OppenheimerFunds Settlement Results in $77M Payment to Illinois
OppenheimerFunds Inc. has agreed to pay $77 million to the state of Illinois to settle an ongoing investigation into the management of the state’s college savings fund.
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.
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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.
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