Investors Sue Over Evergreen Ultra Short Opportunities Fund Losses
It hasn’t been a good week for Wachovia Corporation. On Aug. 4, the bank saw its stock fall as much as 11 percent after analyst Morgan Keegan urged investors to sell their holdings. The following day, Wachovia and its affiliates were sued by a group of investors, who claim the companies caused them substantial financial losses because of ties the now-defunct Evergreen Ultra Short Opportunities Fund’s had to risky investments in subprime mortgage-backed securities.
In the lawsuit, which was filed in a federal court in Boston, investors charge that Wachovia, Evergreen Fixed Income Trust, Evergreen Distributor Inc., Dennis Ferro, chief executive of Evergreen Investments, and Kasey Phillips, principal financial officer of the trust, incorrectly valued and sold shares of the Evergreen Ultra Short Opportunities Fund at artificially inflated prices.
According to the complaint, “As shareholders redeemed their shares, the selling shareholders were overpaid, depleting the fund’s reserves and harming the plaintiffs.
“Plaintiffs purchased at an inflated price and were also damaged by the fund’s failure to properly redeem the shares of the fund investors at a price representing the correct net asset value.â€
The complaint also charges that various statements found in the prospectus of Evergreen’s Ultra Short Opportunities Fund were false or misleading because the Fund failed to employ the safe investing strategy outlined. Instead, unbeknownst to investors, the Evergreen Ultra Short Opportunities Fund invested heavily in high-risk subprime mortgages, with more than 70% of its assets ultimately in these illiquid securities.
In 2008, the Evergreen Ultra Short Opportunities Fund was named one of the worst-performing ultra-short bond funds, losing more than 20 percent. By comparison, similar bond funds posted losses of about 2 percent.
In June, Evergreen Investments announced it was shutting down the Ultra Short Opportunities Fund. The Fund’s shareholders would be paid only $7.48 per share from the liquidation.
At the time of the liquidation, the total value of the Evergreen Ultra Short Opportunities Fund was $403 million. In December 2007, it had been valued at $947 million.
Evergreen Investments is the money-management unit of Wachovia Corp.
Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.
