A Pensacola News Journal news report said the federal court lawsuit against Merrill Lynch and former senior vice president Michael Callaway came from the city’s Firefighters’ Pension Fund, which alleges bad advice and conflicts of interest led to the plan losing more than $3 million over seven years.
The newspaper said the board of the General Pension Fund will consider at a meeting next month whether to likewise sue Merrill and the ex-vice president over an alleged $10 million in losses. This board represents city employees who are not firefighters or police officers.
The Pensacola Firefighter’s Pension Fund hired Merrill Lynch in 2001 to provide expert analysis and advice and terminated its contract with the brokerage firm last March. Meanwhile, the General Pension Fund contracted with Merrill Lynch in 1993 and ended the relationship in June 2008 when the company shut down its pension consulting business in Florida.
Merrill Lynch and Callaway already have come under scrutiny by the U.S. Securities and Exchange Commission. The newspaper said the SEC settled a claim against Merrill Lynch for breaching its duties to pension fund clients in connection with Callaway, with Merrill paying a $1 million fine but not admitting wrongdoing.
The SEC also filed a complaint against Callaway, 57, who worked with Merrill Lynch from 1976 until 2008. He headed The Callaway Group, a team of 10 Merrill Lynch employees who provided advisory services to about 100 public pension funds in Florida.
Callaway, who is accused of failing to disclose to the pension funds his relationships with the money managers, is contesting the allegations and is scheduled to appear at an SEC hearing May 11 in Washington, according to the newspaper.
A Jacksonville-area pension fund also leveled wrongdoing allegations against Merrill and Callaway (see FL Pension Board Axes Merrill Consulting Contract ).
« Health Clerk Loses Jobless Benefit Appeal