County's Lawsuit Over Failed $21M Investment Falls Apart
County Administrative Officer Fred Homan, in an April 30 letter, writes that the firms withdrew because of disclosure of information provided at a secret meeting between county officials and Council on April 16.
Updated (4:59 p.m.)—A contract to hire an outside attorney to sue Merrill Lynch over a failed $21 million investment has been withdrawn.
In an April 30 letter to the Baltimore County Council, County Administrative Officer Fred Homan said the contract with Scott, Douglass and McConnico, LLP and Themis PLLC was being withdrawn due to press reports about the potential lawsuit.
Homan wrote that "due to the disclosure of confidential information about Baltimore County's claim, they are not willing to move forward on the county's behalf at this time."
Patch reported two weeks ago that county officials met secretly with members of the Baltimore County Council to discuss a 2007 investment in Mainsail II LLC. That investment, which involved subprime mortgages, lost more than $21 million in 24 days.
The information disclosed in the Patch story included a three-page memo that was largely copied word-for-word from a 2007 memo to the County Council written by Homan. That three-page memo was provided to the council on April 16 during a secret meeting.
That 2007 memo was a public record and was released by the county at the request of Patch.
The county purchased the investment on July 31, 2007 but by August 24, the county learned its entire $21 million investment was gone. The county sold the full value of the bad investment into the Police, Fire and Widow's Pension fund.
A similar lawsuit was filed by Kings County, WA against Merrill Lynch claiming that the investment firm failed to provide adequate information about the fund. Baltimore County would likely have filed a similar suit.
Don Mohler, chief of staff to County Executive Kevin Kamenetz, said the firms "were less than pleased with the disclosure of public information regarding the case over the last week or so. Maybe publicity is a better word than public information."
Also of concern was the possibility the the statute of limitations had run out on the county. The investment with Merrill Lynch was purchased in 2007. County officials rushed the contract to the council two weeks ago claiming that the statute was close to running out.
Mohler and County Attorney Michael Field declined to define the statute of limitations.
Sources said the law firm believed that the county could circumvent the statute because of exemptions allowed for some government agencies.
"(The law firms) didn't believe that statute of limitations was an issue," Mohler said.
Regardless, sources familiar with the potential lawsuit told Patch that the county did not believe the suit would be easy to win.
For now, the lawsuit appears to be a closed issue.
"We weren't pursuing it before," Mohler said. "You never say never but it's not an issue the county was pursuing before we were approached by the law firms."