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COLUMBIA, Mo. (AP) — A federal judge has ruled that a lawsuit filed against investment banking firm Morgan Keegan after the collapse of a proposed artificial sweetener plant in Moberly, Missouri, will be considered a class action.
Class-action status is the most efficient way to resolve legal questions for investors in the failed Mamtek factory, U.S. District Judge Nanette Laughrey ruled Tuesday in a lawsuit filed by an Alabama man against Morgan Keegan and legal adviser Armstrong Teasdale in October 2012.
The suit seeks returns of investments from 133 people who bought $39 million in bonds between July 2010 and September 2011, The Columbia Daily Tribune reported (http://bit.ly/1B6vZ161 ). Laughrey noted that the class members live in 19 states.
"Under the circumstances, and given the predominance of common questions, the alternatives to class litigation are more burdensome for individuals than participating in class litigation," Laughrey wrote in her 31-page order.
The Moberly Industrial Development Authority agreed in 2010 to issue $39 million in bonds to fund construction of a plant in Moberly that was to produce the low-calorie sweetener sucralose, which Mamtek promised the plant would bring 600 jobs to the town. The state of Missouri also authorized up to $17.6 million in tax credits and other incentives for the plant but no state tax credits were ever issued.
Morgan Keegan purchased the bonds as the underwriter and sold them to investors. The project failed in August 2011 when Mamtek could not make its $3.2 million bond payment.
The class action will be limited to a negligent underwriting allegation included in the lawsuit, which is only against Morgan Keegan, and violations of Missouri's Uniform Securities Act, which is against both defendants, Laughrey ruled.
Attorneys for Morgan Keegan are "still reviewing" the ruling, according to attorney Chuck Hatfield.
Former Mamtek CEO Bruce Cole is scheduled to be sentenced Nov. 3 after he pleaded guilty this month to criminal securities fraud and theft charges. Laughery ruled that Cole committed fraud to obtain $1.3 million from the bond proceeds for his personal use.
Morgan Keegan is also facing five bondholder lawsuits in state courts and a civil case filed by the Missouri Securities Commissioner in Boone County. A Cole County case pitting six Shelter Insurance entities and four investment funds managed by Waddell & Reed against Morgan Keegan, Armstrong Teasdale, and others is set for a trial in March.
Information from: Columbia Daily Tribune, http://www.columbiatribune.com