
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, May 11, 1995                   TAG: 9505110058
SECTION: VIRGINIA                    PAGE: C-4   EDITION: NEW RIVER VALLEY 
SOURCE: Associated Press
DATELINE: WILLIAMSBURG                                LENGTH: Medium

WILLIAMSBURG SUES INVESTMENT FIRM

Stuck with more than $1 million in losses from risky investments, city officials have sued a Texas brokerage firm to recoup the money.

The city alleges that the company misled the city about the securities and failed to alert the city when their values began to plummet.

But Jim Ogg, president of MGSI Securities Inc. in Houston, said Williamsburg officials, particularly Finance Director Ray Adams, knew fully what they were buying and are wrongly blaming him for losses the city suffered as a result of market fluctuations.

``Our question to the city is, if you didn't understand them when the price was going down, then why did you understand them when the price was going up? It's very convenient, it's human nature, once your portfolio depreciates in value, you want someone to come to your rescue,'' Ogg said. ``We empathize with the city and with the taxpayers, but our business is not to insure the investments of the city of Williamsburg.''

Had Williamsburg held onto the securities, as several other municipalities across the country have done, the city's losses would have been substantially reduced, since recent prices have approached levels at which the securities were bought, Ogg said.

Adams declined comment on the lawsuit.

City Manager Jackson Tuttle said MGSI failed to fully inform the city on the nature of the longer-term securities, known as derivatives. Earlier this year, after Tuttle realized the potential for losses the city was exposed to by the volatile but high-yield investments, City Council agreed to get rid of $5.1 million worth of securities. About half of those were derivative stocks - complex financial arrangements tied to rising or falling values in some underlying asset, such as foreign currency prices.

The city lost $1.2 million of its principal when it sold the stocks.

``We think that what we were sold was inappropriate and illegal,'' Tuttle said. The lawsuit also accuses MGSI of ``misrepresentations and concealment of facts'' regarding the stocks sold to the city.

But Ogg said all the facts - including the nature of the risks involved - were disclosed repeatedly to Adams.

If there is anyone to blame, Ogg said, everyone is at fault for failing to correctly predict changes in the market in the fall of 1993, when interest rates bottomed out.

by CNB