Sonn & Erez Suing Morgan Keegan For Investors Who Suffered Losses in Morgan Keegan Bond Funds
Many investtors lost large sums of money in the Region Morgan Keegan Select High Income Fund; Regions Morgan Keegan Strategic Income Fund; Regions Morgan Keegan Select Intermediate Bond Fund; Regions Morgan Keegan Multi-Sector High Income Fund; or the Regions Morgan Keegan Advantage Income Fund.
The law firm of Sonn & Erez does not believe that these losses were caused solely by market forces, as Morgan Keegan may contend. On July 19, 2007. Bloomberg News described James Kelsoe, the funds’ manager, as having an “intoxication” with structured financial products which “kept him from pulling out completely.” These high risk products included “collateralized debt obligations” (CDOs), “collateralized mortgage obligations” (CMOs) and “collateralized loan obligations” (CLOs). Much of the losses are related to the surging defaults and delinquencies in the loans that underlied the securities that Kelso bought.
In one class action suit, directed at the RMK Advantage Income Fund and the RMK Strategic Income Fund, allegaions were made that investors were not told about the true risks of the fund, the extent to which the funds were invested in illiquid securities; that due to the illiquidity of some assets, the fund manager was forced to sell the lower risk assets first, thereby penalizing fund holders; that the funds were heavily invested in risky subprime loans and collateralized debt obligations; that the funds’ board of directors had a conflict of interest; that the funds, which were said to be independent with different strategies, were nearly identical in strategy, resulting in increased risk and that the pre-2006 results were attributable to their concentration in illiquid, subprime and untested investment structures. The bottom line is that it appears that investors may have been hoodwinked by Morgan Keegan.
Investors have lost hundreds of millions of dollars, or more, in Morgan Keegan Bond Funs managed by James Kelsoe, and sold by Morgan Keegan brokers, some of whom feel that they were mislead by Kelsoe themselves. Investors are fighting back. Investors are hiring securities arbitration attorneys, such as Sonn & Erez, to sue to recover their losses. Call us at 1-8… for a free evaluation. Cases are handled on a contingency fee basis. No recovery, No fee. In some cases, the firm will advance the costs of the suit for investors.
Sonn & Erez is “AV” rated by Martindale Hubbel, the independent lawyer rating service. “AV” means Very High to Preeminent lawyer abilities and the highest ethical rating available. The lawyers at Sonn & Erez have substantial securities arbitration and litigation experience, and have recovered millions of dollars for their clients. Sonn & Erez believes that investors should bring individual arbitration actions, rather than a class action for their case.
In an arbitration, a three arbitrator “jury type” panel decides the case. Arbitration has been demonstrated to be cheaper, faster and more final than court. Whereas a class action in court can take years to resolve, arbitrations can generally get resolved in 12-18 months. Arbitration is far from a perfect alternative resolution than court, but in many cases can better serve those who cant wait years to get their money back. Call 1-868-372-8311 today for more information. Please note that Sonn & Erez will not be suing individual stockbrokers, but the Morgan Keegan brokerage firm company, and possibly senior officials, who should be responsible for these losses.
Many times, it is the stockbrokers themselves who step forward, and provide truthful testimony that their employer was not completely truthful about the products they sold, and sometime even mislead the brokers themselves. The stockbrokers themselves may even have claims against Morgan Keegan and James Kelsoe for misleading them as well. Dont suffer in silence.
SEC CHARGES WEXTRUST, STEVEN BYERS, JOSPEH SHERESHEVSKY, AND OTHERS IN $255 MILLION PONZI SCHEME
Aug. 11, 2008 — The United States Securities and Exchange Commission filed charges against Wextrust Capital, LLC (Wextrust), its principals, and four affiliated Wextrust entities, alleging that defendants conducted a massive Ponzi-type scheme from 2005 or earlier that raised approximately $255 million from approximately 1,200 investors. The targets of the fraudulent offerings are primarily members of the Orthodox Jewish community.
