Probe shows college fund poorly monitored
Wednesday, May 6, 2009 10:25 AM PDT
PORTLAND (AP) — State officials were slow to stop risky investments in the Oregon College Savings Plan, resulting in losses of tens of millions of dollars, according to an investigation by The Oregonian newspaper.
E-mails between the state treasurer’s office and OppenheimerFunds detail how officials reacted as $1 billion in college investments became $744 million in less than a year.
The state is suing OppenheimerFunds to recoup $36 million that officials say investors lost when fund managers took excessive risks with investments touted as conservative.OppenheimerFunds says the college fund bonds performed poorly because of market volatility, not because managers took extreme risks.
Communications obtained under Oregon’s public records law show that state officials weren’t closely monitoring the fund and relied on assurances from OppenheimerFunds that the money was well managed.
‘‘We are confident that when the trial of the case takes place, the evidence will show that the staff and (the board that oversees Oregon’s college savings) acted swiftly and appropriately in all respects,’’ Stacey Dycus, State Treasurer Ben Westlund’s chief of staff, wrote in an e-mail to The Oregonian.
The newspaper reports state officials didn’t decide to investigate the problems until the end of December, three months after OppenheimerFunds sent a letter to the state about the portfolios.
In the letter, OppenheimerFunds had informed the state of problems, according to The Oregonian, but also downplayed exposure to the crisis on Wall Street and did not detail risks.
By the end of 2008, parents with children who would soon enter college or were already attending college saw steep losses in their portfolios.
OppenheimerFunds reassured state officials the plan would recover its losses. Former Treasurer Randall Edwards, who was replaced by Westlund in January, said in a written statement last week that the college savings board and treasury staff acted in deliberate speed to address the sudden and dramatic decline in the Core Bond Fund and followed standard fiduciary practices when hiring, managing and monitoring OppenheimerFunds.
Edwards did not call for the replacement of the Core Bond Fund or request a state investigation into whether OppenheimerFunds misrepresented its plans until December.
The five-member board that oversees the Oregon College Savings Plan decided in January to withdraw from the bond fund. It dumped the fund in late March.
