Wells Fargo unit in $25 million settlement
NEW YORK, July 2 |
NEW YORK, July 2 (Reuters) - Evergreen Investment Management Company has agreed to pay $25 million to settle a class action claiming it misled investors about a now defunct mutual fund's exposure to mortgage-backed securities.
Lawyers for the investors filed papers in U.S. District Court in Boston on Friday seeking preliminary court approval of the accord with Evergreen, the former investment management business of Wachovia Corp whose funds are now managed by Wells Fargo & Co. Plaintiffs lawyers announced the settlement on Monday.
The settlement covers investors in Evergreen Ultra Short Opportunities Fund, which the plaintiffs claimed was marketed as an ultra short bond fund. The plaintiffs contended the fund was invested in illiquid and risky mortgage-backed securities.
The fund was operated by Evergreen Investment Management Co, the investment management business of Wachovia, which Wells Fargo agreed to acquire in 2008.
"We are particularly pleased to be able to recover on behalf of our institutional investor clients who ultimately were cheated of millions of dollars as a result of the blatant misrepresentations made by the defendants," Stewart Cohen, a lawyer for the plaintiffs, said in a statement.
Evergreen liquidated the fund in June 2008. By then, the fund's assets were worth $403 million, down by $300 million from nine months earlier, according to an August 2011 court decision. Investors sued, claiming to have lost 25 percent of their investments.
U.S. District Judge Nathaniel Gorton largely denied a motion to dismiss in March 2010 and certified the investor class in August 2011. A jury trial had been set for June 4, but was canceled after the parties notified the judge on May 15 they had reached a settlement.
In the court papers filed on Friday, lawyers for the plaintiffs estimated recoverable damages at $97 million. The figure did not include $33 million the U.S. Securities and Exchange Commission previously obtained for shareholders in June 2009 as part of a $40 million settlement.
Evergreen and Wachovia continue to "deny each and all of the claims alleged by" the plaintiffs, according to Friday's motion.
Laura Fay, a spokeswoman for Wells Fargo, in a statement emphasized that the events in the lawsuit predated Wells Fargo's acquisition of Wachovia.
Wells Fargo's "policies and procedures, and conservative approach to risk management, have led the firm to successfully avoid the regulatory challenges experienced by many firms in the mutual fund industry," she added.
The case is In Re Evergreen Ultra Short Opportunities Fund Securities Litigation, U.S. District Court of the District of Massachusetts, 08-cv-11064.
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