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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

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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.

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