Oppenheimer Fund Lawsuit Settled for $20M

OppenheimerFunds Inc. has reached a $20 million settlement with the state of Oregon, which accused the company of investment fraud over the management of a college investment plan that lost $36 million.

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.