CLEVELAND, Tenn. - The Cleveland City Council reaffirmed Monday its decision to fire its financial adviser.
Even though the contract with Morgan Keegan does not end until June 30, 2012, the council voted to end its relationship with Cumberland Securities, a division of Morgan Keegan.
The council confirmed its decision from two weeks ago. This time, financial adviser Joe Ayers was present to defend his company and say Councilman Richard Banks made inaccurate statements.
Banks tied a federal court settlement reached by Morgan Keegan and several states to the company's financial work for the city. Banks said the city is within its rights to end the contract.
Ayers said Morgan Keegan's mutual funds division has nothing to do with the company's municipal bonds work.
"The firm, like many other firms, did enter into a settlement to resolve a long-standing legal dispute [in] the mutual fund business that Morgan Keegan sold three years ago," Ayers said. It did not plead guilty to any fraud as had been said, he said.
"I have said for several years I thought we are paying too much for financial advice," Councilman George Poe said.
Banks showed an email from the Tennessee Municipal Bond Fund, a rival adviser and a division of the Tennessee Municipal League, saying it could have saved the city $10 million over the past decade.
He said the council's action stems from news reports focused on the financial troubles of other Tennessee cities, also clients of Morgan Keegan.
"The consent order basically says one division of Morgan Keegan has engaged in conduct resulting in Morgan Keegan paying $200 million to various states but leaving open all those lawsuits by those investors who suffered," Banks told Ayers.
Banks said the state comptroller has opined that cities don't necessarily have to have a financial adviser.
Councilmen Avery Johnson and Bill Estes cast the only votes to reconsider terminating the contract. They said the company saved the city money with its advice at the beginning of the national financial meltdown.
City Manager Janice Casteel said the termination could open the city to legal action. She said Morgan Keegan might still insist on its minimum $14,500 fee if the city sells bonds during the coming year. City Attorney John Kimball said the contract has no option for contract termination at will.
The council plans to discuss at its meeting in two weeks whether to request proposals for a financial adviser or go without one.