OppenheimerFunds Settles Mismanagement Case for $100 Million
July 26, 2011, 1:59 PM EDTBy Phil Milford and Dawn McCarty
(Updates with details from court papers in fifth paragraph, company comment in seventh paragraph.)
July 26 (Bloomberg) -- Massachusetts Mutual Life Insurance Co.’s OppenheimerFunds Inc. agreed to pay $100 million to settle allegations of mismanagement brought by mutual fund investors, according to federal court documents filed in Denver.
A hearing to approve the settlement with holders of Oppenheimer Champion and Core Bond Fund shares was scheduled for Sept. 30 before U.S. District Judge John L. Kane, the court announced in a statement today.
Fund officials settled the cases “to eliminate the burden, expense, uncertainty and risk of further litigation,” and deny any wrongdoing, their lawyers said in court documents.
The funds were sued in 2009 by participants who believed they were holding low-risk, conservative investments, and lost money.
“Defendants portrayed the Fund as a diversified, higher- yielding Fund that may be appropriate as part of a retirement plan portfolio,” plaintiffs’ lawyers in the Champion case said. “However, the Fund was substantially more risky than represented because it took huge gambles on mortgage-backed securities and illiquid derivatives that caused the Fund to crash.”
Settlement Amounts
Champion investors will receive $52.5 million, and Core Bond investors will share $47.5 million, minus legal fees, according to settlement papers. The plaintiffs’ lawyers will ask Kane to give them 25 percent of the settlement amount, court documents show.
“OppenheimerFunds entered into these proposed settlement agreements to avoid a lengthy and expensive legal process,” Samuel Wang, a spokesman for OppenheimerFunds in New York, said in an e-mail. “In doing so, the company has not admitted any wrongdoing in the matters raised in the lawsuits.”
OppenheimerFunds isn’t affiliated with Oppenheimer & Co. or Oppenheimer Capital.
“We believe that the proposed settlements are in the best interests of shareholders of the Funds and we are pleased that we are moving toward a resolution of these matters” Wang said. “The settlements have also been approved by the Boards of Trustees of the two funds,”.
The cases are In Re Oppenheimer Champion Securities Fraud Class Actions, 09CV386 and In Re Core Bond Fund, 09CV1186, U.S. District Court, District of Colorado (Denver).
--Editors: Mary Romano, Fred Strasser
To contact the reporters on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
