The settlement of the Oppenheimer lawsuit, reached on Tuesday, will require Oppenheimer to buy back auction-rate securities from more than 1,246 investment accounts.

Cuomo sued the company on behalf of investors, saying that the company promoted the auction-rate securities market as a conservative, low-risk, short-term investment that was an easy-to-sell alternative to cash. However, the auction-rate securities market froze in February 2008, preventing investors from accessing their capital and resulting in large losses.

The $31 million settlement will not pay back all of the money lost by investors. The total value of the frozen auction-rate securities held by customers of the brokerage firm exceeds the company’s ability to pay it back. Accounts that are less than $1 million, including those held by individuals, charities and small businesses, will be eligible for $25,000 reimbursement payments.

Auction-rate securities are bonds that are bid on by investors and sold to those who will accept the lowest interest rate during auctions regularly held to determine the bonds’ rates. When banks withdrew their support for auction-rate securities, investors were unable to sell the bonds, freezing their assets.

Cuomo, the Securities Exchange Commission, and others have been pressuring brokerages to reimburse investors for the face value of losses they suffered as a result of investments in the ARS market.

The Oppenheimer settlement is the latest in a string of auction-rate securities victories Cuomo has reached with various firms, including Morgan Stanley, UBS, Merrill Lynch, and Goldman Sachs. He has settled with 13 different firms in all, and there are still pending lawsuits against a number of brokerages. Including this week’s settlement with Oppenheimer, firms have agreed to pay back nearly $100 million in losses to auction-rate securities investors.

Cuomo still has some major outstanding lawsuits, including a claim against Charles Schwab over $787.9 million lost by Schwab customers when the market froze. The Charles Schwab lawsuit, filed in August, brought to light recorded Schwab conversations of Schwab representatives promoting auction-rate securities as infallible cash equivalent investments. Cuomo has also said that the ignorance defense does not work for Schwab, as the company should have responsibly known the risks and should have trained its brokers accordingly.

The agreement comes as OppenheimerFunds officials also announced that they are near a tentative agreement for $67 million with New Mexico, and follows the announcement last month of a $20 million Oppenheimer Funds settlement with Oregon.

The settlements come in response to allegations raised by several states that OppenheimerFunds mismanaged their 529 college savings programs by making risky investments, resulting in massive losses during the 2008 economic downturn.

In Illinois, the 529 program is known as Bright Start. State officials say that the money from the settlement will be used to recoup losses suffered by families who invested in Oppenhemier’s Core Plus Fixed Income Strategy while trying to save money for their children’s college tuition. The fund was one of 21 funds that were available under the state’s college tuition savings program.

“As a result of this agreement, Illinois families invested in this fund will be able to recover substantial losses in their college savings accounts in a timely manner while avoiding the uncertainty and delay that would accompany lengthy and expensive litigation,” said Illinois Attorney General Lisa Madigan.

OppenheimerFunds, which has changed the management team in charge of the fund, is still in talks with Maine, Nebraska and Texas, according to the Associated Press. All of the states say that the company made inappropriate investments that resulted in the fund suffering losses as high as 78% in 2008. OppenheimerFunds denies any wrongdoing.

Mismanagement by OppenheimerFunds has also resulted in a number of stock fraud arbitration claims filed by individual investors over Oppenheimer mutual fund losses, as well as an Oppenheimer class action lawsuit. The claims allege that the firm failed to adhere to the stated objective for certain mutual funds, by taking undue risk, failing to have adequate controls in place to prevent excessive risk and failing to disclose the extent of risk posted by investments in certain bond funds.

Oregon’s attorney general and treasurer filed the Oppenheimer Fund lawsuit in April, seeking to recover $36.2 million in losses caused by the collapse of the Oppenheimer Core Bond Fund. Although the Oppenheimer fund was promoted as conservative, the company allegedly took speculative risks similar to those of a hedge fund, resulting in substantial losses for the state’s 529 college savings fund.

OppenheimerFunds was accused of making inappropriate bond investments that resulted in massive losses during the 2008 market downturn. In agreeing to the settlement, OppenheimerFunds denies any wrongdoing.

Similar Oppenheimer lawsuits and arbitration claims have been filed over investor losses in the Oppenheimer Champion Income Fund, which is a high-yield bond fund offered by the firm to individual investors.

Starting in July 2008, the value of the Oppenheimer Champion Income Fund began to decline as the credit markets fell apart. When Lehman Brothers and AIG collapsed in September 2008, the value of the fund’s shares fell even further, ending the year with losses of 78% in 2008.

Some individual investors have filed stock fraud arbitration claims over Oppenheimer mutual fund losses through the Financial Industry Regulatory Authority (FINRA), while others are taking part in an Oppenheimer class action lawsuit filed in the U.S. District Court for the Southern District of New York in February. The class action lawsuit alleges that the firm failed to adhere to the stated objective of not taking any undue risk, failed to have adequate controls in place to prevent excessive risk and failed to disclose the extent of the risk posed by investment in the bond fund. The Oppenheimer lawsuit seeks to represent all investors who purchased shares between January 26, 2007 and December 6, 2008.