The complaint alleges an affinity fraud of very large scale. In this case, one of the defendants used his extensive connections in the orthodox Jewish community to solicit more than $250 million from unsuspecting investors. Affinity frauds are especially horrible because the victims tend to let their guards down in circumstances where they might otherwise proceed with much more caution, according to a comment from the SEC.
Jeff Sonn, Esq., a securities attorney with Sonn & Erez, PLC, said that “using one’s faith to steal money is one of the most heinous types of investment scams because the swindlers are defrauding people under the guise that they are pios and moral. Whatever happened to the commandment “Thou shalt not steal.?” As a Jew, I am outraged whenever I see a so-called Orthodox Jew swindle others in his community. Likewise, I have seen other cases where so-called Pastors or Priests have done the same to their own Christian community by using their beliefs to steal money. Its reprehensible.”
The SEC charged in its Complaint that Wextrust, its principals Steven Byers and Joseph Shereshevsky, and its affiliated entities Wextrust Equity Partners, LLC (WEP), Wextrust Development Group, LLC (WDG), Wextrust Securities, LLC (Wextrust Securities) and Axela Hospitality, LLC (Axela) conducted at least 60 securities offerings through private placements and created approximately 150 entities in the form of limited liability companies or similar vehicles to act as issuers or facilitators of the offerings, purportedly to fund the acquisition of specified assets, the majority of which were commercial real estate ventures. Contrary to representations in the offering memoranda that proceeds would be used for specific projects, the defendants allegedly diverted funds to pay returns to investors in prior offerings, or to fund expenses of the defendants.
In one offering, conducted in 2005, the SEC complaint alleges that defendants falsely represented to investors that the more than $9 million raised would be used to purchase seven specifically identified real estate properties that were leased by federal government agencies, such as the General Services Administration. In fact, according to the complaint, the defendants never purchased the seven properties. Moreover, at the time the offering occurred, they knew or were reckless in not knowing that the seven properties would not be acquired. Significantly, while the offering was ongoing, the Wextrust entities “borrowed” more than $6 million from the funds raised in the GSA offering and used these funds for purposes unrelated to the GSA offering.
Overall, the complaint alleges, defendants diverted at least $100 million dollars to unauthorized purposes. The complaint alleges that the defendants are conducting at least four ongoing offering frauds intended to raise money to pay back investors from prior offerings.
The complaint named the following defendants.
Byers, age 46, is a resident of Oakbrook, Ill., and owns sixty percent of Wextrust. He is the Chairman of Wextrust and President and Chief Operating Officer of WEP, the arm of Wextrust focusing on income-producing properties, and is also an owner or controlling person of Wextrust Securities. Together with Shereshevsky and others not named in the complaint, Byers controls the Wextrust affiliated entities.
Shereshevsky, age 51, is a resident of Norfolk, Va., and owns twenty percent of Wextrust through a partnership interest held in the name of his wife. Shereshevsky was, until recently, Wextrust’s Chief Operating Officer, was instrumental in founding Wextrust Securities, and was responsible for Wextrust’s expansion into purported diamond mining investments in Africa. Shershevsky pled guilty to one felony count of bank fraud in June 2003, U.S. v. Shereshevsky, 94 Cr. 248 (CSH).
WexTrust, an Illinois limited liability company, was formed by Byers in 2003. According to the company’s website, Wextrust is a globally diversified private equity and specialty finance company, specializing in investment opportunities ranging from real estate to specialty finance and investment banking. Wextrust is headquartered in Chicago and maintains offices in New York, N,Y., Norfolk, V., Atlanta, Ga., Boca Raton, Fla., Nashville, Tenn., Tel Aviv, Israel; and Johannesburg, South Africa.
WEP is an Illinois limited liability company headquartered in Chicago, engaged in the business of buying real estate assets, generally though its partially-owned subsidiaries. According to WEP documents, WEP is the beneficial owner of approximately 120 entities formed for the purpose of owning equity interests in commercial and multi-family real estate assets.
WDG is an Illinois limited liability company headquartered in Chicago, in the business of developing real estate assets.
