(WMC-TV) - Investors lost roughly 1.5 billion following a deal gone bad at the hands of eight former mutual fund directors at Morgan Keegan.
Those directors are now facing charges, including a few of them right here in the Mid-South.
The charges are neither criminal nor civil, but rather regulatory violations alleged against Morgan Keegan independent fund directors, four of whom are from Memphis.
The Securities and Exchange Commission claims eight former independent directors of Morgan Keegan mutual funds failed to properly oversee asset valuation.
"You'll see that these were good, honest, decent people trying to get it right and they were in a period of incredible market turmoil. And they did their best," said Stephen Krimmins.
Morgan Keegan's attorneys disagree with the SEC filings.
"With the statute of limitations having expired on most of these claims, why is it that five years later we're getting a regulatory administrative hearing being brought against these directors?" asked Krimmins.
The SEC filed allegations against Jack Blair and James Stillman R. McFadden, both from Germantown, Allen B. Morgan Jr. and Archie W. Willis III, of Memphis, and four others from Birmingham, Alabama.
The government says the eight directors merely delegated their valuation responsibilities to others without providing guidance or reviewing the results as required by law.
The SEC said, "Investors rely on board members to establish an accurate process for valuing their mutual fund investments. Otherwise, they are left in the dark about the value of their investments and handicapped in their ability to make informed decisions. Had the board not abdicated its responsibilities, investors may have stood a better chance of preserving their hard-earned nest assets."
But Morgan Keegan attorneys say fair valuation is a notoriously gray area and that these eight fund directors -- as is common practice -- relied on fund managers who lied to them.
"The SEC itself has previously found that these outside directors, these independent directors, were themselves the victims of a fraud. They were themselves lied to and defrauded," said Krimmins.
Though not yet scheduled, there will be a hearing in front of an administrative judge in about four months.
A final ruling expected about six months after that.