Morgan Keegan Loses and Gets Hit with Punitive Damages
A Financial Industry Regulatory Authority (FINRA) arbitration panel in Miami, Florida ordered Morgan Keegan & Company to pay Jeffrey and Marisel Lieberman more than $250,000 after investing their entire investment funds in a now bankrupt hedge fund that steered investments to Bernard Madoff’s Ponzi scheme. The couple’s entire $200,000 account was invested in Greenwich Sentry LP hedge fund.
The Claimants alleged various causes of action including fraudulent misrepresentation, breach of fiduciary duty, negligence, negligent supervision and the violation of Tennessee and Florida statutes, among other things. After two days of evidentiary hearings, the panel took the case under advisement and rendered its opinion on March 3, 2011. The panel decided that Morgan Keegan was liable and ordered them to pay compensatory damages in the amount of $200,000 and expert witness fees for the Claimants in the amount of $14,000. Finally, the panel concluded that “there is clear and convincing evidence that Respondent Morgan Keegan was grossly negligent in not performing Due Diligence and as a result it fraudulently misrepresented the risk of this investment to Claimants.” The evidence was that the Claimants’ last investment objected was “speculation”, not a primary objective, and that Morgan Keegan’s Compliance Memorandum stated that “if the account is predominately composed of this investment (hedge fund) “speculation should be one of the primary objectives. Furthermore, the panel indicated that Morgan Keegan failed to produce the PricewaterhouseCoopers audited report of Greenwich Sentry that it allegedly relied on and did not do an available Internet search. This caused the panel to order Morgan Keegan to shell out an additional $50,000 in punitive damages. (FINRA# 10-00009; Jeffrey S. Lieberman and Marisel Lieberman v. Morgan Keegan & Company, Inc.)