According to a news report by Reuters, an arbitration panel has denied fraud claims against Citigroup Global Markets, Morgan Stanley & Co and others brought by the Detroit pension fund, which sought $39.9 million in damages. The panel from the Financial Industry Regulatory Authority (FINRA), an independent regulator of U.S. securities firms, denied and dismissed all of the claims the pension fund filed against the banks in May 2010.
The pension fund alleged the banks committed fraud, as well as the breached contracts and their fiduciary duty, over their recommendations to invest in various collateralized debt obligation (CDO) funds.
Also named in the complaint were GSC Partners CDO Investors, GSC CDO Fund Ltd., GSCP L.P. and two employees of Smith Barney and Morgan Stanley. The FINRA panel determined these parties did nothing wrong in their dealings with the pension fund.
According to the news report, officials at the pension fund were not available for comment about the panel’s ruling.
This is not the first time the Detroit pension fund has been in the news in recent months. The fund, along with the city’s General Retirement System, are currently in the midst of a court case to decide if Detroit’s bankruptcy can be used to reduce pension benefits (see “Detroit Pensions Lawsuit Against Bankruptcy Stayed”).