Wextrust Securities is a broker-dealer registered with the Commission and a Virginia limited liability company headquartered in Norfolk, Va. It employs thirty-six registered representatives and maintains branch offices in New York, N.Y., Norfolk, Chicago, Southfield, Mich., and Ramat Gan, Israel. It was formed in March 2005, registered with the Commission in March 2006, and has been a licensed broker dealer since that time.
Axela is an affiliate of WexTrust Capital. Axela, through its LLC subsidiaries, owns and operates Wextrust’s hotel properties, including the Axela Baltimore Hotel and the Park View Hotel in Chicago, and provides asset management services to other Wextrust affiliated LLCs, such as Crowne-Phoenix Investors LLC.
The complaint alleges that defendants violated and are violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Wextrust Securities violated Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Shereshevsky violated Section 15(a) or alternatively, aided and abetted, Wextrust Securities’ violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1 promulgated thereunder. Byers aided and abetted Wextrust Securities’ violations of Sections 15(b)(1), 15(b)(7) and 15(c)(1) of the Exchange Act and Rules 10b-3, 15b1-1, 15b3-1 and 15b7-1.
Morgan Keegan Mutual Funds Manager Replaced
April 21, 2008-Morgan Asset Management will turn over investment management of four funds to Hyperion Brookfield Asset Management Inc. pending shareholder approval in July.
An agreement was reached between the two firms Monday and announced after markets closed.
The four funds Hyperion will serve as investment adviser to include the RMK Advantage Income Fund Inc. (NYSE: RMA), RMK High Income Fund Inc. (NYSE: RMH), RMK Multi-Sector High Income Fund Inc. (NYSE: RHY) and RMK Strategic Income Fund Inc. (NYSE: RSF).
Hyperion has served as an independent consultant to the funds since August, said a Morgan Asset Management spokesman.
The funds have been in the spotlight in the last year as more than 50 percent of their market value was whittled away by subprime mortgage losses. Some of the funds had significant exposure to subprime mortgage assets.
The current boards of directors of the funds have unanimously approved new investment advisory agreements with Hyperion Brookfield Asset Management and the nomination of five new directors of the funds.
Joint special and annual shareholder meetings of the funds are scheduled for July 11, 2008 to vote on the proposed new investment advisory agreements and the election of directors, respectively.
Hyperion Brookfield Asset Management is a registered investment adviser that manages more than $21 billion in fixed income assets for institutional and retail investors.
Morgan Asset Management Inc. is the investment advisory arm of Regions Financial Corp. (NYSE: RF). Morgan Asset Management will continue to manage 11 other funds. (source, memphis business journal)
MORGAN KEEGAN LOSES ARBITRATION CASES IN MISSISIPPI AND ARKANSAS
FORT LAUDERDALE, Fla., May 25, 2009 (GLOBE NEWSWIRE) — Regions Financial Corp.’s (NYSE: RF) Morgan Keegan unit was recently hit with more bad verdicts in FINRA arbitration cases, including an award of $285,000 to a Jackson, Mississippi Vietnam Veteran for losses relating to RMK Select Intermediate Bond Fund (MKIBX), and $75,000 to a doctor in Little Rock, Arkansas, $950,000 for an NFL star and nearly $700,000 for a Regions bank president. Morgan Keegan is the subject of numerous arbitration cases relating to over $2 billion of losses in RMK proprietary bond mutual funds managed by James Kelsoe, which funds were decimated due to risky investments in lower tranches of asset backed securities, commonly known as “toxic waste.”
According to Sonn & Erez PLC, a securities law firm in Fort Lauderdale, Florida, Morgan Keegan & Company was hit with more arbitration awards, including a $285,000 arbitration award, in favor Vietnam veteran Gerald Humphries of Jackson, Mississippi, finding that Morgan Keegan violated Mississippi’s Securities Act (FINRA #08-574). The award included losses, interest and attorneys fees. Moreover, another arbitration award of $75,000 was also obtained by Sonn & Erez PLC for a Little Rock, Arkansas, doctor, Duane Velez, (FINRA #08-491) who also was sold several of Regions Morgan Keegan high yield mutual bond funds managed by former Morgan Keegan employee James Kelsoe.
