A class action lawsuit was commenced in the United States District Court for the District of Arizona on behalf of all persons (the “Class”) who purchased or otherwise acquired shares or other ownership units of one or more of a total of 397 mutual funds (the “Manipulated Funds”) that were manipulated by Capital Management Investors Holding and other defendants between May 22, 2000 through and including July 3, 2003 (the “Class Period”). A copy of the complaint is available from the Court or from Bernstein Liebhard & Lifshitz, LLP. Please visit our website at http://www.bernlieb.com or contact us at (800) 217-1522 or by e-mail at [email protected].
The Manipulated Funds include: Janus Worldwide Fund (NASDAQ: JAWWX), American Funds EuroPacific Fund (NASDAQ: AEPGX), MFS Emerging Growth Fund (NASDAQ: MFEGX), Legg Mason Value Trust Fund (NASDAQ: LMVTX), Artisan International Fund (NASDAQ: ARTIX), AXP International Y Fund (NASDAQ: IDIYX), SEI International Equity A Fund (NASDAQ: SEITX), SEI Emerging Markets I Fund (NASDAQ: SIEMX) as well as numerous other mutual funds.
Plaintiff alleges that defendants Security Trust Company (“STC”), Capital Management Investors Holdings, Inc., Grant Seeger (“Seeger”), and William Kenyon (“Kenyon”) violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and aided and abetted in the breach of fiduciary duties. More specifically, Plaintiff alleges that defendants STC, an unregistered financial intermediary, Seeger, STC’s former Chief Executive Officer, and Kenyon, STC’s former president, facilitated and participated in fraudulent late trading and market timing schemes by a group of related hedge funds. During the Class Period, defendants facilitated hundreds of trades by the hedge funds in nearly 400 different mutual funds. Approximately 99% of these trades were transmitted to STC after the 4:00 p.m. EST market close; 82% of the trades were sent to STC between 6:00 p.m. and 9:00 p.m. EST. The hedge funds’ late trading was effected by defendants through STC’s electronic trading platform, which was designed primarily for processing trades by third party administrators (“TPA’s”) for retirement plans. STC repeatedly misrepresented to the mutual funds that the hedge funds were a retirement plan account, even though STC’s employees and senior management, including Seeger and Kenyon, knew that the hedge funds were not a TPA or a retirement plan account. The mutual funds expected that retirement plans and their TPA’s required several hours after the market closed to process trades submitted by thousands of plan participants before market close, but the hedge funds had no such business purpose for submitting their own trades as late as five hours after market close.
In addition to late trading, defendants also assisted the hedge funds in various strategies — some devised by Seeger — to conceal their market-timing activities from mutual funds, including misrepresenting that the hedge funds were retirement accounts, allowing the hedge funds to trade in accounts marked with STC’s tax identification number, and “piggybacking” the hedge funds’ timing trades on the trades of other STC clients without their knowledge. Late trading allowed the hedge funds to trade mutual fund shares at the established 4:00 p.m. EST market close price based upon events reported after close of the market or perceived market momentum caused by after-hours trading. Market timing allowed the hedge funds to engage in short-term trading that exploited inefficiencies in mutual fund pricing. As a result of the late trading and market timing activities facilitated by defendants, the hedge funds realized a profit of approximately $85 million. STC had a compensation arrangement with the hedge funds that included a custodial fee as large as 1% (STC charged most of its TPA clients a custodial fee of just .10%) and a 4% profit sharing arrangement with respect to most of the hedge funds’ trades. STC received over $5.8 million in direct compensation from the hedge funds. Late trading and market timing harmed mutual fund shareholders who did not participate in the scheme between STC and the hedge funds. As a result of “late trading” and “timing” of mutual funds, the hedge funds and defendants and their intermediaries profited handsomely. The losers were unsuspecting long-term mutual fund investors. Defendants’ profits came dollar-for-dollar out of their pockets.
On November 25, 2003, the Securities and Exchange Commission announced that it had brought civil charges against the many of the Defendants based on the allegations set forth above; the New York State Attorney General announced that it had charged them with grand larceny, fraud and falsifying business records; and the Office of the Comptroller of the Currency, the federal bank regulator, ordered STC to dissolve itself by March 31, 2004.
Plaintiff seeks to recover damages on behalf of all persons who purchased or otherwise acquired shares or other ownership units of one or more of the Manipulated Funds during the Class Period. If you purchased or otherwise acquired shares or other ownership units of one or more of the Manipulated Funds during the Class Period, you may wish to join in the action to serve as lead plaintiff. In order to do so, you must meet certain requirements set forth in the applicable law and file appropriate papers no later than February 23, 2004.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as “lead plaintiff.” Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Bernstein Liebhard & Lifshitz, LLP, or other counsel of your choice, to serve as your counsel in this action.
Bernstein Liebhard & Lifshitz, LLP has been retained as one of the law firms to represent the class. The attorneys at Bernstein Liebhard & Lifshitz, LLP have extensive experience in securities class action cases, and have played lead roles in major cases resulting in the recovery of hundreds of millions of dollars to investors. For more information about Bernstein Liebhard & Lifshitz, LLP, please visit our website at http://www.bernlieb.com.
If you would like to discuss this action or if you have any questions concerning this Notice or your rights as a potential class member or lead plaintiff, you may contact the Shareholder Relations Department at Bernstein Liebhard & Lifshitz, LLP, 10 East 40th Street, New York, New York 10016, (800) 217-1522 or 212-779-1414 or by e-mail at [email protected].
<Pre> Contact: Shareholder Relations Department Bernstein Liebhard & Lifshitz, LLP 800-217-1522 or 212-779-1414 <a href=”mailto:[email protected]”>[email protected]</a>
</Pre>
SOURCE: Bernstein Liebhard & Lifshitz, LLP
