A FINRA arbitration panel has ordered Morgan Keegan to pay $1.83 million to a hotel developer in another case involving the firm’s tarnished bond funds.
The three-member panel made the award last Friday, ordering Morgan Keegan to pay the developer, Frank L. Flautt Jr., $1.5 million, his wife Brenda, $246,799, and the Flautt Family Foundation was awarded $69,124. The firm, which is owned by Regions Financial, was also assessed by Morgan Keegan $19,200 for hearing session fees. The panel found Morgan Keegan liable for misrepresentations and omissions, breach of fiduciary duty, unsuitable investments, negligence, failure to supervise, breach of contract and vicarious liability.
A spokeswoman for Morgan Keegan gave the following statement: “We are disappointed with the panel’s decision in the Flautt case and are evaluating the possibility of an appeal. Importantly, this case stands in direct contrast to the results of a series of recent positive legal outcomes for Morgan Keegan. During November, six other arbitration cases have gone to award with five resulting in zero awards to claimants and dismissals of all claims against Morgan Keegan.
“As further background, other cases tried by Mr. Campbell include the Starnes and Bruce cases. Starnes, alleging damages of $7.1 million, resulted in a zero award to the claimants, dismissals of all claims against Morgan Keegan, and claimants were ordered to pay $265,000 in legal costs to Morgan Keegan. The Bruce case, alleging damages of $2.3 million, resulted in an award of $112,500 to claimants.”
The troubled RMK funds suffered severe monetary losses between March 31, 2007 and March 31, 2008. As a result, they have been the focus of numerous arbitration disputes and litigation.
Dow Jones and the Memphis Commercial Appeal newspaper first reported the Flautt award. The latter that Flautt runs the Hilton Sandestin Beach & Golf Resort and that James Kelsoe, the senior former portfolio manager of the funds, testified at the hearings.