Settlement reached in Reserve Primary Fund lawsuit
By Nate Raymond
NEW YORK (Reuters) - Money market pioneer Bruce Bent and others involved in the management of Reserve Primary Fund have reached a settlement worth at least $54.5 million in a shareholder lawsuit stemming from the fund's collapse at the height of the financial crisis.
The accord, disclosed in papers filed late Friday in U.S. District Court in Manhattan, comes less than two weeks before the five-year anniversary of when the one-time $62 billion fund "broke the buck" after the bankruptcy of Lehman Brothers Holdings Inc.
"We are very pleased to have reached this hard-fought settlement, which is an excellent result for investors," said John Browne, a lawyer for the investors.
The class action lawsuit was filed soon after Reserve Primary Fund disclosed on September 16, 2008, that its net asset value fell below $1 per share.
The drop followed losses incurred on more than $785 million in investments in commercial paper and other debt issued by Lehman, which had filed for Chapter 11 bankruptcy protection the day before.
It was the first time in more than a decade that a money market mutual fund had "broke the buck." Those types of funds are designed to maintain a constant $1 per share net asset value.
The fund subsequently entered into liquidation. The U.S. Securities and Exchange Commission meanwhile sued Bent, his son Bruce Bent II, and two Reserve corporate entities, accusing them of making false statements to investors.
A federal jury in November 2012 cleared the senior Bent on all charges. Bruce Bent II was cleared of violating securities fraud laws but was found liable for a single negligent violation. Continued...