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Portfolio > Mutual Funds

Milberg Weiss Sues Canary and Three Mutual Fund Fa

By Staff Writer

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NEW YORK (HedgeWorld.com)–A prominent plaintiffs’ law firm, Milberg Weiss Bershad Hynes & Lerach LLP, announced four class action lawsuits that could put that firm into the thick of the spreading scandal over Edward J. Stern, his Canary hedge fund group and the mutual funds on which Mr. Stern’s funds traded between Oct. 1, 1998 and July 3, 2003.

Milberg Weiss filed one suit on Sept. 8 and each of the others the following day, with the clerk of the Manhattan federal district court.

Although they differ from one another in the mutual fund company defendants named and in the definition of the class of plaintiffs, each lawsuit names hedge fund founder Edward J. Stern as a defendant and each names Canary Capital Partners LLC, Canary Investment Management LLC, Canary Capital Partners Ltd. and various John Does.

The first of the lawsuits named Bank of America Corp. and Banc of America Capital Management LLC as defendants. That complaint accordingly defines its class of plaintiffs as consisting of purchasers of the securities of the associated Nations Funds family of funds.

One of the lawsuits filed on Sept. 9 names, rather, Strong Financial Corp. and Strong Capital Management Inc. as defendants. That lawsuit, accordingly, defines its class of plaintiffs as consisting of purchasers of the securities of the Strong Funds family of funds during the class period.

A separate lawsuit, while again naming the Canary entities and the John Does, also names the Janus Capital Group Inc., Janus Capital Corp., etc., and defines the class of plaintiffs as the purchasers of the securities of the Janus Funds family.

The final lawsuit, again naming the Canary entities and the John Does, also names Bank One Corp. and its subsidiaries and affiliates as its mutual funds defendants and defines the class of plaintiffs as the purchasers of the securities of the One Group family of funds.

In three statements released Sept. 10, one statement per lawsuit, the law firm said that the mutual fund company defendants “improperly allowed certain hedge funds, such as Canary, to engage in the ‘timing’ of their transactions in the funds’ securities,” in exchange for extra fees from the favored investors. The statements condemn not only that favoritism but also the widespread practice of timing itself.

“Timing is excessive, arbitrage trading to turn a quick profit,” the law firm said. Furthermore, the mutual fund defendants “allowed and facilitated Canary’s timing activities, to the detriment of class members” and that these practices were undisclosed in the prospectuses of the funds, which falsely represented that the funds actively police against such timing.”

Milberg Weiss is not the only plaintiffs’ counsel on the case. Charles J. Piven, of Baltimore, announced the filing of four class action lawsuits over the same facts, Sept. 8 Previous HedgeWorld Story.

Milberg Weiss brings with it a storied history. A recent study by Stanford Law School’s securities class action clearinghouse concluded that Milberg Weiss has been lead counsel in more than half the class action securities lawsuits settled since 1995.

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