OppenheimerFunds Probed by Five States Over College Savings-Account Losses

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OppenheimerFunds Probed by Five States on College Plan Losses
By Sree Vidya Bhaktavatsalam


April 7 (Bloomberg) -- OppenheimerFunds Inc., a unit of Massachusetts Mutual Life Insurance Co., is under scrutiny by attorneys general in five states for investment losses in college-savings accounts that used its bond funds.

Officials in Illinois, Maine, New Mexico, Oregon and Texas began last month to jointly explore whether OppenheimerFunds violated its fiduciary duty to investors in the so-called 529 plans, said Scott Burnham, a spokesman for Illinois State Treasurer Alexi Giannoulias. Investors lost $85 million last year in Illinois-sponsored accounts run by the firm, whose managers bought mortgage-linked securities before prices plunged along with the residential real estate market.

“Parents are stunned because Oppenheimer didn’t tell them that they would be exposed to the riskiest part of the bond market,” said Derek Loeser, an attorney with Keller Rohrback LLP in Seattle, referring to securities linked to mortgages. The firm may file a group, or class-action, lawsuit against OppenheimerFunds on behalf of investors, Loeser said.

Illinois, Oregon and Texas have pulled college-savings money from OppenheimerFunds. Oregon is seeking bids to replace the company as a manager.

The inquiry undertaken by the civil enforcement offices of the attorneys general is focusing on accounts that invested in Oppenheimer Champion Income Fund, which fell 79 percent in the past year, and Oppenheimer Core Bond Fund, which lost 41 percent. Oppenheimer Limited Term Government Fund and U.S. Government Trust are also being investigated. .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=afmB.7qR9z2M&refer=home