Archive for the “Oppenheimer Funds” Category

Last month, the state of Oregon sued OppenheimerFunds in an effort to recover more than $35 million that officials say investors lost because Oppenheimer misrepresented the risk of its Oppenheimer Core Bond Fund.  Now it appears Oregon state officials may share in some of the blame by failing to reel in managers of OppenheimerFunds and stop the risky investments they were making in the Oregon College Savings Plan with money labeled as conservative and ultra-conservative.

According to a May 6 article in The Oregonian, e-mails between the state treasurer’s office and OppenheimerFunds reveal state officials failed to closely monitor the Oppenheimer Core Bond Fund and didn’t take action to prevent additional losses until it was too late. Instead, documents show the state relied on information from OppenheimerFunds that the money was being well-managed.

Even more troubling: E-mails point to a possible conflict of interest between OppenheimerFunds and Oregon state officials. In addition to OppenheimerFunds buying meals for state executives at expensive Portland restaurants, the Oregonian article reports that when problems surrounding the Oppenheimer Core Bond Fund were made public, OppenheimerFunds provided the state with a talking points document, and a state official gave the company a heads-up about a pending state investigation.

The central issue concerning the Oppenheimer Core Bond Fund focuses on the investing strategies used by Oppenheimer’s managers. According to a February 2008 filing with the Securities and Exchange Commission (SEC), OppenheimerFunds changed the investment focus of the fund in 2007 by dramatically increasing its holdings in the complex investing arena of derivatives. When the state initially hired OppenheimerFunds, the fund held three derivatives in the form of total-return swap contracts. By the end of 2007, the Core Bond Fund held 150 derivative contracts. 

At the close of 2008, the Oppenheimer Core Bond Fund - at one time a $1.4 billion fund - had lost 41% of its value.

As reported in the May 6 Oregonian article, OppenheimerFunds first disclosed its exposure to the crisis on Wall Street in a Sept. 24 letter to Oregon 529 College Savings Network Executive Director Michael Parker.  The letter, however, failed to accurately portray the amount of the Core Bond Fund’s exposure and lacked other important details. Moreover, OppenheimerFunds reportedly marked the letter as “not for public disclosure.”

On Oct. 23, at a board meeting to discuss the financial status of the Oregon College Savings Plan, Former Oregon State Treasurer Randall Edwards reportedly expressed concern about the deep losses in the Oppenheimer Core Bond Fund yet did not call for making any changes to the investments, according to the Oregonian story.

In January 2009, Oregon voted to replace the Core Bond Fund from the Oregon College Savings Plan; it wasn’t until March, however, that any action occurred.

The bottom line: Red flags were waving loud and clear when it came to OppenheimerFunds’ mismanagement of the Oregon College Savings Plan and the Core Bond Fund. Meanwhile, state officials apparently chose to remain asleep at the wheel as OppenheimerFunds and its managers took on more and more risks with investors’ money.

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.

The fury over auction-rate securities continues to heat up in the state of California, which has filed a lawsuit against three Wells Fargo subsidiaries for allegedly telling California investors that $1.5 billion of the risky securities were “cash-like investments.”

The lawsuit, filed April 23 in San Francisco, focuses on Wells Fargo Investments LLC, Wells Fargo Brokerage Services LLC and Wells Fargo Institutional Services LLC. During a news conference, California Attorney General Jerry Brown said the Wells Fargo firms advertised the auction-rate securities to investors as short-term, liquid investments, similar to money-market accounts. When the market for auction-rate securities collapsed in February 2008, however, investors quickly lost their money.

According to Brown, about 2,400 Californians are unable to sell their ARS investments, leaving many strapped for cash that they need to pay their day-to-day living expenses.

Following the collapse of the auction-rate market, federal and state regulators launched investigations into whether Wall Street institutions deceived investors about the liquidity and risks of auction-rate securities. In August 2008, a number of firms agreed to settle those claims by agreeing to pay fines and buy back billions of dollars of the instruments from retail investors and small businesses.

In addition to California, several other lawsuits recently have been filed over auction-rate securities. On April 17, Braintree Laboratories, a pharmaceutical company based in Braintree, Massachusetts, filed a lawsuit against Citigroup, charging the bank with selling more than $33 million of auction-rate securities and misrepresenting them to Braintree as “money-market investments.”

Also on April 17, Ashland, Inc., which makes Valvoline motor oil and other chemicals, filed a lawsuit against Oppenheimer & Co. over the sale of $194 million of auction-rate securities. According to the complaint, Oppenheimer failed to disclose accurate and truthful information about the liquidity and risks associated with auction-rate securities.

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.

The maker of Valvoline motor oil has filed a lawsuit against Oppenheimer & Co., a subsidiary of Oppenheimer Holdings, over the sale of $194 million of auction-rate securities. According to the complaint by Ashland Inc., Oppenheimer misrepresented the liquidity and risks of the instruments at the time it sold them to the chemical company in 2007 and early 2008. 

When the market for auction-rate securities collapsed in February 2008, Ashland, like thousands of institutional and retail investors, found itself stranded with an illiquid investment that no one wanted to buy. Several months later, in an effort to settle investigations by state and federal regulators, many Wall Street firms, including Citigroup, UBS and Merrill Lynch, agreed to buy back billions of dollars of auction-rate securities from investors. Oppenheimer, however, opted not to participate in the ARS buy-back programs, contending it didn’t issue or underwrite the securities but only sold them.

