Archive for the “Oppenheimer Champion Income Fund” Category

For many institutional and individual auction rate securities investors, life remains in limbo. Their investments, once touted by Wall Street as liquid as cash, have proven otherwise, leaving investors with no where to turn.

Before the ARS market seized up, municipalities, closed-end funds, student loan companies, hospitals and other non-profit entities issued auction rate securities in the form of preferred shares or as debt instruments to companies and individual investors. Problems in the $330 billion auction rate securities market came to a head in February 2008, when auctions for the instruments stopped trading. Since then, several of Wall Street’s major brokerage firms have taken steps to redeem their clients’ ARS holdings, or face the wrath of state securities regulators.

Some brokerage firms, including Oppenheimer and Raymond James, have not gone this route, however. This means their clients are essentially in the same position as they were a year ago. In other cases, investors’ efforts to retrieve their money through class action lawsuits are coming up short, according to a Nov. 8 article by Gretchen Morgenson in the New York Times. Judges overseeing at least 23 auction rate class actions have dismissed them in recent months, the article says.

A coalition comprised of 25 companies holding approximately $8 billion in frozen auction-rate securities backed by student loans is trying to draw attention to ARS illiquidity and the broader consequences of what will happen if there’s no solution to make good on the investments. The group contends if companies and individual investors were able to cash in their securities, the result would be an immediate $58 billion to $63 billion of economic stimulus. Currently, the coalition is taking its message to members of Congress and the Treasury Department, as well as other leaders in political and financial circles.

Individual investors, however, typically don’t have this kind of clout or resources. For them, filing an arbitration claim against the brokerage firm that initially sold them their auction rate securities may hold the most promise for resolution. As reported in the New York Times article, almost 500 auction-rate securities claims have been filed by investors with the Financial Industry Regulatory Authority (FINRA) since the collapse of the ARS market. A total of 253 are pending; 242 have been closed.

Seventeen claims have gone to a final hearing. Of those, investors won in four cases; a $400 million award was handed down by a panel in one matter. But 146 of the 242 closed cases were settled by the parties involved in the dispute, the New York Times reports. Settlement terms aren’t public, but such deals typically involve refunding much, if not all, of investors’ money, the article says, citing lawyers who handle the cases.

Moreover, as the New York Times points out, some settlements involve “consequential damages” - additional money awarded to cover investors’ costs or investment opportunities they missed because they didn’t have access to their funds.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options regarding auction rate securities. Tell us about your situation by leaving a message in the comment box or the Contact Us form.

At least two more investors have filed a lawsuit against OppenheimerFunds, Inc. after assets in the Oppenheimer Champion Income Fund (OPCHX) entered a free fall last year. Investors Gary and Rita Wallen filed their lawsuit April 10 in a Denver, Colorado, U.S. District Court.

The couple’s complaint follows similar charges against Oppenheimer in which investors say managers of the Oppenheimer Champion Income Fund misled them about the fund’s portfolio composition. Instead of being a conservative high-income fund, the Champion Income Fund invested more than 25% of its assets in high-risk mortgage-backed securities and illiquid derivatives.

According to the fund’s own policies, that move required a majority vote from shareholders, something Oppenheimer failed to obtain and which violated state laws.

As a result of the high-risk investments, the Oppenheimer Champion Income Fund lost more than 80% of its value, dropping almost $2 billion over the course of a year. By comparison, other high-yield funds averaged a drop of 32% in 2008.

Our affiliation of 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.

Losses totaling $36 million in Oregon’s 529 college savings plan has prompted the state to sue OppenheimerFunds, charging that the money manager made risky investments that were never disclosed to plan participants. Oregon filed its lawsuit against Oppenheimer on April 13, according to an April 14 article in the Wall Street Journal, citing violations of securities law, breach of contract, breach of fiduciary duty, negligence and negligent misrepresentation.