The state’s Oppenheimer lawsuit joins similar class action suits and claims filed by investors who allege that misrepresentations were made about the risk associated different mutual funds offered by Oppenheimer.

The Oregon lawsuit involves losses in the Oregon College Savings Plan and the OppenheimerFunds 529 Plan. The attorney general and treasurer of Oregon allege that Oppenheimer distorted the facts about their bond funds, claiming that they were conservative investments for the state, when in reality the money was in a high-risk hedge fund-like vehicle.

OppenheimerFunds, Inc., is accused of making inappropriate bond investments, resulting in massive losses for the Oppenheimer Core Bond Fund during the market downturn late last year.

Similar Oppenheimer lawsuits and arbitration claims have been filed over losses in the Oppenheimer Champion Income Fund, which is a high-yield bond fund offered by the firm to individual investors.

Starting in July 2008, the value of the Oppenheimer Champion income Fund began to decline as the credit markets fell apart. When Lehman Brothers and AIG collapsed in September 2008, the value of the fund’s shares fell even further, ending the year with losses of 78% in 2008.

In February 2009, an Oppenheimer class action lawsuit was filed in the U.S. District Court for the Southern District of New York, which seeks to represent all investors who purchased shares between January 26, 2007 and December 6, 2008. The Oppenheimer lawsuit alleges that the firm failed to adhere to the stated objective of not taking any undue risk, failed to have adequate controls in place to prevent excessive risk and failed to disclose the extent of the risk posed by investment in the bond fund.

A number of individual investors have also filed arbitration claims over Oppenheimer mutual fund losses through the Financial Industry Regulatory Authority (FINRA).

The Oppenheimer Fund lawsuit was filed on February 13, 2009, in the United States District Court for the Southern District of New York seeking to represent all shareholders as a class.

Investors claim that they purchased what they thought was a high-yield bond fund, and it was not disclosed that fund managers were placing their assets in unstable mortgage-backed securities and corporate bonds which carried significantly more risk than they knew they were exposed to.

The Champion Fund shares began to decline in July 2008, as concerns about the financial industry’s poor underlying fundamentals increased. In September 2008, with the collapse of AIG and Lehman Brothers, the funds share prices sunk even further, ending the year with losses of 78%.

According to the Oppenheimer Champion Income Fund class action complaint, the defendants failed to disclose that they were no longer adhering to their stated objective of not taking any undue risk and were actually pursuing riskier investments to achieve greater yields. The plaintiffs also claim that the extent of the Fund’s leverage exposure was misstated and that material facts were omitted about the extent of their liquidity risk and the extent of their exposure to derivatives and other high risk instruments.

While the class action lawsuit seeks to pursue the interests of all investors, a number of those who have lost money are pursuing individual investment loss arbitration claims through the Financial Industry Regulatory Authority (FINRA).

In January 2009, two elderly investors filed what is believed to be the first FINRA arbitration claim over the Oppenheimer Champion Income Fund, stating that they lost $125,000.

OPPENHEIMER FUND LAWSUIT STATUS: Lawyers have filed an Oppenheimer Champion Income Fund Class Action lawsuit on behalf of all shareholders between January 26, 2007 and December 9, 2008. In addition, some investors are pursuing individual arbitration claims to recover their losses.

>>CONTACT A OPPENHEIMER CHAMPION FUND LAWYER<<

OVERVIEW: Oppenheimer Champion Income Fund (NASDAQ: OPCHX, OCHBX, OCHCX, OCHNX, OCHYX) is an open-ended fixed income mutual fund offered by OppenheimerFunds, Inc.

While investors thought they purchased a relatively conservative high-yield bond fund, in late 2006 fund managers changed their investment style without informing shareholders and began increasing risk in an effort to obtain higher returns. Positions were increased in derivative instruments, with risky mortgage-backed and corporate bonds, and the extent of leverage exposure was increased.

Starting in July 2008, the value of shares of the Oppenheimer Champion Income Fund began to decline as the credit markets began to fall apart. When Lehman Brothers and AIG collapsed in September 2008, the value of the fund’s shares fell further, ending the year with losses of 78% in 2008.

OPPENHEIMER CHAMPION INCOME FUND CLASS ACTION LAWSUIT: On February 13, 2009, a lawsuit was filed in the United States District Court for the Southern District of New York which seeks to represent all investors who held or purchased shares between January 26, 2007 and December 9, 2008, as a class.

The complaint alleges that fund managers:

• Failed to adhere to the objective of not taking any undue risk, and pursued riskier instruments in an attempt to increase yields
• Failed to have adequate controls to prevent excessive risk
• Failed to disclose the extent of the Fund’s liquidity risk caused by a large portion of the Fund’s illiquid portfolio
• Failed to disclose the extent of exposure to derivatives and other high risk instruments
• Failed to properly state the extent of the leverage exposure

FINRA ARBITRATION FOR OPPENHEIMER FUND LOSSES: A number of investors are electing to pursue individual Oppenheimer Champion Fund lawsuits as arbitration claims through the Financial Regulatory Authority (FINRA), which oversees about 5,000 different firms throughout the United States.

Bond Fund lawyers who pursue claims on behalf of investors generally find that those who have losses in excess of $50,000 are in a better position to recover their losses through individual arbitration claims.