Maui County is suing Merrill Lynch, Pierce, Fenner & Smith Inc. in federal court over access to $32 million invested in student-loan auction-rate securities, county officials announced Wednesday.
The county purchased securities from Merrill Lynch with the understanding they were safe, short-term, liquid investments, the officials said.
"The County of Maui was told that the investments could be easily accessed, just like cash," said Maui Mayor Charmaine Tavares. "Assurances by Merrill Lynch at the time of the investment turned out to be false, and we are seeking justice for the taxpayers of Maui County."
Merrill Lynch spokesman Bill Halldin defended the company.
"We acted appropriately, made relevant disclosures to the county concerning auction rate securities, and intend to vigorously defend ourselves," he said.
County officials said about $44 million in student-loan auction-rate securities (SLARS) were purchased through Merrill Lynch between Aug. 16, 2007, and Jan. 16, 2008, and today, the county owns $32 million of the securities that are not liquid.
"Maui County seeks to recover its money," said Joachim Cox of Goodsill Anderson Quinn & Stifel LLP, special counsel for the county.