* Morgan Keegan refuses to pay $333,000 in interest
* Brokerage says federal, not state, rate applies
By Suzanne Barlyn
Nov 19 Morgan Keegan & Co is disputing the
amount of interest owed to retired NBA basketball player Horace
Grant on a $1.46 million arbitration award and has refused to
pay $333,000 in interest that Grant says he is owed.
A lawyer for Grant on Friday asked the Financial Industry
Regulatory Authority (FINRA), Wall Street's industry funded
watchdog, to immediately suspend Morgan Keegan's brokerage
license for not paying Grant the full amount after a nearly
four-year battle over bond fund losses that the brokerage took
all the way to a federal appeals court in California, where it
Last week, Morgan Keegan sent Grant a check for $1.59
million, far less than Grant's lawyers say he is owed, leading
to the suspension request.
A spokesman for Raymond James Financial Inc, which
owns Morgan Keegan, did not immediately respond to requests for
comment. A spokesman for Regions Financial Corp, which
owned Morgan Keegan at the time of the bond fund debacle in
2008, and which remains financially responsible for the cases,
declined to comment.
It is the latest twist in a bitter dispute between Grant and
Morgan Keegan that began in 2008. According to correspondence
reviewed by Reuters, the brokerage and former Chicago Bulls star
are at odds over how to properly calculate the interest owed in
a case that stemmed from losses Grant sustained in a group of
troubled Morgan Keegan bond funds.
In October, the U.S. Court of Appeals for the Ninth Circuit
rejected claims by Grant's former brokerage, Morgan Keegan, that
arbitrators in the case who entered the $1.46 million award,
might have been biased, prejudged the outcome or exceeded their
The award included $1.45 million for damages and $10,000 for
FINRA, which also runs the arbitration forum in which
investors typically resolve disputes against their brokerages,
can generally suspend brokerages for not paying arbitration
awards within 30 days. Exceptions are made when parties take the
unusual step of contesting arbitration rulings in court.
Grant's Chicago-based securities lawyer, Andrew Stoltmann
said the basketball star is owed a total of $1.92 million. That
amount includes $464,000 in interest - calculated at 10-percent
annually since September, 2009, as allowed by California law and
FINRA rules, according to Stoltmann.
Morgan Keegan, however, says the 10-percent interest rate
should apply only for part of the time that the case was
pending, according to a letter to Stoltmann from a lawyer for
Morgan Keegan. Instead, a federal interest rate of 0.29 percent
should apply for the period after a federal district court
upheld the arbitration ruling in July, 2009, wrote Terry Weiss,
an Atlanta-based lawyer that represents Morgan Keegan, in a
letter to Stoltmann on Nov. 1.
The brokerage appealed the district court's decision to the
Ninth Circuit - a process that lasted for more than two years
and ended unsuccessfully for the brokerage. Weiss said the
brokerage only owes Grant $1.59 million including its
calculation of interest, Weiss wrote.
Morgan Keegan has faced more than 1,000 customer arbitration
cases over the bond funds, which invested in risky
mortgage-backed securities and were marketed as being safe. The
funds later lost as much as 80 percent as the subprime market
imploded. Morgan Keegan paid a $200 million civil regulatory
fine over the funds and a star manager at the firm was banned
from the securities industry.
Some of those cases are still winding through FINRA's
The dispute over how much interest is owed to Grant could
take months more to resolve, say lawyers, because the procedure
for dealing with such an issue is unclear.
"There's no precedent for something like this," said
Jonathan Uretsky, a New York-based securities lawyer who
The federal district judge who initially affirmed the ruling
could decide the matter or it could be decided by FINRA if a
suspension process against Morgan Keegan moves forward.
Stoltmann, in his letter to FINRA, cited a FINRA arbitration
rule directing interest to be applied at the rate prevailing in
the state where the ruling was entered. There is "no carve-out"
for brokerages "who continue to abuse the appeals process after
losing" in efforts to overturn a ruling, Stoltmann wrote.
Grant, 47, played in the NBA for 17 years and won three
titles with Chicago Bulls teams featuring Michael Jordan and one
with the Los Angeles Lakers. He bought most of the troubled
funds through his Morgan Keegan brokerage account in 2004. At
the time, the brokerage owned the sports agency that represented