Dale Ledbetter graduated from Messick High School and Rhodes College, and from his childhood has been a friend of prominent Memphian and sports commentator Tim McCarver.

For more than 30 years, Ledbetter has worked in several areas of the securities business, including a stint at a subsidiary of the Countrywide mortgage giant. Today he represents investors across the country who believe they unwittingly bought toxic financial products – like his old friend, the former ballplayer and namesake of the former Tim McCarver Stadium in Memphis.

On a recent trip back home to Memphis, the Florida attorney stopped at a Downtown hotel to meet with a client who’d made an investment in Morgan Keegan & Co. Inc.’s batch of troubled mutual funds. A handful of the Regions Morgan Keegan funds saw more than $2 billion of investors’ value evaporate starting in 2007.

The funds were closely tied to the subprime mortgage market and suffered markedly when the economic downturn began more than a year and a half ago.

Attorneys like Ledbetter have been nipping at Morgan Keegan’s heels for months over the dismal performance and the marketing of the funds, which Morgan Keegan unloaded to a New York asset management company last year.

Ledbetter told The New York Post that McCarver, who had entrusted a chunk of his wealth to Morgan Keegan partly because of the hometown ties he shared with the firm, wanted his money invested conservatively because he didn’t have much of it growing up. Earlier this year, McCarver won $100,000 in compensatory damages in an arbitration he brought against Morgan Keegan over the RMK funds.

The attorneys may not be alone in their pursuit of the Memphis brokerage company much longer. Morgan Keegan’s parent, Alabama-based Regions Financial Corp., disclosed in a regulatory filing Wednesday the U.S. Securities and Exchange Commission might bring formal charges against Morgan Keegan and its asset management unit over issues stemming from the RMK funds’ performance.

In a dining area off the hotel lobby after meeting with his client last month, Ledbetter shared with The Daily News several sketches of financial diagrams he’d drawn to show why the bottom had fallen out of the funds.

“We represent schools, charities, people in their 90s, and you can’t tell me anybody would have said what I’ve described here is a suitable investment for those people,” Ledbetter said.

Morgan Keegan declined to comment on its receipt earlier this month of a Wells notice, which is a formal alert that SEC staff members may recommend the commission pursue charges against a firm or person. Morgan Asset Management, a unit of Morgan Keegan, and three unidentified employees also got Wells notices at the same time.

Toxic mix

Tim Deighton, a spokesman for Regions, said the bank is cooperating with the SEC and seemed to lay part of the blame over the funds’ performance on the economic slump.

“Given the ongoing market conditions affecting securities like these, this is obviously a point of interest for the SEC,” Deighton said.

Speaking to a reporter, Ledbetter’s voice rose as he countered that point with what he believes is the larger issue: that the funds were loaded with risky housing-related debt and similar instruments that weren’t completely spelled out for investors.

“It’s like you getting on a plane in Memphis and flying to Atlanta, and on takeoff they tell you all about how the seat cushions can be used as flotation devices, and all the normal warnings,” Ledbetter said. “You get to Atlanta. Then they come back later and say, ‘We’re changing the cargo on the plane.

“‘We’re going to be carrying highly flammable, highly explosive cargo, and in order to fly the plane with that kind of cargo, we’ve also got to use nitroglycerin as the fuel instead of the gas. Anybody that would like to depart, go ahead.’ Everybody would get off that plane.”

Instead of flammable liquid, the RMK funds were flying on low-rated debt, the likes of which investors didn’t understand, Ledbetter said. He added they didn’t understand them because anyone who did likely wouldn’t have been involved with the funds.

Morgan Keegan has consistently maintained it produced complete and timely disclosures of the funds’ makeup and risk level.

Regions’ disclosure of the Wells notices suggests federal regulators are close to making a decision on what to do about problems related to the funds.

A Wells notice is a formal alert that the SEC is poised to bring civil charges. It is not an allegation or finding of wrongdoing. After receiving the notice, a company still has the chance to convince representatives of the federal agency there’s not enough evidence to bring a case in court.