Illinois' 529 Plan and Treasurer Alexi Giannoulias Settle Dispute with Oppenheimer

Now comes a piece in the Chicago Daily Observer by veteran political operative Don Rose that discloses some disturbing information for his handling of the treasurer's office.

Through carelessness or something else, he has lost tens of millions of dollars that Illinois parents had invested in Bright Star, a fund created to help kids through college.

This is must reading for everyone, and certainly worthy of being picked up by Chicago's major media.

Illinois' Bright Start college savings funds lost nearly twice as much as state officials have previously announced -- about $150 million -- the state treasurer's office confirmed today as it announced a settlement with the fund manager that will recover about 50 cents on the dollar for families who lost money.

The $77 million settlement with OppenheimerFunds Inc., announced today by Treasurer Alexi Giannoulias and state Atty. Gen. Lisa Madigan would partially reimburse about 65,000 account holders.

The treasurer's office had previously said Bright Start lost only $85 million in 2008. But as part of the settlement announcement today, the treasurer's office said that only accounted for losses from April 2008 through the end of 2008.

OppenheimerFunds Inc. and the state of Illinois announced they have agreed to settle the state’s investigation of the way Oppenheimer and 3 subsidiaries managed part of Illinois’ 529 college savings program.

Under the agreement, OppenheimerFunds does not admit any wrongdoing. In a statement, the company maintains that it acted lawfully and in good faith in managing the investments in the 529 plan, known as Bright Start.

OppenheimerFunds, a subsidiary of Massachusetts Mutual Life Insurance Company, Springfield, Mass., agreed to pay the state more than $77 million, which state officials have earmarked for distribution to eligible Bright Start participants.

Families invested in Bright Start’s Core Plus Fixed Income Strategy accounts suffered “extraordinarily high losses” after the severe market downturn last year, Illinois state Attorney General Lisa Madigan said in announcing the settlement. Core Plus, one of 21 underlying funds in Bright Start, incurred losses that were well above those shown by a bond index used by her office as a performance benchmark, according to Madigan.

NEW YORK (AP) -- OppenheimerFunds Inc. said Tuesday it will pay the state of Illinois $77 million to settle an investigation into the firm's management of a college savings program.

Oppenheimer spokeswoman Jeaneen Pisarra said the firm has also reached a tentative $67 million settlement with New Mexico. The firm is in talks with Maine, Nebraska and Texas.

Last month, OppenheimerFunds agreed to pay $20 million to settle a lawsuit filed by the state of Oregon.

The settlements stem from an underlying fund in the states' 529 college saving programs. Oppenheimer had marketed that fund, Core Plus, as a conservative investment for students who were at or near college age, according to Illinois Attorney General Lisa Madigan's office.

The hits just keep on coming for the Oppenheimer 529 plans around the country. In this case, Illinois has settled for $77 million with the Oppenheimer 529 program over misrepresenting the risk in its Core Plus Bond Fund. This comes right on the heels of huge settlements with both Oregon and New Mexico.

As with the other settlements, only parents who actually invested in the Oppenheimer 529 Core Plus Bond Fund will be eligible for settlement funds. The actual formula has yet to be determined, with claim notices likely being sent to parents in early 2010.