Two of Cleveland's largest financial services companies are the target of a lawsuit stemming from the failure of a local government investment pool.
Cuyahoga County has accused National City Corp. and McDonald & Company Securities Inc. of violating Ohio's antifraud statutes in connection with the sale of some $377 million of bonds in 1993 and 1994. The taxable bonds, sold in two series of tax and revenue anticipation notes, matured in one year or less.
Ronald Riley, assistant county prosecutor, said the firms invested the bond proceeds in long-term bonds for the Secured Assets Fund Earnings, an investment pool set up for local governments.
The Bond Buyer reported that the lawsuit contends that these activities resulted in losses at the fund and that these losses were not disclosed to the county. The suit also claims that National City, as the county's depository bank, should have disclosed the existence of the account engaged in the investment strategy to the Ohio auditor's office, but concealed it, instead, to hide the losses.
"There were guidelines that were established, and they were violating them," said Mr. Riley. "McDonald & Co. and National City are alleged to have committed fraud."
A spokeswoman with National City said the company could not comment on pending litigation.
William Summers Jr., chairman and chief executive of McDonald & Company Securities, denied the allegations, saying, "We are not responsible for the Safe program's losses, and firmly believe that the County's claims against us are without merit."