Oregon Settles with Oppenheimer on 529 Plan Losses

The Oregon 529 College Savings Board approved the agreement, which will divide $20 million among roughly 45,000 account holders, based on how heavily individual accounts were invested in the Core Bond Fund, according to The Wall Street Journal.

In April, the Board and the Oregon State Treasurer sued the firm for losses of $36 million incurred by participants in the OppenheimerFunds Core Bond Fund. The suit claimed Oppenheimer Funds represented that certain investments were appropriate for conservative and ultra-conservative portfolios “but shuttled college savings instead into a hedge-fund like investment fund that took extreme risks in a search for speculative large returns.” (see “Oregon Sues 529 Fund Manager”)

Oregon’s Attorney General’s office estimates that about $5 million of the Core Bond Fund’s losses was due to poor market performance, the news report said. Attorney General John Kroger noted that the 65% recovery is much higher than the average recovery for securities class-action cases.

Other states that have also lost money in the Core Bond fund include Illinois, New Mexico, Texas, Maine, and Nebraska. Illinois is seeking to recover $77 million for investors in its Bright Start College Savings Program.

OppenheimerFunds did not admit to any wrongdoing.