Brokers Accused of Defrauding Mississippians of $65-MillionBy Jeffrey Hess | Published 08 Aug 2011 04:00pm |
Three investment managers accused of defrauding Mississippi investors are facing civil hearings in Jackson. MPB's Jeffrey Hess reports that the managers are accused covering up the level of risk in a securities-backed asset they were selling.
The secretary of State's office is pursuing civil penalties against the three employees....Brian Sullivan, Gary Stringer and Michelle Wood...for allegedly inflating the value of mortgage investments the company was selling just as the housing market began collapsing in 2007, costing Mississippians 65-million dollars.
On the Campus of the Mississippi College School of Law, James Holland, the attorney for the secretary of state, told the Hearing Officer that the trio claimed the securities were safe government corporate bond funds and preferred stocks, when they were really inferior investments.
In his words, “They failed to disclose the extreme risk. They breached their own policies and procedures.”
The attorney for the three employees, Atlanta-based attorney Peter Anderson, argues that the risk of the investment made was clear to investors, and Mississippi has no business prosecuting them because they never lived or worked here.
Anderson called the hearing a miscarriage of justice, saying quote: "It goes beyond the pale for them to have be here to defend these charges".
University of Mississippi Securities law professor Mercer Bullard says the state will have to prove that the brokers intentionally misled or deceived investors, even if customers could have found more reliable information about the investment.
"The investor often hires a broker precisely so that they need not read the prospectus. They have a relationship of trust and confidence with the broker and expect to get independent honest advice," Bullard said.
Bullard says these hearings are not uncommon, especially in the wake of the housing market collapse.
last summer, Morgan Keegan settled a civil fraud charges against them in connection with these securities for 200-million dollars.
The hearing, at the MC School of law, could last up to three weeks....the final decision on penalties rests with the Mississippi Secretary of State.
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