3 more lawsuits filed against Strong
Legal actions come following allegations by N.Y. attorney general
By KATHLEEN GALLAGHER [email protected], Journal Sentinel
Wednesday, September 10, 2003
Three more lawsuits have been filed against Strong Capital Management Inc. in connection with allegations made last week by New York attorney general Eliot Spitzer that Strong and three other mutual fund companies allowed a New Jersey hedge fund to engage in improper trading practices in their funds.
Unlike two of the investment companies, Strong has not yet said whether it intends to reimburse shareholders who lost money as a result of Canary Capital Partners LLC’s trading in five of its mutual funds.
The new filings bring to four the number of lawsuits Strong faces over Spitzer’s allegations.
One of the lawsuits, filed in federal court in Milwaukee this week, seeks to replace Strong’s six fund trustees as representatives for the interests of shareholders in the Strong Growth funds, where Canary’s trading occurred.
The lawsuit said “the trustees of the trust are all hand-picked by Strong management, and thus owe their positions as well as their loyalties solely to Strong management and lack sufficient independence to exercise business judgment.”
The plaintiff in the complaint is Gregory D. Coleman of Mukwonago.
“The information is under review by our attorneys. It would be inappropriate to comment further,” Stephanie Truog, a Strong spokeswoman, said Tuesday.
Strong is cooperating with Spitzer’s office, she said.
Two of the companies Spitzer fingered — Bank of America Corp.’s Nations Funds and Janus Capital Group — have said they intend to reimburse shareholders who lost money as a result of Canary’s trading. They have also said they would return to shareholders in the affected funds any fees generated in exchange for giving Canary moneymaking opportunities that weren’t available to other investors.
Bank One Corp., the other company Spitzer made allegations against, has not said whether it will reimburse shareholders.
The other three lawsuits that have been filed against Strong so far all seek class action status. Only one of the four suits will likely end up representing the interests of shareholders in the funds.
Another suit was filed this week in federal court in Milwaukee by James Blevins, whose hometown was not identified; another was filed this week in Milwaukee County Circuit Court by Gerald Klafter of Boca Raton, Fla.; and the other was filed last week in Waukesha County Circuit Court by Congregation Ohel Torah of Brooklyn, N.Y.
All of the lawsuits accuse Strong of breaching its fiduciary responsibility to shareholders by giving favorable treatment to Canary over the interests of some mutual fund shareholders.
The six trustees, or directors, of Strong’s funds are: Richard S. Strong, Strong’s chairman; Willie D. Davis, president and chief executive officer of All Pro Broadcasting, Inc.; Gordon B. Greer, a former partner of the law firm of Bingham McCutchen LLP; Stanley Kritzik, partner of Metropolitan Associates; Neal Malicky, president emeritus of Baldwin-Wallace College; and William F. Vogt, senior vice president of IDX Systems Corp.
