A North Carolina state court recently found a law suit may go forward against Morgan Keegan involving one of its own broker commiting criminal fraud against an elderly woman.

Martha Capps (Capps) was an elderly woman who suffers from Alzheimer’s related dementia. Her memory has been declining since 2001. Since 1988 and until the events complained of, Capps invested substantial assets with broker Harold Earl Blondeau (Blondeau). In 1997, Blondeau became a partner at Morgan Keegan & Company, Inc. (Morgan Keegan), and advised Capps to move her personal and trust accounts to that firm. At the time that her accounts were moved Capps executed certain documents.

R. J. Blondeau, while working at Morgan Keegan, defrauded an of approximately 1.775 million dollars. Blondeau subsequently pled guilty to investment advisory fraud in federal court.

Regions has indicated it plans to collect a $250 million dividend from Morgan Keegan prior to any sale, increasing proceeds from the business, the people said.  Estimated sale price in the range of $1 billion.

Source:  InvestmentNews.com, November 3, 2011.

FRANKFORT, Ky. (Oct. 27, 2011) - U.S. Securities & Exchange Commission and regulators from Tennessee, Alabama, Kentucky, Mississippi, and South Carolina announced today the appointment of A.B. Data, Ltd.. of Milwaukee to distribute $200 million to investors from the regulators’ settlements with Regions Morgan Keegan.

The settlements resulted from an investigation of seven proprietary bond funds sold by Regions Morgan Keegan to more than 30,000 account holders. The firms were charged with sales violations and fraudulently overvaluing the funds which lost approximately $1.5 billion in value from March 31, 2007, to March 31, 2008. The SEC’s and the five states’ Administrative Orders, required Morgan Keegan and Morgan Asset Management to pay a total of $200 million to establish an SEC Fair Fund and a States’ Fund, both for the benefit of investors. A.B. Data has previously administered several large settlement funds in securities litigation cases and for the SEC.

The A.B. Data website for investor information is: www.abdataclassaction.com under “Morgan Keegan Settlement.” Further, A.B. Data has set up live operators available for questions from investors and they will be available for the duration of the claims process (888-208-9083) during normal business hours. (Central time zone) Investor inquiries may also be directed by mail to: Morgan Keegan Settlement, Claims Administrator, c/o A.B. Data Ltd., PO Box 170500, Milwaukee, WI 53217-8091.

The federal and state regulators’ Orders also required that the costs for establishing, managing and disbursing these funds shall be paid separately by Regions Morgan Keegan and Morgan Asset Management and will not be paid out of the $200 million in settlement funds which will all go to investors based on the filing of claims. The regulators’ Orders provided that nothing in the settlement requires any investor to give up any rights in arbitration or any other proceeding that the investors are legally entitled to initiate. Investors are not signing releases and the filing of a claim has no effect on whether investors are allowed to bring other claims.

Investors who purchased any of the Regions Morgan Keegan Funds from other broker-dealers are also allowed to file claims for their losses. However, it is important that these investors contact the Fund Administrator instead of waiting to be contacted because the Fund Administrator does not have the transaction data for investors that did not have an account at Regions Morgan Keegan.

Kentucky’s securities regulator is the Department of Financial Institutions (DFI). DFI is an agency in the Public Protection Cabinet. It supervises the financial services industry by examining, chartering, licensing and registering various financial institutions, securities firms and professionals operating in Kentucky. DFI’s mission is to serve Kentucky residents and protect their financial interests by maintaining a stable financial industry, continuing effective and efficient regulatory oversight, promoting consumer confidence, and encouraging economic opportunities.

To see SEC’s Order go to: http://www.sec.gov/litigation/admin/2011/34-65227.pdf

To see Kentucky’s Order go to: http://kfi.ky.gov/legal/Pages/morgankeegan.aspx.

To see Tennessee’s Order go to: http://1.usa.gov/qI9NzR

To see Alabama’s Order go to: http://www.asc.alabama.gov and click on “Morgan Keegan Bond Fund Case”

To see South Carolina’s Order go to: http://www.scag.gov/scsecurities/notices-and-orders

To see Mississippi’s Order go to: http://www.sos.ms.gov

Regions Financial Corp. still doesn’t have a deal to announce for Morgan Keegan & Co. Inc., its Memphis-based investment banking unit the company put up for sale this summer.

“We’re not in a position to comment on this further today,” said Regions president and CEO Grayson Hall during the Birmingham, Ala.-based bank’s third quarter earnings conference call for analysts Tuesday, Oct. 25. “Progress is on schedule and in line with our expectations, and we do expect to have more to say on this issue in the near future.”

Regions is in talks with two competing private equity groups negotiating to buy the brokerage firm, according to the Bloomberg news service. A sale will help Regions – which is among the largest banks that still have not repaid Troubled Asset Relief Program funding – pay back its $3.5 billion TARP investment.

According to multiple sources with knowledge of the matter, a deal to sell Morgan Keegan could be announced in a matter of days.

“I can tell you that Morgan Keegan advisers are being led to believe by management that an announcement is imminent,” said recruiter Ron Edde of Armstrong Financial Group Inc., who added he’s not sure whether a deal will be completed soon.

