U.S. court rejects Genworth investors' class action attempt

Wed Apr 16, 2014 1:51pm EDT

* Investors said Genworth made false promises

* "Moneytalk" radio host Bob Brinker said to offer help

* Judge says investors had too little in common to sue

By Jonathan Stempel

NEW YORK, April 16 (Reuters) - A federal judge in New York has refused to let more than 2,000 Genworth Financial Inc clients pursue a class action lawsuit claiming they were defrauded into believing a well-known radio talk show host and financial adviser would oversee their portfolios.

The plaintiffs claimed to lose millions of dollars from December 2003 to December 2009 because Genworth Financial Wealth Management Inc reneged on promises that Bob Brinker, host of the syndicated "Moneytalk," would recommend asset allocation and investment choices, and that "experienced professionals" would implement his strategy.

Instead, Genworth allegedly stuffed their portfolios at its BJ Group Services affiliate with underperforming funds that generated higher administrative and service fees, and which were not recommended or chosen by Brinker. Those funds routinely made up more than half of the portfolios, the plaintiffs claimed.

Though the plaintiffs enlisted former U.S. Securities and Exchange Commission Chair Harvey Pitt for support, U.S. District Judge Joseph Bianco in Central Islip, New York on Tuesday said they could not pursue their securities fraud case as a group.

"Plaintiffs have failed to establish by a preponderance of the evidence a common method of proving that all class members relied on defendants' alleged representations and omissions," he wrote.

Genworth spokesman Tom Topinka declined to comment, saying the Richmond, Virginia-based financial services company does not discuss pending litigation.

UNDERPERFORMANCE

The plaintiffs claimed that Genworth's marketing materials touted the company's "exclusive partnership" with Brinker, in which it would implement Brinker's recommendations by selecting mutual funds for clients.

They contended that Genworth did not actually do that, causing their returns to trail those in Brinker's "Marketimer" portfolio in every calendar year from 2003 to 2008.

For example, in 2003 Brinker's portfolio allegedly returned 43.4 percent while a BJ Group portfolio earned 29.1 percent.

Meanwhile, in 2008, the year of the financial crisis, Brinker's portfolio allegedly fell 37.4 percent, while the BJ Group portfolio lost 39.6 percent.

Among the non-Brinker funds allegedly used by Genworth was Bill Miller's Legg Mason Value, which had outgained the Standard & Poor's 500 for 15 straight years through 2005.

But in each of the next three years, the fund lagged that benchmark by at least nine percentage points and trailed at least 97 percent of its peers, according to Morningstar Inc. The fund is now known as ClearBridge Value.

Joseph Weiss and Lenard Leeds, two of the lawyers for the plaintiffs, did not immediately respond to requests for comment.

The case is Goodman et al v. Genworth Financial Wealth Management Inc et al, U.S. District Court, Eastern District of New York, No. 09-05603. (Editing by Linda Stern, Bernard Orr)