Suit Seeks $30M for Failed Sweetener Plant
COLUMBIA, Mo. (AP) — A new lawsuit filed in Boone County is seeking $30 million from an investment banking firm and 10 employees accused of fraudulent business practices in a failed factory project in central Missouri.
Morgan Keegan, which has merged with Raymond James Financial Inc., was the underwriter in 2010 for a $39 million bond issue for a failed artificial sweetener factory for Mamtek US Inc. in Moberly. The bonds were issued by the Moberly Industrial Development Authority and backed with a promise that the city would repay the debt from profits paid in by Mamtek.
Construction on the factory stopped in August 2011 when Mamtek failed to make a required bond payment. Since then, more than a dozen lawsuits have been filed to assign blame for bondholder losses, including a criminal case pending against former Mamtek CEO Bruce Cole.
Laura Swinford, spokeswoman for Secretary of State Jason Kander, said the new lawsuit was filed Wednesday in Boone County because $5.6 million worth of the bonds, in default since September 2011, were sold there. The lawsuit was filed by state Securities Commissioner Andrew Hartnett, The Columbia Daily Tribune reported.
The new state lawsuit seeks $6.6 million in restitution and $15 million in fines from the company. The 10 individual employees are being sued for amounts ranging from $100,000 to $800,000. Hartnett also wants the company barred from underwriting municipal bond offerings in Missouri until a consultant has reviewed its due diligence rules.
In a statement through his attorney Chuck Hatfield, Steve Hollister, senior manager of public communications for Raymond James, said the company denied wrongdoing.
"Morgan Keegan and its employees are not responsible for the losses suffered by Missouri taxpayers caused by the default of Moberly, Missouri on its bonds," he wrote.
Hollister also said the state reviewed the project for several months before Moberly was chosen and the city agreed to issue bonds before Morgan Keegan was hired. Gov. Jay Nixon announced a state contribution of $17.6 million in tax breaks and other incentives when the project was unveiled in July 2010.
Moberly "failed to honor its moral obligation to appropriate funds, and passed a resolution changing the credit structure of the documents after default by Mamtek, over a year after the bonds were issued," Hollister wrote in his statement.
Information from: Columbia Daily Tribune, http://www.columbiatribune.com