VOL. 125 | NO. 215 | Thursday, November 04, 2010
New Claim Filed Against Morgan Keegan
By Andy Meek
After winning a nearly $1.5 million award against Morgan Keegan & Co. Inc., four-time NBA champ Horace Grant has filed a new $3 million arbitration claim against the Memphis investment firm.
Grant won the $1.5 million award against the firm in late 2009. The basketball player, who was a power forward for the Chicago Bulls in the 1990s and who retired in 2004, said he lost almost $1.5 million from investing in some of Morgan Keegan’s mutual funds that tanked in value and have since become the subject of scores of investor arbitrations and lawsuits.
A Financial Industry Regulatory Authority panel decided Grant’s award. Morgan Keegan challenged it, saying statements of panelists displayed bias against the company.
A judge threw out Morgan Keegan’s appeal. But Grant’s new $3 million arbitration claim says Morgan Keegan’s strategy forced him to prematurely cash in an NBA pension, which he did prior to his 50th birthday.
“To be clear: Had Morgan Keegan paid the arbitration award in a timely fashion or even after losing its frivolous motion to vacate, Grant would not have needed to take his entire NBA pension in a lump-sum payout in order to avoid financial ruin,” wrote Grant’s lawyer, Chicago securities lawyer Andrew Stoltmann, in a statement of claim. “Importantly, Mr. Grant would have been able to receive the full benefit of his pension and begin to draw from it after he turns fifty in less than five years.
“Further, Mr. Grant will pay hundreds of thousands of dollars in taxes due to this pension withdrawal caused by Morgan Keegan’s motion to vacate, which was denied, and the subsequent appeal.”
In a statement responding to Grant's new arbitration claim, Morgan Keegan said, "This claim is completely frivolous. The claim of economic distress comes as a surprise, since Mr. Grant’s accounts at Morgan Keegan, even with the losses in the funds, were profitable by more than $250,000. In addition, at the time of the hearing, Mr. Grant was worth more than $1 million."
Stoltmann disagrees with Morgan Keegan's characterization of Grant's accounts.
Grant began working with Morgan Keegan after deciding he wanted a stable placeto park his money to provide him a steady income during his retirement, according to Stoltmann.
“I wanted to be risk free,” Grant said during the four-day arbitration hearing for the earlier $1.5 million case. “I was retired, and I wasn’t going to get any more paychecks from the NBA, and I wanted to, you know, settle down and have a good life.”
In its appeal of the award to Grant, Morgan Keegan focused on a break in the hearing, when panel members were alone and talked among themselves. A recorder that captured the arbitration proceedings was apparently still running.
One arbitrator could be heard referring to the funds as “crap” and “a sucker play.”
Morgan Keegan claimed those statements showed that “before hearing Morgan Keegan’s defense, the arbitrators had already made up their minds that Morgan Keegan should pay.”
The company’s attorney pointed to the historic credit and market “tsunami” that was “not foreseeable” and “not predictable” in defending the Memphis investment bank in the arbitration hearing.
The judge said Morgan Keegan didn’t prove the discussion was anything more than banter between arbitrators. And in denying the appeal this summer, the judge also said the company was “given a full and fair opportunity to present its case.”