay $200 million to settle civil fraud charges that it overstated the value of mortgage investments in 2007, as the housing market was collapsing.
Under the settlement, half the money was to be distributed to the victims by the 50 states and the other half by the SEC. Hosemann said all 50 states distributed $100 million to victims in 2012, but the other $100 million remains in a fund at the federal agency.
SEC spokesman John Nester said there’s a proposed distribution plan under consideration
He said a public comment period ended May 3 with several responses.
“Under the commission’s rules, public comments must be analyzed by staff and presented to the commission with a recommendation for action,” he said. “Due to the complexity of the comments received, an extension was granted until August 23 to enable a complete analysis, consultation with other offices, and recommendation to the commission.”
Five states — Alabama, Kentucky, Mississippi, Tennessee and South Carolina — started the investigation of Morgan Keegan firms. The SEC and the Financial Industry Regulatory Authority later joined the investigation, and Morgan Keegan agreed to settle civil fraud charges tied to subprime mortgage-backed securities. Regulators said the firms lured investors with false sales materials for five funds that lost an estimated $1.5 billion.
Attorney Don Barrett of Lexington, Mississippi, filed a lawsuit July 25 in U.S. District Court for the southern half of Mississippi, on behalf of three state residents who are owed money. The suit seeks to force the SEC to distribute the funds. Hosemann filed a brief last week supporting the lawsuit.
Hosemann’s brief says the SEC has given itself several extensions of time to consider how to handle distribution of the money from the Morgan Keegan settlement. The most recent extension came July 22, when the SEC gave itself another 30 days.
As secretary of state, Hosemann regulates the sale of securities.
Hosemann said more than 500 people who are owed money in the settlement have died in the past two years, including 83 from Mississippi.
About 2,000 Mississippi residents lost money because of the Morgan Keegan case, Hosemann said. Among them is Betty Kilgore of Bolton, who’s a plaintiff in the lawsuit. The lawsuit says Kilgore had two accounts with Morgan Keegan and lost $33,949.
During the news conference Wednesday, Kilgore said she is 83 and still working.
“It hurts me to think that I have money that I cannot get,” she said. “I have tried and tried and tried. I’ve talked to everyone. I’m still without money.”