Suit alleges American Century invested in illegal gambling

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Thursday, September 4, 2008 - 2:43 PM CDT

Suit alleges American Century invested in illegal gambling

Kansas City Business Journal


American Century Cos. Inc. and its directors have been sued in San Francisco by a shareholder who alleges that the company invested in illegal online gambling companies that the federal government cracked down on in 2006.

The Kansas City-based mutual fund company’s alleged investments in various online gambling Web sites and the subsequent law enforcement action taken against those sites ruined the investments and caused shareholders to lose value on their shares in the American Century Ultra Fund, according to the complaint.

None of the illegal Web sites was named in the suit, but New York lawyer Thomas Sheridan, who represents the plaintiff, New York resident and American Century Ultra Fund investor Laura Seidl, said Thursday that one of the sites was Gibraltar-based Partygaming.com.

“What we allege in the complaint is that the defendant caused the Ultra Fund to invest in illegal gambling companies like Partygaming.com,” Sheridan said. “Around 2006, events took place that caused the price of the underlying gambling stocks to go down, that caused the mutual funds to lose money, which in turn caused the investors to lose money.”

American Century spokesman Chris Doyle dismissed the suit’s claims.

“The suit is without merit, and we are vigorously going to defend ourselves,” Doyle said.

The derivative suit was filed Aug. 28 in U.S. District Court for the North District of California. Derivative complaints usually are brought by shareholders of a company against its directors claiming mismanagement or not conducting business in the best interests of the company.

The suit also is filed under the Racketeer Influenced and Corrupt Organizations Act, claiming that systemic racketeering took place as American Century and its directors “repeatedly and over a significant period of time” harmed shareholders’ interests investing in businesses they should have known were illegal.

Sheridan said that it’s not yet known how many members are part of the class that’s suing American Century but that it could include anyone who bought shares in the American Century Ultra Fund before July 17, 2006.