In November 2008, Massachusetts’ Secretary of State William Galvin sued Oppenheimer, charging the firm with fraud and dishonest and unethical conduct in connection to its auction-rate securities business. Galvin not only wanted Oppenheimer to rescind all sales of auction-rate securities at par and make full restitution to investors who already had sold their securities but also sought to revoke Oppenheimer Chairman and CEO Albert Lowenthal’s Massachusetts registration as a broker-dealer agent of Oppenheimer, as well as fine the company and several senior-level executives.

Ashland filed its lawsuit against Oppenheimer on April 17 in the U.S. District Court for the Eastern District of Kentucky.

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.

Unexpected losses in 529 college savings plans containing investments in OppenheimerFunds are generating increased scrutiny by attorney generals in Maine, Illinois, New Mexico, Texas and Oregon, as regulators try to determine whether the asset management firm violated its fiduciary duty to investors.

As reported April 7 by Bloomberg, the inquiries apparently are zeroing in on 529 plans that invested in the Oppenheimer Champion Income Fund, which fell nearly 80% in 2008, and another poor performing fund, the Oppenheimer Core Bond Fund, which lost 41%. Two other OppenheimerFunds are the subject of the investigations, as well: the Oppenheimer Limited Term Government Fund and the U.S. Government Trust. 

In Illinois alone, investors have lost $85 million in state-sponsored 529 college savings plans due to risky mortgage linked securities purchased by OppenheimerFunds management. For parents in the plans, the news is especially sobering because Oppenheimer managers reportedly failed to reveal details about the investments and the extra risks associated with them.

In the case of the Champion Income Fund, investors’ financial pain was further aggravated by Oppenheimer’s decision to buy complex total return swap contracts that created a leveraging effect and, ultimately, disastrous consequences. Instead of the prices on mortgage backed securities going up, as Oppenheimer managers predicted, the opposite outcome materialized. Prices plummeted, as did the Champion Income Fund, which fell in value by more than 70% in the fourth quarter of 2008.

Since then, Illinois, Oregon and Texas have pulled their money from OppenheimerFunds investments.  

The financial havoc caused by Oppenheimer’s Champion Income Fund has resulted in a slew of lawsuits and arbitration claims by both investors in the troubled college savings plans and those outside of the plans.  The common theme in their complaints: OppenheimerFunds marketed and sold the fund as a conservative, relatively low-risk high-income investment.

This past December, when it became apparent that several of Oppenheimer’s bond funds were tanking in value because of wrong-way bets on mortgage backed securities, portfolio manager Angelo Manioudakis abruptly resigned from his post at OppenheimerFunds.

Other executive changes soon followed. In early 2009, Bill Glavin, the newly appointed chief executive officer of OppenheimerFunds, announced plans to clean house, beginning with those who presided over his investment team and the troubled bond funds. Among the changes: Chief Investment Officer Kurt Wolfgruber, who is set to leave the firm on April 30.

Oppenheimer Funds also says it intends to step up its risk control measures and improve communication with clients. The move may, in part, be related to the company’s dismal performance last year. In 2008, Oppenheimer Funds’s bond funds lost an average of 29%. By comparison, the average decline for bond mutual funds was 7.9%, according to Morningstar.

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. 

Investors in several state college 529 savings program are crying foul over OppenheimerFunds and investment losses that they say were the direct result of poor management. The states of Illinois, Maine, New Mexico and Oregon all have opened investigations into whether OppenheimerFunds and its fund managers violated consumer protection or securities laws.

Now, the state of Oregon is expanding its probe into OppenheimerFunds, issuing subpoenas and adding another fund as part of an investigation into losses suffered by investors in the most conservative portfolios of Oregon’s 529 College Savings Network.

On Feb. 2, Oregon Attorney General John Kroger announced that his office had demanded financial information from OppenheimerFunds for both the OppenheimerFunds Core Bond Fund and the OppenheimerFunds Limited Term Government Bond Fund.

The Oregon Attorney General’s Office is coordinating its probe with attorney general offices in Illinois, Maine and New Mexico, which also have 529 college savings investments with OppenheimerFunds.

Both the Core Bond Fund and the Limited Term Government Bond Fund are considered responsible for massive losses in Oregon’s most conservative college savings portfolios. In 2008, Oppenheimer’s Core Bond fund declined about 40%, with the short-term government bond fund losing 6%.

The Oppenheimer Core Bond Fund was supposed to adhere to a low-risk, conservative investing strategy, one that invested in investment-grade bonds and U.S. government securities. Instead, under the watch of former OppenheimerFunds manager Angelo Manioudakis, the fund had a huge exposure not only to mortgage-backed securities, but also to credit default swaps.

According to Morningstar analyst Eric Jacobson, the investment exposure was the equivalent of 180 percent of its assets. When the housing market tanked at the end of September and the credit crunch began in earnest, those investment choices were made worse by the leverage of the fund’s managers.

Making matters even more frustrating for investors: No disclosures about the investing strategy could be found in Oppenheimer’s legal documents nor were they cited by Oppenheimer managers in interviews with analysts.

On Jan. 22, the Oregon 529 College Savings Board voted to terminate the Core Bond Fund and the Limited Term Government Bond Fund from Oregon’s college savings plan.

Other states, along with thousands of investors, are in the same boat as Oregon after experiencing huge losses in their college savings accounts because of the Oppenheimer Core Bond Fund. Currently, Illinois State Treasurer Alexi Giannoulias is preparing to file a lawsuit against OppenheimerFunds over $85 million of losses in the Core Bond Fund, which he says was improperly managed.

Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in valuating 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.