MutualFundWire.com: OppFunds Dishes Out $67.3 Million to Settle a 529 Probe

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Wednesday, December 16, 2009

OppFunds Dishes Out $67.3 Million to Settle a 529 Probe

OppenheimerFunds will hand over $67.31 million to New Mexico to settle an investigation into the management of the state's 529 programs. New York City-based Oppenheimer did not admit nor deny wrondgoing.

Three weeks ago, Oppenheimer agreed to settle a 529 suit filed by the state of Oregon for $20 million.

The agreement with New Mexico, which awaits final approval from the Education Trust Board to take effect, stipulates that the $67.31 million will be distributed to 529 plan participants impacted by the performance of the Oppenheimer Core Bond Fund.

"Oppenheimer Funds settled New Mexico's investigation of the 529 college savings plans to avoid a lengthy legal process and focus on the future of the 529 business," OppenheimerFunds spokesman Jeaneen Pisarra told The MFWire. "Oppenheimer did not admit any wrongdoing in the settlement and while the performance of the Core Bond Fund was disappointing, the settlement does not admit any wrongdoing with regard to the Core Bond Fund."

The investigation into the management of the state's two 529 plans was led by New Mexico Attorney General Gary King and the Education Trust Board. According to its website, the attorney general's office worked with other states, including Illinois, Oregon, Texas, Maine and Nebraska.

Meanwhile, Oppenheimer's affiliate, OFI Private Investments, will continue to serve as program manager for New Mexico's two 529 college savings programs, namely the Education Plan and Scholar's Edge.

Statement from New Mexico Attorney General Gary King

Company Press Release

(SANTA FE)---Attorney General Gary King today announced a settlement agreement with OppenheimerFunds, Inc., to resolve the state's investigation into Oppenheimer's management of New Mexico's 529 college savings programs.*

This settlement allows all parties to avoid a lengthy and expensive legal process and closes out the year long investigation by the AG and the state Education Trust Board.

Under terms of the settlement agreement, Oppenheimer agrees to pay New Mexico $67.31 million, all of which will be distributed to 529 plan participants affected by the performance of Oppenheimer Core Bond Fund. Oppenheimer's affiliate, OFI Private Investments, remains the program manager for the state's two 529 college savings programs; the Education Plan and Scholar's Edge.

The settlement requires final approval from the Education Trust Board before it becomes effective. Additionally, implementation may be delayed due to lawsuits by private parties against the ETB and Oppenheimer. The Attorney General's Office is working to to reduce or eliminate these potential delays to the extent possible.

Although this is a separate settlement for New Mexico, the AGO worked with other states including Illinois, Oregon, Texas, Maine and Nebraska.

Statement from OppenheimerFunds

December 15, 2009—OppenheimerFunds, Inc. (OFI) and the State of New Mexico have reached an agreement in principle to resolve New Mexico’s investigation into the management of the State’s two 529 college savings programs, the Education Plan and Scholar’s Edge. OFI does not admit any wrongdoing under the terms of the settlement, which allows both the State and OFI to avoid a lengthy and expensive legal process and to apply resources to more constructive ends.

Under the terms of the proposed settlement, OFI agrees to pay the State $67.31 million which the State intends to distribute to participants in the Plan. Further details on timing and the State’s plans for distribution of settlement funds will be released after the settlement is finalized.

OFI is one of the largest and most successful 529 program managers and remains committed to its 529 plan management business. Long known for its advocacy on behalf of investors, the Company continues to help individuals reach the important goal of savings for a college education by encouraging smart planning and informed choices through its “Keeping College Within Reach” program.