Sparer Law Group Files Class Action Against Oppenheimer Bond Fund

The Sparer Law Group has filed the first class action lawsuit on behalf of investors who purchased the Oppenheimer California Municipal Fund (Symbols: OPCAX, OCABX, OCACX) between September 27, 2006 and November 28, 2008. The case was filed on February 4, 2009 in the United States District Court for the Northern District of California, case number C 09-00567 SI. See our press release here.


The lawsuit alleges that the Fund's Registration Statements and Prospectuses misled investors about the Fund's investment objectives and underlying risk by describing the Fund as seeking current income "consistent with preservation of capital." The Fund lost over 41% of its net asset value ("NAV") in 2008. By comparison, the average loss for funds within the same Lipper peer group over this period was only 11.5%.

"The promise that a municipal bond fund follows a strategy designed to preserve capital cannot be just a sales pitch. It has to be reflected in an objective investment approach," said Alan W. Sparer, lead counsel. "Investors put their 'safe' money and retirement savings in muni bonds. These funds are not the place for speculative strategies or junk bond investments."

The lawsuit alleges that the Oppenheimer California Municipal Fund policies and operations ignored the preservation of capital objective by concentrating 78% of its assets in bonds rated at the lowest investment grade or below, and concentrating 60% in bonds that were not rated by any independent rating agency. In addition, 33% of the Fund's investments were placed in Dirt Bonds, which are based on contracts for land developments that have not been built yet and were especially vulnerable to the recent declines in California's real estate market.

In addition, the lawsuit alleges that Oppenheimer failed to disclose that, because of the Fund's overconcentration in lower rated bonds and bonds that had not been rated by any independent agency, there was a significant risk that more than 25% of its assets were in junk bonds, a violation of the Fund's fundamental investment policy.

The NAV of the Oppenheimer California Municipal Fund decreased by more than $1.1 billion in 2008.

A copy of the complaint is available here.

Investors who lost money in the Oppenheimer bond funds should contact the Sparer Law Group to investigate potential avenues for recovery.

Morningstar Flunks Oppenheimer Bond Fund

Morningstar gives Oppenheimer an 'F' for failing to disclose the additional risks it had taken on in its bond funds:

""The managers bought complex, off-balance-sheet swap contracts that created a leveraging effect on the funds," Gogerty said. The managers made no attempt to tell investors that the funds were taking on additional risk, he said."

The article states that "Oppenheimer failed investors by not telling them that two of its bond funds had recently taken on extra risk." The end result was that "Oppenheimer's normally stable Champion Income and Core Bond funds saw huge losses in 2008, dropping 78% and 36% respectively."

Oregon Investigating Oppenheimer Bond Funds

Officials demand financial data from OppenheimerFunds:

Oregon State officials are investigating Oppenheimer, which managed Oregon's College Savings Network:

"The bond funds in question contributed to exorbitant losses in the network's conservative portfolios. OppenheimerFunds' Core Bond fund declined about 35 percent last year. The short-term government fund lost 6 percent last year. By comparison, a benchmark measure of its peers -- Barclays Capital U.S. 1-3 Year Government Bond Index -- gained 6.7 percent."