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Vanguard Managers Invested in Web Gambling, Suit Says (Update2)
By Andrew Harris
Aug. 29 (Bloomberg) -- Executives of Vanguard Group Inc., the second-biggest U.S. manager of stock and bond mutual funds, illegally invested client assets in companies running Internet gambling businesses banned in the U.S., according to a lawsuit.
Chief Investment Officer George Sauter, portfolio manager Duane Kelly and eight trustees violated U.S. racketeering laws and breached their fiduciary duties to investors by acquiring stock in the Web-based businesses, investors in two Vanguard- managed funds said in a complaint filed today in U.S. District Court in New York.
``Defendants caused the funds to become owners of illegal gambling businesses,'' according to the complaint. The plaintiffs seek class-action, or group, status on behalf of all similarly situated investors, plus unspecified compensatory and punitive damages.
Vanguard, based in Valley Forge, Pennsylvania, has more than $1.25 trillion in assets. Vanguard itself is a nominal defendant in the suit that plaintiff investors Deanna McBrearty and Marylynn Hartsel styled as an action brought on the company's behalf.
Rebecca Cohen, a Vanguard spokeswoman, said the company hasn't been served with the complaint and declined to comment.
While no publicly traded Internet gambling business is identified in the complaint, U.S. prosecutors in 2006 indicted London-based Betonsports Plc; its founder, Gary Kaplan; Chief Executive Officer David Carruthers; and nine other people for accepting wagers from U.S. bettors in violation of federal law.
Betonsports Sentencing
Now-bankrupt Betonsports has pleaded guilty and is awaiting sentencing. Four individual defendants also have pleaded guilty. No trial date has been set for the remaining defendants.
Gibraltar-based Partygaming Plc, operator of the PartyPoker.com Web site, was one of several Internet businesses in which Vanguard invested client assets, plaintiffs' lawyer Thomas Sheridan said today in a phone interview. He declined to name the others.
Named in the suit are the Vanguard International Equity Index Funds, which does business as the Vanguard European Stock Index Fund, and the Vanguard Horizon Funds, which the complaint said is also known as the Vanguard Global Equity Fund.
``We don't have detailed information at the moment about what they actually paid and what they actually sold these investments for,'' Sheridan said. He said the defendants could be liable for tens of millions of dollars in damages.
`Significant Losses'
The unlawful investments suffered ``significant losses'' after the federal government prosecutions began in 2006, according to the complaint. Sheridan said he doesn't believe the Vanguard defendants invested in Betonsports.
Partygaming has lost nearly 28 percent of its value this year. Its poker unit had average gross daily revenue of $815,400 in the four weeks ended Aug. 25, down from $855,300 in the previous four weeks, the company said today. Average daily casino revenue fell 12 percent in August, from July, it said.
The case is McBrearty v. The Vanguard Group, 08cv7650, U.S. District Court, Southern District of New York (Manhattan). |
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发表于 2008-8-30 20:30
