- The Washington Times - Monday, April 13, 2009

SALEM, ORE. (AP) - State officials are seeking $36.2 million in damages from OppenheimerFunds Inc., which managed a fund responsible for steep losses in the Oregon College Savings Plan.

Officials said in a statement Monday that risky, “hedge-fund like” investments cost the Oppenheimer Core Bond Fund 36 percent of its value last year _ and 10 percent more so far this year.

Meanwhile, comparable funds in a benchmark index posted a gain of about 5 percent for 2008, they said.

The lawsuit filed in Marion County against the Colorado-based OppenheimerFunds includes allegations of negligence, breach of contract and violations of state securities laws. Oppenheimer officials did not respond to a request for comment.

Treasurer Ben Westlund and Attorney General John Kroger said the lawsuit was filed on behalf of families and aims to recoup their losses.

“Families were doing the right thing and saving for college,” Westlund said in a statement, “but unknown to them or Oregon, their money was invested in ways that were plainly inappropriate for those saving for college or already in college.”

James Sinks, spokesman for Westlund, said about 66,000 accounts were affected.

Westlund and Kroger said Oregon is the first state to take legal action against OppenheimerFunds Inc. for losses in college savings programs.

They said a three-month investigation by Kroger’s office found that OppenheimerFunds managers hoping for large returns labeled risky, “hedge-fund like” investments appropriate for conservative and ultraconservative portfolios.

The OppenheimerFunds Core Bond Fund had changed in 2007 and 2008, the two state officials said, but neither the government nor investors were alerted it had become more risky.

The five-member board that oversees the Oregon College Savings Plan decided in January to withdraw from the bond fund.

OppenheimerFunds Inc. is not affiliated with Oppenheimer & Co. Inc.

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