These latest awards comes on the heels of other arbitration awards, including a $950,000 award to former NFL star Jerome Woods (FINRA #07-357), and a nearly $700,000 award to a former Regions bank president and his brother, an insurance agent (#08-336). Like other victims, Mr. Humphries and Dr. Velez brought arbitration cases against Morgan Keegan, alleging Morgan Keegan deceptively marketed and sold Regions Morgan Keegan (RMK) branded high-yield bond mutual funds as safe, low risk investments although the funds in fact invested in risky lower tiers of structured finance which most bankers call “toxic waste.” “By our count, Morgan Keegan has lost 17 out of the last 23 cases, including where they settled mid trial or post trial,” said Jeff Sonn, Esq. of Sonn & Erez PLC, which firm said it represents many Morgan Keegan victims.
“We are very pleased that the arbitrators are recognizing and agree with our claims that Mr. Humphries, Dr. Velez, and others, are victims of what we believe was deceptive marketing by Morgan Keegan in the selling of their RMK proprietary bond mutual funds to our clients and others. Mr. Humphries is a Vietnam war hero who served our country honorably and deserved better,” said Jeffrey Erez of Sonn & Erez, PLC who represented Mr. Humphries. Jeffrey Sonn added, “Dr. Velez’ Morgan Keegan broker admitted in the arbitration hearing that he was unaware that the Morgan Keegan high yield bond mutual funds had substantial investments in risky lower tranches of asset backed securities, aka ‘toxic waste,’ until I had told him in the arbitration; he even sold the funds to his family without knowing the risk,” said Jeffrey Sonn, Esq. who represented Dr. Velez. “We believe that many Morgan Keegan brokers were improperly used as conduits to put out false and misleading information to get their clients to purchase Morgan Keegan branded high yield bond mutual funds, managed by James Kelsoe. Mr. Kelsoe reached ‘rock star’ status as the RMK funds produced very high yield in the early years, before he and the Morgan Keegan funds crashed, burned, and in some cases, were liquidated due to their high concentration in toxic waste, which high risk we believe was not disseminated by Morgan Keegan brokers or advertisements given to our clients,” added Sonn.
It was alleged in both the Humphries and Velez arbitration cases that Morgan Keegan helped to create and sell high yield bond mutual funds managed by former Morgan Keegan employee, James Kelsoe, that were allegedly stable high yield bond mutual funds but were in fact highly speculative due to investments in low-tiered asset backed securities, commonly called “toxic waste.” Now there are hundreds of arbitration claims nationwide pending against Morgan Keegan, Reuters reported. Regions Morgan Keegan (RMK) bond mutual funds managed by James Kelsoe lost over $2 billion in 2007 and 2008.
Jeffrey Erez added, “Mr. Humphries and Dr. Velez are just two of many, many victims of these RMK bond funds sold by Morgan Keegan and we will continue to fight for these victims.” Jeffrey Sonn, Esq., added, “By our count, Morgan Keegan has lost the last 17 out of 23 of the most recent arbitrations. In my opinion, this means that the arbitration panels are now almost routinely recognizing that the RMK proprietary bond mutual funds sold by Morgan Keegan and managed by James Kelsoe were mismarketed,” added Sonn.
The Morgan Keegan bond funds that are the subject of hundreds of investor arbitrations include the following:
* Regions Morgan Keegan Select High Income-A, (Sym: MKHIX)
* Regions Morgan Keegan Select High Income-C, (Sym: RHICX)
* Regions Morgan Keegan Select High Income-I, (Sym: RHIIX)
* RMK High Income Fund, (Sym: RMH)
* RMK Strategic Income Fund, (Sym: RSF)
* Regions Morgan Keegan Select Intermediate Bond Fund-A,
(Sym: MKIBX)
* Regions Morgan Keegan Select Intermediate Bond Fund-C,
(Sym: RIBCX)
* Regions Morgan Keegan Select Intermediate Bond Fund-I,
(Sym: RIBIX)
* RMK Multi-Sector High Income, (Sym: RHY)
* RMK Advantage Income, (Sym: RMA)
* RMK Strategic Income Fund (Sym RSF)
* RMK High Income Fund (sym: RMH)
In 2008, Hyperion Brookfield announced its appointment as Advisor to certain of the RMK funds, replacing James Kelsoe. For more information on the awards, please contact Jeffrey Sonn or Jeffrey Erez at Sonn and Erez PLC.
