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ARS Investor Seeks Help for ‘Theft by Any Other Name’

Posted by Larry Doyle on August 15, 2011 6:00 AM |

The twists and turns in the ongoing saga of the auction-rate securities nightmare are replete with some of the most gut-wrenching personal stories I have experienced.

Regulators like to trumpet the progress made on cleaning up the ARS mess over the years.

Let’s hold the applause for these regulators because a full three and a half years have passed and approximately $100 billion remains frozen in those ARS which were pitched as cash surrogate, money market equivalent securities.

Over and above the cash, little attention is paid by the media or others to elevate and expose the personal nightmares of those individuals and businesses which continue to hold these frozen ARS. These nightmares are very real and have put a stranglehold on many individuals and businesses in our nation.

Even when supposed success and progress occur within the ARS universe, we need to look a little deeper and realize that the progress is not all that it may appear. How so?

Let’s navigate, get very personal, and try to help an individual American businesswoman who feels she has no place to else to turn.

A month or so ago both Morgan Keegan and Raymond James announced that they were making clients whole for auction-rate securities holdings frozen in their accounts. I reported on these developments on June 30th in writing, ARS Update: Raymond James and Morgan Keegan ARS Investors ‘Nightmare Over’.

How is it then that an individual businesswoman whom had purchased ARS in her company’s name and in a business account through Morgan Keegan continues to be left both without her cash and any satisfaction? She  moved her account to Raymond James when her broker left Morgan Keegan.

This individual recently reached out to me. I am happy to share her story in the hope that others may weigh in and we can collectively create added pressure on state securities regulators let alone the crowds at the SEC and FINRA who have failed to perform in adequately protecting ALL ARS investors.

The writer chooses to remain anonymous for obvious reasons. She recently wrote the following letter.

July 30, 2011
Morgan Keegan & Company, Inc.
Auction Rate Securities Processing Reorganization Dept.
50 North Front Street Memphis, TN 38103
Re: ARS Repurchase Program

Dear Sir or Madam:
This is my formal request to be included in the ARS repurchase program that is currently in place for the above numbered Jefferson County Alabama Water & Sewer bonds.

I see no distinction between my losses and those of other Morgan Keegan ARS purchasers who relied on the advice and information given to them by Morgan Keegan.

Because you have removed The Acceptance Form from your website I have been unable to complete and send back the official documentation.

This week I have spoken with Joe Barkley, among others at Morgan Keegan, who declined to send me the forms.

********, President
********, Inc.

I had the following exchange with her,

LD: Did you originally purchase the ARS bonds from Morgan Keegan or through another brokerage house? I recall your telling me that you moved your account after the broker left. Where are these ARS currently held?
Businesswoman: “I purchased the ARS at MK, I moved my account to Raymond James in Miami where they are currently held.

LD: “Do you have any contact or engagement with anybody at Morgan Keegan? Businesswoman: “No I have not heard from those people in a long while. After my MK broker, ******, disappeared, I was contacted by a man named *************. I recently googled him but wasn’t sure if he was still at MK. I believe he was in the same office as **** had been.

LD: “Any other pertinent info that you can share is appreciated.”
Businesswoman: “I had withdrawn cash as late as late Dec. 2007, and was told nothing of any auction failures. ***** had been repurchasing the ARS every 35 days without any instruction from me. I had been in two different bonds, one of which was Jefferson County, and for some reason when I took cash out in 12/07 he took the remaining cash in that bond and put it in Jefferson County, which put 100% of my cash in Jefferson County.

What do I believe are the issues for this individual businesswoman? In reviewing the Morgan Keegan settlement from the WSJ article I referenced back on June 30th, we see the following,

“Morgan Keegan said it will repurchase all remaining auction-rate securities sold by the firm and held by retail investors, including securities issued to debt-laden Jefferson County, Ala., a move that will conclude a program initiated in early 2009.

Additionally, in every ARS settlement I have reviewed ONLY those investors who continued to maintain their accounts at the brokerage house through which they initially purchased the ARS have been made whole.

Is this fair? Is this right? Is this justice?

Or is this another instance of the ongoing nightmare scenarios which plague our fellow citizens tangled in the ARS web.

Why would regulators exclude non-retail investors? If securities are held by a small business does that make the fraudulent manner in which the ARS were distributed any less heinous?

If a broker leaves an institution and the firm provides no satisfaction in returning frozen ARS funds, why should an investor now be penalized by that fact?

