The original complaint states that the Plaintiff brings this action as a class action on behalf of investors in mutual funds belonging to the Dresdner Asset Management of America L.P. ("ADAM of America") family of PIMCO mutual funds (the "PIMCO Funds"), and derivatively on behalf of the PIMCO Funds, against the PIMCO Funds investment advisers, their corporate parents and the PIMCO Funds trustees.
Specifically, this complaint alleges that the Investment Adviser Defendants (as defined herein) drew upon the assets of the PIMCO Funds to pay brokers to aggressively push PIMCO Funds over other funds regardless of the best interests of the investors in PIMCO Funds, and that the Investment Adviser Defendants concealed such payments from investors by disguising them as brokerage commissions. Such brokerage commissions, though payable from fund assets, are not disclosed to investors in the PIMCO Funds public filings or elsewhere.
PIMCO Funds investors were induced to purchase PIMCO Funds by brokers who received undisclosed payments from the Investment Adviser Defendants to push PIMCO Funds over other mutual funds and who therefore had an undisclosed conflict of interest. Once invested in one or more of the PIMCO Funds, PIMCO Funds investors were charged and paid undisclosed fees that were improperly used to pay brokers to aggressively push PIMCO Funds to yet other brokerage clients.
The Investment Adviser Defendants were motivated to make these secret payments to finance the improper marketing of PIMCO Funds because their fees were calculated as a percentage of funds under management and, therefore, tended to increase as the number of PIMCO Funds investors grew. The Investment Adviser Defendants attempted to justify this conduct on the ground that by increasing the PIMCO Funds assets they were creating economies of scale that inured to the benefit of investors but, in truth and in fact, PIMCO Funds investors received none of the benefits of these purported economies of scale. Tlu-oughout the Class Period (as defined herein), the Investment Adviser Defendants skimmed from the PIMCO Funds to finance their ongoing marketing campaign. The PIMCO Funds trustees, who purported to be PIMCO investor watchdogs, knowingly or recklessly permitted this conduct to occur.
The complaint alleges that by engaging in this conduct, the Investment Adviser Defendants, and the defendant entities that control them, breached their statutorily-defined fiduciary duties under Sections 36(a) and (b) of the Investment Company Act of 1940 (the "Investment Company Act") and Sections 206 of the Investment Advisers Act of 1940 (the "Investment Advisers Act"), breached their common law fiduciary duties, and knowingly aided and abetted the brokers in the breach of fiduciary duties to their clients. The Investment Adviser Defendants also violated Section 34(b) of the Investment Company Act because, to further their improper campaign, they made untrue statements of material fact in fund registration statements, and omitted to disclose material facts with respect to the procedure for determining the amount of fees payable to the Investment Adviser Defendants and with respect to the improper uses to which these fees were put. Additionally, the PIMCO Funds trustees breached their common law fiduciary duties to the PIMCO Funds investors by knowingly or recklessly allowing the improper conduct alleged herein to occur and harm PIMCO Funds investors.
The case was ordered consolidated on July 8, 2004, and plaintiffs filed their Consolidated Amended Complaint on November 19, 2004. Defendants moved for dismissal on February 18, 2005. A year and a half later, on September 18, 2007, the judge ruled in favor of all defendants and dismissed the action. Specific reasons cited for dismissing each claim can be viewed in the Judge's Order.