On January 30, 2008, parties stipulated and agreed to dismiss with prejudice all remaining defendants. On May 8, 2008, the Honorable Judge Alvin signed the final order dismissing the case in its entirety.
The First Consolidated complaint was filed on October 20, 2004. Two months later, defendants moved to have the complaint dismissed. For the next three years discovery continued while plaintiffs and defendants argued over the merits of the case and the pending dismissal motions. Finally, on January 30, 2007, plaintiffs filed a motion to correct and amend the First Consolidated complaint. The judge entered an order on February 23, 2007 denying the 2004 motions to dismiss as moot while allowing plaintiffs to file their Second Amended Consolidated complaint on the same day. On December 6, 2007 both parties agreed in a stipulation of dismissal to drop the 34(b), 36(a), and 48(a) claims, as well as certain earlier named defendants.
The complaint alleges that the Investment Adviser Defendants drew upon the assets of the Hartford Funds to pay brokers to aggressively push Hartford Funds over other 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 Hartford Funds public filings or elsewhere.
Thus Hartford Funds investors were induced to purchase Hartford Funds by brokers who received undisclosed payments from the Investment Adviser Defendants to push Hartford Funds over other mutual funds and who therefore had an undisclosed conflict of interest. Then, once invested in one or more of the Hartford Funds, Hartford Funds investors were charged and paid undisclosed fees that were improperly used to pay brokers to aggressively push Hartford Funds to yet other brokerage clients.
The Investment Adviser Defendants were motivated to make these secret payments to finance the improper marketing of Hartford Funds because their fees were calculated as a percentage of funds under management and, therefore, tended to increase as the number of Hartford Funds investors grew. The Investment Adviser Defendants attempted to justify this conduct on the ground that by increasing the Hartford Funds assets they were creating economies of scale that inured to the benefit of investors but, in truth and in fact, Hartford Funds investors received none of the benefits of these purported economies of scale. Rather, fees and costs associated with the Hartford Funds steadily increased during the Class Period (as defined herein), in large part because the Investment Adviser Defendants continued to skim from the Hartford Funds to finance their ongoing marketing campaign. The Hartford Funds Directors, who purported to be Hartford investor watchdogs, knowingly or recklessly permitted this conduct to occur.
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 material omissions, 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 the fees were put. Additionally, the Hartford Funds Directors breached their common law fiduciary duties to the Hartford Funds investors by knowingly or recklessly allowing the improper conduct alleged herein to occur and harm Hartford Funds investors.
Plaintiff brings this action as a class action on behalf of investors in mutual funds belonging to The Hartford Financial Services Group, Inc. family of mutual funds, and derivatively on behalf of the Hartford Funds, against the Hartford Funds investment advisers, their corporate parents and the Hartford Funds directors.
The Hartford Family of Funds:
Hartford Advisers Fund Hartford Capital Appreciation Fund
Hartford Disciplined Equity Fund
Hartford Dividend and Growth Fund
Hartford Equity Income Fund
Hartford Focus Fund
Hartford Global Communications Fund
Hartford Global Financial Services Fund
Hartford Global Health Fund
Hartford Global Leaders Fund
Hartford Global Technology Fund
Hartford Growth Fund
Hartford Growth Opportunities Fund
Hartford High Yield Fund Hartford Income Fund
Hartford Inflation Plus Fund
Hartford International Capital Appreciation Fund
Hartford International Opportunities Fund
Hartford International Small Company Fund
Hartford MidCap Fund
Hartford MidCap Value Fund
Hartford Money Market Fund
Hartford Short Duration Fund
Hartford Small Company Fund
Hartford SmallCap Growth Fund
Hartford Stock Fund
Hartford Tax-Free New York Fund
Hartford Tax-Free California Fund
Hartford Tax-Free Minnesota Fund
Hartford Tax-Free National Fund
Hartford Total Return Bond Fund
Hartford U.S. Government Securities Fund
Hartford Value Fund Hartford Value Opportunities Fund