Vanguard Managers Invested in Web Gambling, Suit Says

[clevfan]

Vanguard Managers Invested in Web Gambling, Suit Says (Update1)

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. The company itself is only 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

The now-bankrupt company 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 in a phone interview. He declined to name the others.

``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.

The case is McBrearty v. The Vanguard Group, 08cv7650, U.S. District Court, Southern District of New York (Manhattan).

[Total Square]

many of the largest holders of the the publicly traded online gaming shops were brokerage houses based in the us

[drunkguy]

Originally Posted by Total Square

many of the largest holders of the the publicly traded online gaming shops were brokerage houses based in the us

yea, is this news? I thought it was pretty obvious that a lot of these banks were investing in the gambling companies when they went public

[clevfan]

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).

[clevfan]

Vanguard sued for "illegal gambling" investments

Fri Aug 29, 2008 6:47pm EDT
By Grant McCool

NEW YORK, Aug 29 (Reuters) - Shareholders in Vanguard funds sued the Vanguard Group Inc on Friday, accusing fund managers of investing their money in illegal gambling businesses before the government cracked down on them in 2006.

The lawsuit filed in U.S. District Court in Manhattan said "these unlawful investments suffered significant losses when the government began arresting principals of the gambling enterprises," but it did not provide a specific amount.

A spokeswoman for Vanguard Group in Malvern, Pennsylvania said the investment fund management firm had not yet been served with the lawsuit and she could not comment.

An attorney for the two plaintiffs, Tom Sheridan, said the exact amounts would be revealed in the discovery process, but he estimated Vanguard's losses exceeded $10 million.

"The investments by the plaintiffs are not worthless, but they are less than they would have been if the money had not been invested in offshore gambling companies," Sheridan said.

The U.S. cracked down on offshore betting companies in 2006 that included the arrests of executives from British online companies such as Sportingbet and BetOnSports Plc.

Large public companies lost billions of dollars in market value and millions of customers when they shut down their Web sites for sports betting, poker and other games in the United States.

Friday's class action lawsuit brought by Deanna McBrearty of New York, New York, and Marylynn Hartsel of Boca Raton, Florida, makes claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) and seeks a jury trial, compensatory and punitive damages.

A similar lawsuit was filed in U.S. District Court in San Francisco on Thursday against American Century Companies Inc.

The funds named as defendants in the New York lawsuit include Vanguard International Equity Index Funds, Vanguard European Stock Index Fund, Vanguard Horizon Funds and the Vanguard Global Equity Fund.

McBrearty first purchased shares in Vanguard European through her individual retirement account in May 2005, the lawsuit said. It said Hartsel bought shares before July 1, 2006 for investment purposes.

The lawsuit does not name any of the online sites. The largest sites such as PartyGaming and Sportingbet earned most of their money from the United States. PartyGaming suspended its U.S. business after President George W. Bush signed the Unlawful Internet Gambling Enforcement Act on Oct. 13, 2006.

Other defendants named in the lawsuit are Alliance Bernstein LP, Acadian Asset Management LLC, Marathon Asset Management LLP.

A spokesman for Alliance Bernstein LP declined comment. Representatives of Acadian and Marathon could not be reached for comment. (Editing by Andre Grenon)

[Don Eagleston]

Amazing! Why isn't the fed involved, unless there is insufficient proof? Perhaps, these folks are "too important" to wear jumpsuits. I"m guessing that investors took a chance on a "sure thing" and now want their money back. Hogs get slaughtered.

[clevfan]

Vanguard gambling suit a bust, observers say

By Sam Mamudi, MarketWatch
Last update: 8:57 a.m. EDT Sept. 3, 2008

NEW YORK (MarketWatch) -- Vanguard Group is facing a lawsuit from investors angry that two of its funds invested in Internet gaming companies -- but observers are skeptical about the complaint's chances.

