DALLAS — An audit of Harris County’s finances has found questionable overpayments in transactions involving federal securities acquired or sold for the Texas county’s investment portfolio.

The report by forensic accountant ParenteBeard LLC said two traders with Morgan Stanley Smith Barney and UBS Financial Services paid $265,006 above par in 11 trades over seven months in 2010.

The analysis cites a report prepared for the county auditor by First Southwest Co. that estimates $339,774 was lost through above-market purchases.

An analysis of county records by the Houston Chronicle puts the overpayments at $906,213 over three years and dozens of above-market purchases and below-market sales.

Harris County Judge Ed Emmett said Wednesday he would ask district attorney Patricia Lykos for a criminal ­investigation.

“It was either malfeasance or corruption,” Emmett said. “Those are the only two options, but we are going to get our money back whatever it was.”

“It is not a coincidence that the money went to just two brokers,” he added. “The question I have is, where did that money go?”

County auditor Barbara Scott released the ParenteBeard analysis Tuesday after the Chronicle filed a Freedom of Information Act request regarding the county’s probe into the seven-year tenure of Edwin Harrison as the county’s financial director.

The analysis found significant market discrepancies between the trades accomplished by Royce Oliver Simpson of UBS and J. Howard Ledet of Morgan Stanley.

Without the above-par purchases by Harris County that skewed the totals, the analysis said, the unfavorable market-price variances would be even worse

Based on data from the Financial Industry Regulatory Authority’s trade reporting and compliance engine, ParenteBeard said Harris County paid the highest daily price recorded for 10 of the 11 trades between March 1 and Sept. 30, 2010. On several occasions, Harris County was the only purchaser offering a premium.

Morgan Stanley spokeswoman Christine Pollak defended the value of the firm’s actions.

“We believe that we provided the county with appropriate pricing and are not aware of any instances where the county did not receive appropriate execution,” she said.

Representatives of UBS declined to comment on the report.

Harris County should try to recover the excessive premiums through negotiations or a lawsuit, ParenteBeard recommended, and offending brokers should be barred from further business with the county.

The county attorney’s office has turned over to Lykos information investigators have gathered in the ongoing probe of Harrison’s tenure as financial director and the ParenteBeard audit.

Harrison selected the firms responsible for buying and selling the securities without requiring competitive bids, the analysis found. Other brokers offered the same services at or below par, the report said, but UBS and Morgan Stanley received a bulk of the county’s business during Harrison’s tenure.

“County personnel may be trying to circumvent or override internal controls,” the report noted.

There were 2,864 transactions by 24 traders involving the county’s investment fund between April 2007 and September 2010, for a total of $25.8 billion.

UBS accounted for $4.58 billion in 293 trades, ParenteBeard said, with Morgan Stanley responsible for $4.5 billion in 287 trades. The remaining 22 brokers were credited with $16.7 billion in 2,284 transactions.

Harris County currently does not have formal agreements with brokers involved in investment transactions, the analysis said, and does not receive monthly statements from them.

In the eight months since Harrison was demoted, the two firms have seen their share of the county’s investment business go to 12% from 48%. UBS and Morgan Stanley have participated in 24 transactions at or below par since.

Harris County’s investments totaled $1.6 billion at the end of 2010. The county also serves as the investment manager for another $850 million in funds from other entities, including the Houston Port Authority and the Harris County Hospital District.

Harrison was removed from his executive position in September 2010 when he was indicted on state financial fraud charges unrelated to his county work. He is currently a management analyst with the county, but is set to retire June 30.

Harris County’s debt is rated triple-A by all three agencies.

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