Maui Files Suit Claiming it was Stranded with $44 Million in Debt Securities
By Wendy Osher
The County of Maui is demanding a jury trial in a lawsuit it filed last week against Merrill Lynch Pierce Fenner & Smith Inc. The county claims it was stranded with $44.2 million in debt instruments when the firm abandoned its practice of supporting auctions for the SLARS or Student Loan Auction Rate Securities.
According to the docket filed with the U.S. District Court of Hawaii, the County of Maui purchased the securities on or after August 16, 2007. The suit claims the firm abandoned its practice of supporting SLARS auctions on or about February 13, 2008, claiming it could no longer sell the securities at par.
Today, the County of Maui owns $32 million of SLARS that are not liquid.
The County of Maui further claims it would not have purchased SLARS at all if it had known of the grown risks associated with the investments.
SLARS are secured by pools of student loans guaranteed by government agencies under the Federal Family Education Loan Program.
Maui Mayor Charmaine Tavares is expected to comment on the litigation during a press conference in Honolulu later today.