What needs to happen here and for the untold thousands of other investors who continue to be frozen out from reclaiming THEIR cash?

State securities regulators nationwide need to band together and overwhelm the ineptitude and inability of the SEC and FINRA to make ALL ARS investors whole. What may help that happen?

Perhaps the airing of the PBS documentary on the ARS travesty which I have referenced previously may help bring the necessary pressure on regulators to end this nightmare once and for all. We can only hope.

Fraud is fraud or as we witness in the case of this businesswoman, the ARS nightmare remains ‘theft by any other name’.

I strongly encourage any ARS investors to weigh in on this specific situation with their own thoughts and opinions that may help this specific businesswoman.

Larry Doyle

Isn’t it time to  subscribe to all my work via e-mail, an RSS feed, on Twitteror Facebook? Do your friends, family, and colleagues a favor and get them to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

  • fred


    I believe Morgan Keegan is owned by Regions. Regions still owes the federal gov’t $$$ in TARP loans which kick up to an interest rate of 8-9% in 2013 if the loans are not repaid. The talk on the street is that Regions is shopping around Keegan so that they can meet their TARP obligations.

    Clearly Regions has decided to honor MK ARS obligations for current customers so they can sell MK free and clear. My suggestion to your friend, reopen an account with MK and transfer her ARS holdings back over, she will then probably get her money back before Keegan is sold.

  • fred


    Why doesn’t the media cover the story? Because it isn’t (new) news. The ARS ripoff is a great cause, these people (including your friend), clearly deserve to get their $$$ back IMMEDIATELY.

    Couldn’t help but notice the protesters outside my local Verizon today. Why are unions and their issues the only groups capable of getting media attention?

    LD, what if someone contacted ARS holders and held flash protests at XYZs HQs, let major media know, contact every congressperson, (why leave out the whitehouse), while, at the same time, try to create some buzz online at Twitter, Google, Facebook, etc.

    The protesters would have to very focused and prepare their soundbites carefully, they will probably only get one chance to make a pitch to the American people, but if successful, watch how quickly ARS $$$ are returned.

  • I ran into this question when researching and interviewing ARS victims for my book, RUTHLESS. Here’s the back story as it came to me from certain legislators, Treasury and sources inside the Fed:

    In 2009, with pressure building in Washington to make retail investors whole, what I call the “liquidity gambit” came fully into play. The concept was to find ways to pay off the “little guys” (retail investors) while agreeing to make institutional and corporate ARS holders bite the bullet and wait at least six months beyond the time many retail investors were made hold. Liquidity was at the time considered too tight to pay off retail investors and the corporate side.

    Regulators decided corporate entities were in a better position liquidity-wise and could afford to wait longer for redemption. It was a lousy idea but one that was given the blessing of Treasury, the Fed and the majority of state regulators. I have to wonder if your MK correspondent fell into this category: that is, “corporate.”

    And there was another nasty hitch in all this: Banks and brokerages such as Wachovia, among others, arbitrarily concocted a policy about investors moving ARS paper from the brokerage house where the ARS were originally sold to another brokerage in hopes of redemption. If an investor tried this ploy, the original seller would then be clear of any responsibility to repay the investment, and the new brokerage would refuse to redeem something they hadn’t sold. Your MK investor apparently moved her ARS in hopes of being made whole and, in doing so, stepped into this particularly nasty snake pit of no return. By the way, this policy remains in force, as does the ploy to string out corporate investors as long as possible.

    LD: You know how to reach me and I invite you to give my phone number to the businesswoman who has reached out to you. I’ll be glad to help her if I can.

  • Mari

    Phil, Do you concur with Fred that I open a MK account and transfer my ARS back to them? Would we be taking any greater risks than leaving them at RJ? They can’t refuse to allow me to transfer the ARS back to them can they?Do you think I have any hope of looking to RJ to repurchase them since they were just ordered to repurchase all the ARS they
    Any other thoughts…

  • Sam


    is there any update to this story
    my ARS were purchsed by a Broker at Amosuth Bank
    in which Regions later Purchased and my account was
    transfered to MK = later when the Broker moved
    he talked me into moving my account with him

    and now I am stuck

    Thanks for any Help in ending this nightmare for me

    • LD


      I wish I could give you a path to redemption of all your funds.

      I have written extensively on this topic BUT despite the efforts here and elsewhere, regulators and government officials have FAILED you and thousands of others.

      I wish I had better news.

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