Oregon’s charges against Oppenheimer focus on the Oppenheimer Core Bond Fund, which served as the conservative portion of the investing options offered in the state’s $770 million Oregon College Savings Plan. In late 2007 or early 2008, however, the conservative option turned considerably more risky, with the Core Bond Fund losing nearly 40% of its value. By comparison, its benchmark index, the Barclays Capital Aggregate Bond Index, rose 5.2%. 

In the complaint, Oregon states that “the Core Bond Fund was no longer a plain bond fund. It had become a hedge fund like investment fund that took extreme risks.”

Those risks included credit default swaps, total return swaps, derivatives and other high risk, toxic instruments that were a far cry from suitable investments for conservative and ultraconservative portfolios.

On March 27, Oregon replaced the Core Bond Fund with the Dreyfus Bond Market Index Fund. Another Oppenheimer fund, the Limited Term Government Bond Fund, was replaced as well with the Vanguard Short Term Bond Index Fund.

OppenheimerFunds, which is a unit of Massachusetts Mutual Life Insurance Co., also faces scrutiny by attorney generals in four other states for losses suffered in college savings plans. The states include Texas, New Mexico, Illinois and Maine. Officials in those states currently are jointly exploring whether OppenheimerFunds violated its fiduciary duty to investors in their 529 plans.

Our affiliation of 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. 

Investor allegations of mismanagement and negligence regarding an open-ended fixed income mutual fund owned and managed by OppenheimerFunds have resulted in a class-action lawsuit against Oppenheimer and its Champion Income Fund (OPCHX).

Filed on Feb. 13, the complaint charges OppenheimerFunds and various officers and directors connected to the Champion Income Fund of violating the Securities Exchange Act of 1934, the Securities Act of 1933 and the Investment Company Act of 1940.

According to the complaint, OppenheimerFunds and its managers not only failed to exercise due diligence when it came to the Champion Income Fund but also intentionally withheld critical information about their investing strategy. Marketed as a high-yield bond fund, Oppenheimer managers began to substantially increase their use of derivative instruments in late 2006, purchasing high-risk subprime mortgage securities. Information regarding that additional risk exposure, however, apparently was never disclosed to investors until after the Champion Income Fund plummeted in value.

In December 2008, Angelo Manioudakis, the man whose gamble on toxic mortgage-backed securities and other risky structured finance deals ultimately backfired, abruptly resigned as the manager of the Champion Income Fund.

The Oppenheimer Champion Income Fund has lost nearly 80% of its value, making it the worst-performing taxable high-yield bond fund of 2008. By comparison, similar bonds were down 30%. 

Credit-default swaps also added to the losses of the Champion Income Fund. Similar to insurance contracts, credit-default swaps provide protection for investors against bond and loan defaults. In exchange for making possible payouts, sellers of credit-default swaps receive regular interest payments.

In the case of the Oppenheimer Champion Income Fund, credit-default swaps were sold on financially troubled companies like Lehman Brothers Holdings, American International Group (AIG) and General Motors Corp.  In 2008, all three firms either went bankrupt or sought financial protection from the federal government. That, in turn, had a devastating financial effect on the assets in the Champion Income Fund’s portfolio.

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. 

With investor confidence at an all-time low, you would think investment firms might be burning the midnight oil to keep lines of communications between themselves and shareholders as open and transparent as possible. Think again. One of the firms to apparently misplace its fiduciary duty to investors: OppenheimerFunds.

As reported Feb. 6 by Morningstar, several of Oppenheimer’s funds have crashed and burned in recent months, as managers of the funds kept taking on more and more risks - a fact that reportedly was kept quiet from investors. 

Both the Oppenheimer Champion Income Fund (OPCHX) and the Core Bond Fund (OPIGX) suffered unexpected and massive losses in 2008. The Champion Income Fund lost nearly 80% of its value and the Core Bond Fund 40%.

It was more than just toxic securities that contributed to the funds’ losses. Specifically, Oppenheimer managers bought complex, off-balance-sheet swap contracts that in turn produced a leveraging effect on the funds, according to the Morningstar article. Ultimately, those added risks - which were never apparent nor communicated to investors - translated into even more losses. 

