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News and Press Releases |
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HEADLINE:
Getting A Refund After The Scandal: Gauging The Odds
By: Riva D. Atlas
NYTimes.com. December 7, 2003
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EXCERPT: IF the New York attorney general, Eliot Spitzer, has his way, investors will receive tens of millions of dollars in refunds from mutual fund managers who allowed improper trading in their funds. But it's too early to say what that will mean for individual shareholders. How much money an investor held in a fund and for how long will be factors in determining the size of eventual payouts, experts said. There is still a big difference between what Mr. Spitzer says is a fair way of reimbursing shareholders and what some of the fund companies have proposed. Mr. Spitzer says that all of the management fees earned by fund companies during periods of improper trading should be returned to investors. "The money should go back to the original shareholders for whom the fiduciary duty was breached,'' Mr. Spitzer said recently. At the moment, though, companies like Janus Capital and Bank of America have promised to return only the management fees on the fund shares that were improperly traded, a much smaller sum that could wind up representing just pennies to the average investor. Mr. Spitzer made his intentions clear on Nov. 20 in a suit against Gary L. Pilgrim and Harold J. Baxter, founders of the PBHG funds. He demanded that the men and their company return more than $250 million - all the management fees they earned in the several years in which they allowed improper trading in the PBHG funds. And last week, in a suit against Invesco Funds Group, the attorney general sought the return of $161 million in management fees earned over two years. The fees that the attorney general wants to extract are subject to litigation, but some managers may yield to his demands to avoid a battle. Mr. Spitzer's approach has raised eyebrows. "We're really starting to talk about big bucks, and that will hurt" the fund executives, said Kathryn McGrath, a lawyer with Crowell & Moring and a former director of mutual fund regulation at the Securities and Exchange Commission. Of course, for individual shareholders, these sums could end up as small amounts after they are divided among hundreds of investors, particularly those who may have owned a fund for just part of the period of wrongdoing or who have since sold their investments in the fund.
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