Philadelphia Health Funds Securities Class Action Claim Certified
By: chris.placitella @ Aug 19, 2011
Stewart L. Cohen and Stuart J. Guber of Cohen, Placitella & Roth are among the lead counsel representing a newly certified securities class action alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 against Evergreen Fixed Income Trust, Evergreen Investment Services, Evergreen Management Co., LLC, and Wachovia Corp., Evergreen’s corporate parent, along with various officers, directors and trustees of the various corporate entities.
Judge Nathaniel M. Gorton of the United States District Court for the District of Massachusetts recently certified a class of all persons or entities who purchased or otherwise acquired the shares of a mutual fund called Evergreen Ultra Short Opportunities Fund (the “Fund”) between October 28, 2005, and June 23, 2008.
The firm represents two Philadelphia area union health funds: The Bricklayers and Allied Craftworkers Local 1 of PA/DE Health and Welfare Fund and the Bricklayers Local 54 of Pennsylvania Supplemental Welfare Fund. Each union’s health fund suffered heavy losses after investing with Evergreen based on alleged misleading information represented in registration statements, prospectuses and certified shareholder reports.
Plaintiffs allege that the defendants violated federal securities law by registering, marketing and selling the Fund as a safe, liquid and stable investment when, in fact, it was comprised of illiquid, risky and volatile securities. The defendants marketed the Fund to investors as a higher-yielding alternative to money-market funds, offering a combination of safety and liquidity according to plaintiffs.
The plaintiffs also allege that the defendants artificially inflated the Fund’s net asset value (“NAV”) and continued heavily investing in risky mortgage backed securities, many of which were attached to sub-prime mortgages, even as news accounts revealed troubles in the mortgage and credit markets.
Although the Fund traded in a stable range from $9-$10 per share during the October 2005 through June 2008 class period, the true risks presented by the Fund’s over-inflated NAV materialized, resulting in the re-pricing of the Fund’s assets, the Fund’s closure and significant losses to the Fund’s investors.
On June 19, 2008, Evergreen announced the Fund would be liquidated. Shareholders received a cash distribution based on a $7.48 per share NAV, significantly lower than the average value of the Fund’s shares during the Class Period. At the time of the Fund’s liquidation, its assets were worth only $403 million — over $300 million less than the NAV it reported only nine months earlier. Plaintiffs allege that they lost approximately 25% of their investments as a result of the defendants’ misrepresentations.
In June, 2009, plaintiffs received $1.065 million as a result of a regulatory settlement between some defendants and the Securities and Exchange Commission. Plaintiffs maintain that the regulatory settlements do not cover the damages they suffered as a result of their decision to invest in the Fund based on alleged false statements provided to them by Evergreen. In this class action, plaintiffs allege much broader claims encompassing false statements regarding the Fund’s investment strategy, objectives and risks over a longer period of time not covered by the regulatory settlements.
Trial has been set for June 12, 2012.