Evergreen Tipped Off Select Clients and Overstated Fund Value
In 2009 Evergreen Investment Management, the investment management subsidiary of Wachovia Securities, entered into a $40 million settlement with the U.S. Securities and Exchange Commission (SEC) to put to rest claims surrounding their Ultra Short Opportunities Fund. Evergreen was a wholly owned subsidiary of Wachovia, now a wholly owned subsidiary of Wells Fargo & Company, based in San Francisco, CA. According to SEC allegations, the fund was marketed as a safe, low risk, conservative, capital preservation investment that provided investors with a steady flow of income when in fact it contained risky mortgage backed securities (MBS) that plummeted in value in 2007. The fund was liquidated in June 2008 after the fund’s NAV dropped 20% in less than two weeks and it was announced that shareholders would receive $7.48 per share. During this short time frame, the fund’s assets under management were nearly cut in half going from $732 million to $403 million.
According to regulators, negative news and price changes affecting the fund’s value were hidden from the valuation committee from February 2007 until June 2008 causing the net asset value (NAV) of Ultra Short to be inflated by as much as 17%. This made the fund appear to be one of the best in its class, when it should have been near the bottom of its category according to the SEC. It also resulted in investors paying more than they should have paid for the shares. It was also alleged that certain investors were forewarned about the declining value of the underlying investments before it was made public so that they could get out.
If you have suffered losses in the Evergreen Ultra Short Opportunities Fund shares (EUBAX, EUBBX, EUBCX and EUBIX), please contact our securities law firm for a confidential, no obligation consultation at 1-800-259-9010.