In a consent order signed on October 7, 2011, the Georgia Commissioner of Securities entered a Finding of Fact that found that Morgan Keegan committed fraud in the marketing and sale of the RMK Funds.  This finding is consistent with findings of fact entered by law enforcement agencies in at least five other states–South Carolina, Mississippi, Kentucky, Alabama, and Arkansas.

Anyone wishing to obtain a copy of the Georgia Commissioner of Securities findings of fact can email jim@jamesdunlaplaw.com for a copy.

Though the broker-dealer, now up for sale, had a judge rule in its favor, its reputation could be hurt

A recent ruling by a judge overturning a $9.2 million award in Morgan Keegan’s favor isn’t likely to give parent company Regions Financial much upside as it looks to sell the brokerage firm, experts say. Furthermore, the anti-client nature of the decision could make Morgan Keegan look less desirable to potential purchasers, according to recruiter Rick Peterson of Rick Peterson & Associates in Houston.

More (From AdvisorOne.com)

Reuters.com reports that Thomas H. Lee Partners and a consortium that includes Blackstone Group (BX.N) and Carlyle Group CYL.UL are finalists to acquire Regions Financial Corp’s (RF.N) Morgan Keegan brokerage and investment banking unit, sources familiar with the matter said on Monday.

A deal is far from certain, the sources said, as debt-financing marketsremain tight, and Morgan Keegan faces the challenge of keeping some 4,100 employees in place amid uncertainty about their future.

Regions, a large regional bank which still has not repaid $3.5 billion of 2008 U.S. bailout money, in June announced the unit could be sold.

Regions is in parallel negotiations with the two private equity groups for the business, which has a book value of about $1.5 billion, one of the sources said on Monday.

Regions is hoping to get a price that’s close to book value. If it does not, the Birmingham, Alabama, bank may decide not to sell the business, the source said.

The sources were not authorized to speak publicly.

Regions on June 22 said it had hired Goldman Sachs (GS.N) to explore options for Memphis-based Morgan Keegan, which has more than 300 offices spanning the U.S. South, Midwest, Texas and the Mid-Atlantic.

More

An eye-opening analysis of the “distributions” of nontraded REITs sold exclusively by David Lerner Associates Inc. shows the REIT’s property investments largely underperformed the level required to pay promised dividends to investors. Indeed, the analysis claims that the REITs consistently borrowed from a line of credit and used distributions investors were recycling back into the real estate investment trust to meet the targeted dividend payout.

The examination of the REITs sold by David Lerner brokers, known as Apple REITs, is included in an amended complaint of a prospective class action filed by investors this week in federal court in Newark, N.J.

The original class action was filed in June, weeks after the Financial Industry Regulatory Authority Inc. sued David Lerner Associates, a broker-dealer based in Syosset, N.Y., for misleading investors. The firm allegedly provided misleading performance figures for Apple REITs and implied that future investments could be expected to achieve similar results, according to Finra.

According to the amended class action complaint, the distribution paid to investors did not match the level of income generated from the various Apple REITs, which invested primarily in Marriott and Hilton extended-stay hotels. Brokers at David Lerner allegedly told clients that the Apple REITs were safe conservative investments that would protect their savings from the volatility of the stock market. The suit says investors were promised steady, annualized returns in the neighborhood of 7% to 8%.

According to the complaint, David Lerner represented that distributions would be made based on cash flow. Offering documents, however, stated that paying distributions from other sources could happen only in “certain circumstances” and “from time to time.” For example, Apple REIT Eight paid $238.2 million in distributions to investors from 2007 to 2010, with only $82.3 million — or 34% — coming from cash from the REIT’s operations, according to the complaint.

Likewise, Apple REIT Nine from 2008 to 2010 paid $188.5 million in distributions, with $42.2 million — or 22% — derived from cash from operations.

David Lerner Associates and other defendants “paid distributions without regard to profitability, even as they acquired properties at prices they knew could not conceivably justify the level of distributions they were paying,” the complaint alleges.

Regions Financial, an Alabama bank weakened by poor real estate loans in Florida and Georgia, has looked for a suitor willing to pay a top price for its Memphis-based investment business.

Unconfirmed press reports on Monday and Tuesday identified the Morgan Keegan bidders as:

Thomas H. Lee Partners of Boston; and

Blackstone Group of New York and Carlyle Group of Washington, D.C., in a joint bid.

Morgan Keegan’s all-important bond and investment sales force would not defect to a rival if a sale took place, said Tim White, managing partner of personnel recruiter Kaye/Bassman International, Dallas.

“From what they told me the private-equity firm really is an acquirer they can embrace,” White said Tuesday after speaking with Morgan Keegan brokers.

Many brokers expect a private-equity firm would resell the company in several years to Morgan Keegan’s senior managers, White said.

Selling to a buyout firm could favor Memphis and keep in place most of Morgan Keegan’s 1,050 jobs here.

Companies owned by private-equity firms often shed jobs, but they usually run as standalone businesses and seldom merge entire operations with other companies the equity firm controls.

Only a few weeks ago, rival investment firms including St. Louis-based Stifel Financial were said to be considering a buyout of Morgan Keegan. That raised concerns that overlapping office work — such as accounting, marketing and administration — might shift to the acquirer’s home city.

More at:  http://www.knoxnews.com/news/2011/oct/12/two-bidders-running-memphis-based-morgan-keegan/