A second OppenheimerFunds fixed income offering just got hit by a lawsuit over its recent performance woes. On Wednesday Coughlin Stoia Geller Rudman & Robbins, the San Diego-based law firm that sued OppFunds over Champion Income in February (see MFWire, 2/13/2009), filed another complaint against the MassMutual subsidiary, this time over the alleged strategic change (and lack of disclosure of that change) at the Oppenheimer California Municipal Fund in 2007.

An Oppenheimer spokesperson was not immediately available for comment.

According to Google Finance, the fund is up 6.51 percent year to date to $6.05 at close on Tuesday but down 44.9 percent over the past five years. It's trailing total return YTD is 8.64 percent (6.77 percent annualized for the past five years). The fund offers A shares (with an expense ratio of 86 basis points), B shares (with a deferred load of 500 bps and an expense ratio of 169 bps) and C shares (with a deferred load of 100 bps and an expense ratio of 164 bps).

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Company Press Release

SAN DIEGO--(BUSINESS WIRE)--Coughlin Stoia Geller Rudman & Robbins LLP (“Coughlin Stoia”) (http://www.csgrr.com/cases/oppenheimercalmuni/) today announced that a class action has been commenced in the United States District Court for the Northern District of California on behalf of all persons or entities who purchased or held shares of the Oppenheimer California Municipal Fund (“California Fund” or the “Fund”) (NASDAQ:OPCAX), (NASDAQ:OCABX), (NASDAQ:OCACX) offered by OppenheimerFunds, Inc. (“OppenheimerFunds”) in connection with its September 27, 2006, March 8, 2007 and October 31, 2007 offerings (the “Offerings”).

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from February 19, 2009. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Darren Robbins of Coughlin Stoia at 800/449-4900 or 619/231-1058, or via e-mail at djr@csgrr.com. If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.csgrr.com/cases/oppenheimercalmuni/. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

The complaint charges the California Fund, OppenheimerFunds and certain of its officers and directors with violations of the Securities Act of 1933 and the Investment Company Act of 1940. The California Fund is a mutual fund that seeks as high a level of current interest income exempt from federal and California income taxes for individual investors as is consistent with preservation of capital.

The complaint alleges that while the California Fund promoted itself as focusing on capital preservation and being safer than a high yield municipal bond fund, the Fund altered its investment style and began to significantly increase its risk in the hopes of seeking higher returns. Defendants concealed that the California Fund had increased its exposure in these excessively risky bets, such that investors remained unaware of these additional risk exposures. Then, beginning in late September 2008 and continuing through February 2009, the Fund began to acknowledge the serious deterioration in its portfolio. As a result of these disclosures, the price of the Fund’s shares collapsed.

According to the complaint, the true facts which were omitted from the Registration Statements/Prospectuses issued in connection with the Offerings were as follows: (a) the Fund was no longer adhering to its objective of preserving capital, but in an effort to achieve greater yields was pursuing riskier instruments; (b) the extent of the Fund’s liquidity risk due to the illiquid nature of a large portion of the Fund’s portfolios; (c) the extent to which the Fund’s portfolio contained unrated securities; (d) the Fund’s internal controls were inadequate to prevent defendants from taking on excessive risk or to prevent them from improperly evaluating the credit quality of unrated securities; and (e) the extent of the Fund’s leverage exposure was misstated.

Plaintiff seeks to recover damages on behalf of all persons or entities who purchased or held shares of the California Fund in connection with the September 27, 2006, March 8, 2007 and October 31, 2007 offerings (the “Class”). The plaintiff is represented by Coughlin Stoia, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.

Coughlin Stoia, a 190-lawyer firm with offices in San Diego, San Francisco, Los Angeles, New York, Boca Raton, Washington, D.C., Philadelphia and Atlanta, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations. The Coughlin Stoia Web site (http://www.csgrr.com) has more information about the firm.  

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