Morgan Keegan Bond Fund Fraud Lawsuit Filed
FORT LAUDERDALE, Fla., Feb. 21, 2008 (PRIME NEWSWIRE) — Sonn & Erez (http://www.sonnerez.com/) attorneys today announced that it has filed an arbitration action against Morgan Keegan & Company Inc. relating to the sales and management of its proprietary bond mutual funds. Sonn & Erez filed the arbitration case of Louis Velez vs. Morgan Keegan and Company Inc. (FINRA Case No.08-491) before the Financial Regulatory Authority. he suit for a Little Rock, Arkansas customer of Morgan Keegan alleges that the Morgan Keegan proprietary funds, known as RMK Advantage Income Fund, RMK MultiSector High Income Fund, RMK Strategic Income Fund, RMK High Income Fund, sustained horrific losses because of their “common strategy of investing in volatile, risky and illiquid investments such as collateralized debt obligations (’CDO’),” the suit alleges. The suit also alleged that, “Morgan Keegan was also the administrator and distributor for the RMK funds and deceptively marketed the RMK bond funds as conservative bond investments. For example, in (a) September 30, 2006 Annual Report, Morgan Keegan stated that ‘Bond funds tend to experience smaller fluctuations in value than stock funds.’” However, by September 20, 2007, Morgan Keegan revised its statements to read, “Investors in any bond fund should anticipate fluctuations in price, and removed its prior statement that stated that bond funds experience smaller fluctuations than stock funds. Morgan Keegan by its very own actions admits that its pre-September, 2007 disclosures were inaccurate and mislead investors and its own stockbrokers.”
Class Actions have been filed against Morgan Keegan and its affiliated companies, but Sonn & Erez has decided to accept cases against Morgan Keegan in securities arbitration rather than in class actions. “We believe investors will fare better in arbitration than in a class action,” said Jeff Sonn, Esq., of Sonn & Erez. The funds’ losses are set forth below as of
12/31/2007:
Ticker Bond Fund Y-T-D Return as of 12/31/07
RMH RMK High Income Fund -65.53%
RHY RMK Multi-Sector High Income Fund -65.09%
RMA RMK Advantage Income Fund -66.68%
RSF RMK Strategic Income Fund -66.92%
RHICX Regions MK Select High Income-C -59.95%
MKHIX Regions MK Select High Income-A -59.74%
RHIIX Regions MK Select High Income-I -59.64%
RIBCX Regions MK Select Intermediate Bond Fund-C -50.54%
MKIBX Regions MK Select Intermediate Bond Fund-A -50.30%
RIBIX Regions MK Select Intermediate Bond Fund-I -50.07%
If you lost $50,000 or more in the Morgan Keegan Funds, please contact Jeffrey R. Sonn, Esq. or Jeff Erez, Esq. of Sonn & Erez, PLC, at 866-372-8311, to explore your legal rights.
Sonn & Erez is “AV” rated by Martindale Hubbel, the highest rating from this preeminent attorney rating service; Sonn & Erez is an experienced and nationally recognized securities litigation law firm, continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.
CONTACT: Sonn & Erez, PLC Jeffrey R. Sonn Jeff Erez, Esq. 866-372-8311
Lawyer Targets Morgan Keegan
(reprint from the South Florida Business Journal, 2/29/2008) A Fort Lauderdale lawyer is gathering investors and planning a lawsuit against mutual fund operator Morgan Keegan, an affiliate of Regions Financial Corp. (NYSE: RF).
The action would involve investors who lost money on funds that invested in some of the mortgage-related products that have gained headlines nationally, including collateralized mortgage obligations (CMOs).