The losses, as well as the investment strategy that created them, could land Oppenheimer in a legal bind. Already, several investors have filed arbitration claims with the Financial Industry Regulatory Authority (FINRA), charging Oppenheimer of gross mismanagement and negligence.

Meanwhile, a number of states also are getting ready to file lawsuits against OppenheimerFunds for billions of dollars in losses connected to Oppenheimer funds in state college savings programs. 

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. 

Following a year of big financial losses in many of its bond funds, OppenheimerFunds has begun slashing jobs and laying off employees. The New York-based company’s bond funds lost an average of nearly 30% in 2008, as customers withdrew some $12 billion. That puts Oppenheimer in the bottom 11% of competitors, according to Bloomberg.

The combination of investment losses and a mass exodus of clients had a dramatic effect on the money-management firm’s bottom line. As of Dec. 31, Oppenheimer’s assets had fallen by 45%.

This week, OppenheimerFunds announced plans to immediately reduce its workforce by about 10%. The loss of 220-plus positions will affect offices in New York, Boston, Rochester and Denver.

Adding to OppenheimerFunds’ woes is the ongoing case involving Bernard (Bernie) Madoff and his alleged $50 billion Ponzi scheme. Tremont Group Holdings, which is owned by OppenheimerFunds, invested $3.4 billion with Madoff.

Oppenheimer’s biggest problems stem to ill-timed bets on subprime mortgage securities and risky credit-default swaps, which created a financial crisis for investors of the Oppenheimer Champion Income Fund (OCHCX). The fund plummeted by more than 80% in value last year, making it the worst-performing taxable high-yield bond fund of 2008. By comparison, similar bonds were down 30%.

The manager of the fund, Angelo Manioudakis, resigned from Oppenheimer last month. 

Other Oppenheimer funds have been on a losing streak, as well. The Oppenheimer Core Bond Fund (OPIGX), which is offered by 529 plans in Oregon, Texas, Maine and New Mexico, fell nearly 40% last year. By comparison, similar funds posted 4% gains.

Then there’s the Oppenheimer Rochester National Municipals Fund. Managed by Ronald Fielding, the fund dropped about 50% in 2008.

Meanwhile, investors of several Oppenheimer bond funds have filed claims with the Financial Industry Regulatory Authority (FINRA). Among their charges: Oppenheimer managers represented certain funds, including the Champion Income Fund and the Core Bond Fund, as ultra-safe and conservative when, in fact, they were tied to high-risk, speculative investments.

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. 

Hedge-fund firm Tremont Group Holdings, which is owned by OppenheimerFunds, could be forced to close its doors later this year after losing more than half of its assets to Bernard Madoff and his alleged $50 billion Ponzi scheme.

As reported Jan 27 by the New York Post, Tremont already has reduced its staff by some 40%, with the remaining employees told to prepare for potential severance packages this June.

Tremont’s Rye Investment Management shuttered its operations last month. The hedge fund group had retained Madoff as the sole manager of its funds, investing some $3.5 billion of client’s money with him.

The Tremont situation is another black mark against parent company OppenheimerFunds, which has faced a slew of problems over massive losses in several of its bond funds. The Oppenheimer Champion Income Fund (OCHCX) has plunged more than 80% in value in the past nine months, following wrong-way bets on subprime mortgage securities and risky credit-default swaps.

The Oppenheimer Core Bond Fund, which is offered by 529 plans in Illinois, Oregon, Texas, Maine and New Mexico, also has recorded big losses recently, falling by more than 40% in 2008. By comparison, similar funds posted 4% gains.

Both funds are the subject of investor lawsuits and state investigations over claims that the funds’ management misrepresented the funds as conservative and low risk when, in fact, they invested in some of the most risky and highly illiquid derivatives possible.   

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. 

