The San Diego Union-Tribune reports that a hearing is scheduled Friday regarding the Southeastern Economic Development Corporation’s suit to collect more than $750,000 in costs associated with numerous mistakes. Michael Conger, the attorney for SEDC, said Morgan Stanley allowed employees to trade on the margin, which is not allowed in the plan, and also made highly speculative investments.
Conger said Morgan Stanley is liable for up to $500,000 of the losses.
In addition, the company claims two auditing firms, Brownell & Duffey and Macias Gini & O’Connell, either did not find or alert anyone to the errors. While SEDC is seeking the cost to fix the plan from Brownell & Duffey, it is trying to recoup $260,000 for four years of work done by Macias Gini & O’Connell, claiming the firm did not do the job it was hired for.
According to the Union-Tribune, SEDC says in 2008, it discovered that the vendors hired to implement the program and audit it missed several significant issues that were a violation of the Internal Revenue Service code and immediately sought to fix those problems. Early last year, the IRS deemed the changes made to the pension system were acceptable and opted not to penalize SEDC.A fourth defendant, James B Kerr & Associates, settled out of court for $75,000, the news report said.