Jeffrey R. Sonn, a partner at Fort Lauderdale-based law firm Sonn & Erez PLC, plans to raise questions about the suitability of the funds for conservative investors, such as a 94-year old client in Palm Beach who lost $2 million.
Two other firms are also seeking investor/claimants: Mark & Associates P.C., which has offices in Massachusetts and New York, and Houston-based Shepherd Smith & Edwards LLP.
A comparison of six Morgan Keegan and Regions funds on NASDAQ.com showed they had all dropped at least 70 percent over the past 12 months.
The company did not return a call for comment
Mat / ASTA (Citigroup) Hedge Fund Investors Still Have Time To Sue or Settle
Citigroup Alternative Investments announced on July 15, 2008 today that the Company has extended the expiration date of the tender and exchange offers for each Portfolio to August 8, 2008. The deadline was July 15, 2008.
“A substantial number of investors have not chosen to settle their claims against Citigroup,” said Jeff Sonn, Esq., of Sonn & Erez, a securities attorney representing Mat Investors. “Citigroup is desparately trying to settle these claims for 23 cents on the dollar, and they have extended the deadline, we think, because they are afraid their customers will sue them for their losses,” said Sonn. “We think that customers deserve their right to ask an arbitration panel for all of their money back, and not settle for 23cents on the dollar” said Sonn.
As of July 14, 2008, holders of existing shares had tendered only approximately (i) 55% (166,550,000) of the Existing Shares of the National Portfolio; (ii) 22% (43,000,000) of the Existing Shares of the National Portfolio II; (iii) 42% (61,550,000) of the Existing Shares of the California Portfolio; and (iv) 73% (111,125,000) of the Existing Shares of the New York Portfolio.
“Any shareholder can still rescind their tender of their shares, and then can sue Citigroup Alternative Investments if they wish to ask for all of their money back,” said Sonn.
Auction Rate Securities Fraud
Auction rate securities (ARS) are long-term variable rate bonds tied to short-term interest rates that are reset through a “dutch auction” process which occurs every 7 to 35 days. The holder can participate in the auction and liquidate the auction rate securities to prospective buyers through their broker/dealer. The holder does not have the right to put the security back to the issuer.
Auction rate securities are considered highly liquid by market participants because of the auction process. However, because the auction rate securities have long-term maturity dates and there is no guarantee the holder will be able to liquidate its holdings, these securities do not meet the definition of cash equivalents per paragraphs 8 and 9 of FASB Statement No. 95, Statement of Cash Flows
To clear up some misconceptions: First, it wasn’t the reclassification of ARS from cash equivalent to marketable securities that caused the recent run on the ARS markets. That change took place three years ago and apart from a temporary divesting, demand for ARS actually increased thereafter as a result of the attention (so much so that for a time, taxable ARS actually yielded less than commercial paper.) The cause of the recent trouble was two-fold: failed auctions in August and September, 2007 for CDO-backed ARS (the least safe variety) and the revelation that municipal bond insurers had sub-prime exposure.
Secondly, it was not the SEC that mandated the reclassification of ARS. Price Waterhouse, in 2005, unilaterally, allegedly decided that ARS would no longer be treated as cash equivalents. FASB and the SEC simply accepted the auditor’s decision. This somewhat capricious decision, while now seeming to have been prescient, raised strong objections from the issuer community at the time as it did not allow for a period of comment from practitioners, as is the standard FASB practice. Clearly, this flies in the face of many Wall Street Firms who told their customers that these were “highly liquid” “cash equivalents” or “cash alternatives,” sometimes actually written on customer statements or in their online statement.
“It now appears that many customers were not told that the dutch auctions could fail or that their securities could become illiquid,” said Jeff Sonn, Esq., who is representing some investors in their claims to recoup lost investments in ARS. “When Wall Street sells these securities as “cash like” or “cash equivalent,” we will hold them to their word and sue to enforce that promise” said Sonn.
Call today for a free consultation. Cases are handled on a contingency fee basis.
