Terms of agreement in lawsuit over botched plan to build artificial sweetener plant in Missouri weren't disclosed
JEFFERSON CITY, Mo.—Attorneys said an investment firm settled a federal class-action lawsuit that accused it of bilking investors across the United States out of US$39 million in bonds in a botched plan to build an artificial sweetener plant in Missouri.
The terms of the agreement weren’t disclosed.
The settlement, announced the same day opening statements in the trial were scheduled, came after less than an hour of private discussions and ended the lawsuit against investment banking firm Morgan Keegan.
Morgan Keegan was accused of misrepresenting the failed project’s chances of success to bondholders.
The case pitted the investment firm and legal adviser Armstrong Teasdale against 133 people who bought bonds for the plant.
Investors from 19 states were represented.
Attorneys for Morgan Keegan and Armstrong Teasdale declined to comment on the settlement.
The factory had been touted as an economic boon for Moberly, Mo., a town of less than 14,000 residents.
Gov. Jay Nixon had announced in July 2010 that Mamtek U.S. Inc.’s plant for the low-calorie sweetener sucralose would bring 600 jobs to Moberly.
Missouri lawmakers authorized as much as US$17.6 million in tax credits and other incentives for the plant, although no credits were issued.
The Moberly Industrial Development Authority agreed to issue US$39 million in bonds in 2010 to pay for the plant’s construction.
Morgan Keegan purchased the bonds as the underwriter and sold them to investors.
But plans for the plant disintegrated after Mamtek failed to make a US$3.2-million bond payment, and the partially built factory was abandoned.
Moberly’s credit rating plummeted after the town refused to make payments on the bonds, which cost Moberly at least US$300,000 in insurance premiums and other expenses.
A slew of lawsuits followed, including the one filed in 2012 by Alabama investor John Cromeans.
A federal judge had granted the case class-action status, allowing Cromeans to sue on behalf of all bondholders involved.
Cromeans claimed Morgan Keegan didn’t verify the financial and patent claims made by Mamtek and assured investors that Moberly would repay the debt.
“These parties must be satisfied,” said Alabama attorney Tim Francis, who led the team representing the bondholders.
Former Mamtek CEO Bruce Cole was sentenced in November 2014 to seven years in prison for stealing more than US$700,000 from the project.