Pacific Investment Management Co. [see profile], will be $92 million poorer in the New Year.
That's because the Newport Beach, California-based company has agreed to shell out $92 million to settle a private class-action lawsuit that accused it of manipulating the price of Treasury futures contracts
Specifically, Pimco was accused by investors Josef Kohen and Richard Hershey and Breakwater Trading LLC of cornering the market for contracts on the 10-year notes in May and June 2005 on the Chicago Board of Trade. The lawsuit, which originally sought as much as $600 million in damages, said that the firm used its holdings to drive up the price for traders who had sold the securities short.
For its part, Pimco last week said in a statement that its position "is that all such trades were properly designed to secure best execution for its clients”.
Pimco's co-CIO Bill Gross wasn't named as a defendant in the suit, although he allegedly made purchases through his Total Return Fund, according to the complaint.
NEWPORT BEACH, CA--(Marketwire - December 30, 2010) - PIMCO and PIMCO Funds today announced the proposed settlement of a class action lawsuit, Kohen et al. v. PIMCO and PIMCO Funds, originally filed in 2005 challenging certain trades by PIMCO in the June 2005 10-year futures contract. PIMCO will make a payment of approximately $92 million to the plaintiff class plus plaintiffs' attorneys' fees and expenses. The settlement agreement must be filed and approved by the U.S. District Court for the Northern District of Illinois before it becomes effective.
The settlement is being borne by PIMCO, not the PIMCO Funds or any client. If approved by the Court, the settlement is expected to be finalized in 2011.
Additional case background: The plaintiffs, a class of all short-sellers in the above-referenced contract, challenged certain PIMCO trading under the June 2005 contract, including the timing of liquidations, the taking of a substantial delivery and the purchasing of the cheapest-to-deliver notes.
PIMCO's position is that all such trades were properly designed to secure best execution for its clients; that by lending cheapest-to-deliver notes back into the market it eliminated any concerns; and that all parties making delivery did so using cheapest-to-deliver notes. Thus, the parties strongly disagreed about whether PIMCO was entitled to protect its clients to the extent that it did and PIMCO and PIMCO Funds deny liability. The parties have resolved this disagreement through the present settlement, which resolves all of the class claims against PIMCO and PIMCO Funds.
About PIMCO
PIMCO is a global investment management firm that was founded in Southern California in 1971. The firm serves an array of clients and manages retirement and other assets that reach more than 8 million people in the U.S. and millions more around the world. Our clients include state, municipal, union and private sector pension and retirement plans, educational, foundations, endowments, philanthropic and healthcare institutions, individual and investment saving accounts, public sector reserve management and other public entities in North and South America, Europe, the Middle East and Asia.
PIMCO has more than 1,300 employees. In addition to its headquarters in Newport Beach, California, the firm has offices in Amsterdam, Hong Kong, London, Munich, New York City, Singapore, Sydney, Tokyo, Toronto and Zurich.
PIMCO is owned by Allianz S.E., a diversified financial services provider.
Media Contact:
Mark Porterfield
(949) 720-6397
presscenter@pimco.com
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