South Miami Pension Trustees File Claim over Merrill Consulting Practices

The Miami Herald reports the board of trustees for South Miami’s pension plan have filed an arbitration claim alleging that, rather than looking out for the interests of city employees, Merrill Lynch pursued an investment strategy intended to generate excessive fees and commissions. In November Merrill Lynch sent letters to pension boards around the state informing them that Securities and Exchange Commission (SEC) staff believe the firm and one of its pension consultants, Mike Callaway, violated federal regulations (See SEC Looks into Merrill’s Florida Pension Consultancy Practice).

Soon after, Jacksonville Police and Fire Pension Fund trustees announced the termination of the fund’s contract with Merrill Lynch Consulting Services (See FL Pension Board Axes Merrill Consulting Contract).

Callaway, who has taken a leave of absence, also wrote clients a letter stating SEC staff believes that he and Merrill Lynch did not disclose “all of the relevant information about your fees, manager selections, alleged conflicts of interest and what I earned,” the Miami Herald said, citing the Palm Beach Post.

SEC staff notified Callaway they intended to recommend the commission institute a cease-and-desist proceeding alleging he violated securities laws.

“This office was a bunch of bad apples who woke up every morning with the express thought of how they were going to generate fees and commissions off the pension plans they represented in the state of Florida,” said Bradley Cassel, board chairman of South Miami’s pension plan, in the news report.