Massachusetts-based Watertown Savings Bank reveals in court a $42 million loss due to erroneous advice by an investment adviser from Shay Assets Management in Chicago, Courthouse News Service reports. Shay is the advisor to the AMF Funds [profile].

The bank states that the adviser endorsed "mortgage-backed securities as conservative" and liquid, even after the market was collapsing.

Although the complaint made by the bank is considered as having "insufficient evidence", Watertown asserts that it was "fraudulently induced to hold its shares through representations made on conference calls with Shay Assets through May 6, 2008 and thereafter."

They also allege that Shay purposely hid from their investors “the precise securities owned by the Fund to ensure they did not redeem their shares.”

Watertown is seeking $42 million in "punitive damages for fraud, conspiracy, breach of fiduciary duty and negligent misrepresentation" from the asset management company.

Steven Aroesty from Napoli, Bern, Ripka and Shkolnik will represent the bank. 

Edited by: Sean Hanna, Editor in Chief


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