Unexpected and unexplained losses in the Oppenheimer Champion Income Fund (OCHCX), the Oppenheimer Core Bond Fund (OPIGX) and other funds owned and managed by OppenheimerFunds are causing a financial headache for investors, college savings plans and pension funds across the country. Now, as OppenheimerFunds prepares for what could be the first of a lengthy run of arbitration claims, a consortium of four nationally recognized law firms has launched an independent investigation into how Oppenheimer executives may have misrepresented the funds to investors.

The legal alliance behind the investigation into OppenheimerFunds includes Maddox Hargett & Caruso, Uhl & Bakhtiari, David P. Meyer & Associates, and Page Perry, LLC. It was in 2007, following the onset of the subprime mortgage crisis and the subsequent meltdown on Wall Street, that the group created their affiliation - SubprimeLosses.com - to help individual and institutional investors combat fraudulent actions on the part of dishonest investment firms and brokerages.

As it turns out, dishonesty and wrong-way bets on subprime mortgage securities and risky credit-default swaps are responsible for the fiscal nightmare now facing investors in the Oppenheimer Champion Income Fund and the Core Bond Fund. The funds, which initially had been presented as conservative and safe investments by Oppenheimer management, were instead tied to high-risk, speculative derivative deals.

By the end of December 2008, assets in the Champion Income Fund had plunged by more than 80% in value. The Oppenheimer Core Bond Fund, which is offered by 529 plans in Illinois, Oregon, Texas, Maine and New Mexico, fell by more than 40% last year. By comparison, similar funds posted 4% gains.

Both the Oppenheimer Champion Fund and the Core Bond fund were managed by Angelo Manioudakis. In December, Manioudakis abruptly resigned from his position at OppenheimerFunds.

Meanwhile, investors are left to inherit the repercussions of Manioudakis’ ill-informed management decisions. Far from safe or conservative, the Champion and Core Bond funds invested in extremely risky and highly illiquid derivatives. Not knowing about this critical detail has collectively cost investors - many of whom are retirees, living on a fixed income - millions of dollars. Yet, Oppenheimer management, company marketing materials, even information contained in the funds’ prospectus never revealed this important and vital fact.

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.

A champion it’s not. Investments in high-risk mortgage-backed securities and credit-default swaps have pummeled the Oppenheimer Champion Income Fund (OPCHX). OppenheimerFunds’ flagship junk-bond mutual fund recorded one of the worst performances among its bond-fund peers in 2008, with assets losing more than 80% of their value. Only the Regions Morgan Keegan Select High Income Fund fared worse.

Problems for Oppenheimer’s Champion Income Fund first came to light in 2006, when fund manager Angelo Manioudakis started to focus on a risky - and, some say questionable - investing strategy that involved total-return swaps. A total return swap is a financial contact that transfers both the credit risk and market risk of an underlying asset from one party to another.

In the case of the Champion Income Fund, the underlying assets were tied to securities on commercial mortgages. Following the burst of the housing bubble in the summer of 2007 and the subsequent onset of the subprime debacle, Manioudakis’ gamble that the securities would increase in value never saw the light of day.

Making matters even worse for the Champion Income Fund: credit-default swaps. Through at least September 2008, the fund sold credit-default swaps on companies that already were in deep financial trouble - companies like Lehman Brothers Holdings, which filed for bankruptcy protection on Sept. 15, and American International Group (AIG), which has required two emergency bailouts from the government in order to stay afloat.

The financial devastation caused by wrong-way bets placed on derivatives goes far beyond just investors of the Champion Income Fund. At least 10% or more of the fund is held by other Oppenheimer funds, as well.

Unfortunately, investors never realized the level of risks they were taking on with the Champion Income Fund. That’s because Oppenheimer’s financial advisors marketed the fund as a conservative, high-income bond fund, one that presented only minimal degrees of risk. Even the fund’s own prospectus - as well as a revised version that was created after the fund began to lose vast amounts of money - described the Champion Income Fund as an appropriate investment for retirees, with an overall investment strategy that focused on building a broad and diversified portfolio to help moderate the special risks of investing in high-yield debt instruments.