The suit was filed on Friday against executives at Vanguard and outside money managers Acadian Asset Management, AllianceBernstein and Marathon Asset Management. It claims that by investing in companies that engage in banned U.S. activities, they endangered investor's interests.

The suit, which names Vanguard's European Stock Index funds, says the investments, "suffered significant losses when the government began arresting principals of the gambling enterprises during a law enforcement crackdown beginning in 2006." It does not name the companies the funds are alleged to have invested in.

Research by Daniel Wiener, editor of The Independent Adviser for Vanguard Investors newsletter, found that there are two Internet gaming companies owned by both European Index and Global Equity, Partygaming PLC and Sportingbet PLC.

In September 2006, Sportingbet's Chairman Peter Dicks was arrested in the U.S. At the time shares in the company were suspended on the London Stock Exchange.
"By engaging in illegal gambling in the U.S., those companies became illegal gambling companies," said Thomas Sheridan of Hanly Conroy Bierstein Sheridan Fisher & Hayes, which brought the suit on behalf of Vanguard investors.

Vanguard strongly defended itself against the allegations.

"We generally do not comment on pending litigation, but we feel it is important to emphasize that Vanguard adheres to the highest ethical standards in every aspect of our business," said John Woerth, spokesman.

"Vanguard fund managers would certainly never knowingly invest fund assets in companies engaged in illegal activities. We believe that the plaintiffs' case is without merit, and we intend to defend the matter vigorously."

Sheridan said he estimates the funds suffered more than $10 million in capital losses as result of the investments. Shares of Sportingbet are down about 35% this year, while Partygaming shares have lost about 28%.

As well as pursuing the losses, Sheridan said the plaintiffs want the forfeiture of compensation paid to the funds' managers.

Wiener was not convinced. "The single largest holding of either company was a 0.036% position in Sportingbet in European Series European Index [only available in Europe] in June 2006 -- a whopping $1.1 million out of $3.1 billion in total assets," he said in an email. "If Vanguard was gambling, I'd hardly call that a big bet!"

"We don't believe the funds' holdings [in these companies] were small, though they may have been small relative to its total holdings," Sheridan said.

There was also skepticism about the suit's charges against European Index, which is a passive, index-linked fund.
"I'm not sure how you can allege misconduct in an index fund," said Dan Culloton, an analyst at investment researcher Morningstar Inc. European Index tracks the MSCI Europe Index, which is made up of about 603 stocks in 16 European countries.

A similar suit was filed on Thursday against American Century Investments and its Ultra Fund for alleged investments in Internet gaming companies. Sheridan said he estimates Ultra's losses in these investments to also exceed $10 million.

"The suit's without merit and we're going to vigorously defend ourselves," said Chris Doyle, spokesman at American Century. He did not elaborate, but said the company had not yet been served papers.

The case is not the first time that a fund company has been sued for investment holdings. In 2005, AllianceBernstein won a case brought by the State of Florida, for which it managed pension fund money. The state alleged that the-then Alliance Capital mismanaged the fund's portfolio and breached its contract by investing in Enron Corp., the now-disgraced energy company.

[MRW2276]

If anything the investors should be sueing Fisk, leech, and the rest of the neocons behind that and not Vanguard. That's who stole their investment and the companies they pulled their shit on were legal entities in the rest of the world.

[drunkguy]

Originally Posted by MRW2276

If anything the investors should be sueing Frisk, and the rest of the neocons behind that and not Vanguard. That's who stole their investment and the companies they pulled their shit on were legal entities in the rest of the world.

yea, that's the tricky part


international investment groups should be allowed to invest in legal corporations in other countries

[indio]

Let them call Jon Kyl. He publicly stated how happy he was that gaming stocks had plummeted thanks to him and his fellow fascists. Still can't believe that scumbag was overjoyed that many hard working Americans lost their hard earned savings that they had invested into LEGITMATE holdings.

I usually don't wish bad things on other people, even those I dislike,but Kyl is one cat I would love to see die a slow and painful death from some wretched disease.