Investors who’ve lost millions of dollars because of Oppenheimer’s irresponsible gamble on some of the riskiest and most toxic derivatives possible know otherwise.

In related OppenheimerFunds news, thousands of Illinois families are up in arms over unexpected and dramatic losses in the state’s Bright Start College Savings program and what they say is the mismanagement of the Oppenheimer Core Plus Bond Fund (OPIGX).

The fund, which was supposed to be invested in conservative investment-grade bonds and U.S. government securities but instead took on assets in risky mortgage-backed securities, credit default swaps and other toxic investments, lost more than 40% of its market value last year. By comparison, similar funds managed by other investment firms posted positive returns of about 5%.

Illinois State Treasurer Alexi Giannoulias is preparing to sue OppenheimerFunds in an attempt to recover the $85 million that the Bright Start College Savings program has lost thus far.  

Like Oppenheimer’s Champion Income Fund, the Core Plus Bond Fund was managed under the not-so-watchful eye of Angelo Manioudakis.  Besides Illinois, the Oppenheimer Core Plus Fund is included in 529 college savings plans in Oregon, Texas, Maine, and New Mexico.

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. 

Investors in the Oppenheimer Champion Income Fund (OCHBX, OPCHX and OCHCX) have lost millions of dollars because of decisions by the fund’s management to gamble on illiquid mortgage securities and credit-default swaps. Now, some investors - many of whom are retirees and have lost their entire life savings - are taking legal action. The first of what may be many arbitration claims to come has just been filed with the Financial Industry Regulatory Authority (FINRA).

Among the charges in the complaint: OppenheimerFunds and the former manager of the Oppenheimer Champion Income Fund, Angelo Manioudakis, intentionally withheld critical information about the fund’s risks and its concentration in toxic derivatives and other risky securities. 

As of Dec. 31, 2008, the Oppenheimer Champion Income Fund has seen the value of its assets plunge by more than 80%. The reason: Massive bets on subprime mortgage securities and total-return swaps. Total-return swaps are extremely complex agreements between parties to exchange cash flows in the future based on the performance of a set of underlying securities in the fund.

The Oppenheimer Champion Income Fund also contained credit-default swaps, another complicated and highly speculative derivative product. Credit-default swaps are like an insurance policy; they protect investors in the event a bond or loan defaults. In return for this guarantee, buyers agree to pay - much like an insurance premium - a fixed percentage fee to the seller of the contract.

There is a downside to this kind of speculative leveraging, however. Billionaire investor Warren Buffet spoke out against credit-default swaps as early as 2002, calling them “financial weapons of mass destruction.”

The $50-plus trillion market for credit-default swaps is unregulated. That means contracts are regularly traded without any oversight to ensure buyers actually can cover possible losses. When the mortgage-backed securities that many credit-default swaps were supporting began to plummet in value in 2007, investors quickly discovered their credit-default swaps to be a liability, rather than a guarantee, against risk. 

For sellers of credit-default swaps, the outcome can be equally grim. This is especially true in instances where the seller has provided insurance on companies that go bankrupt or experience severe financial problems. Oppenheimer’s Champion Income Fund found this out after selling credit-default swaps on Lehman Brothers Holdings, American International Group (AIG) and General Motors Corp.

At issue for investors in the Oppenheimer Champion Income Fund is the fact that the fund’s management, as well as various literature and materials on the fund, touted its investment strategy as “building a broad and diversified portfolio to help moderate the special risks of investing in high-yield debt instruments.”  Investors also claim the fund was advertised as far less risky than the typical high-income fund.

In reality, the Oppenheimer Champion Income Fund achieved neither. Instead, it invested in some of the most dangerous and toxic securities on the market.

For retirees and other conservative, risk-adverse investors who were in the Champion Income Fund, this strategy was a disaster waiting to happen.

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.