In re Schwab Yieldplus Securities LItigation

Reed Richard Kathrein

Practice Area:Securities & Investment Fraud

Outcome:Settled for $235 Million

Description:Hagens Berman Sobol Shapiro filed the first class-action lawsuit against Charles Schwab Corporation (NASDAQ:SCHW) on March 18, 2008, alleging that Schwab deceived investors about the underlying risk in its Schwab YieldPlus Funds Investor Shares (SWYPX) and Schwab YieldPlus Funds Select Shares (SWYSX). The lawsuit claimed Charles Schwab and the funds' underwriter deceived investors about the underlying risk in the funds, which were sold as cash alternatives, but were in fact highly speculative and risky mortgage-related structured debt, according to the complaint. The complaint also stated that the funds' registration statements failed to include required facts about the investments - specifically that the funds have a high vulnerability of suddenly becoming illiquid and that the net asset values were highly speculative and inflated. The entire case settled just before trial in two stages. One part for $200 million and another involving just California purchasers for a shorter period of time for $35 million. April 20, 2010 - The Charles Schwab Corporation agreed to settle with plaintiffs represented by Hagens Berman in a civil class-action lawsuit related to the Schwab YieldPlus Fund. The settlement, which the company announced today, would pay plaintiffs' a total of $200 million to resolve claims if approved by the court. The preliminary settlement is subject to a definitive agreement and final approval of the court. Plaintiffs are encouraged to check back here for future updates and information in regards to the class action. Steve Berman, managing partner of Hagens Berman, said in response to the settlement, "We're pleased with the proposed settlement and believe it is eminently fair to the class members. We look forward to the court's review and approval." April 8, 2010 - Judge William Alsup today refused to grant Schwab's motion for a summary judgment in the remaining two causes of action against the investment giant, clearing the way for a May 10th trial. The judge earlier granted the plaintiff's motion for a summary judgment for a class of California plaintiffs, leaving only the amount of damages for that class yet to be determined. March 31, 2010 - A U.S. District Court yesterday ruled that Charles Schwab Corp. engaged in unlawful conduct when the company loaded its popular YieldPlus Mutual Fund with high-risk mortgage-related structured debt without shareholder approval. Judge William Alsup granted plaintiff's motion for summary judgment, which could allow one of three classes to recover damages as high as $140 million in a proceeding to be held later. Questions surrounding the two larger classes remain, and the case is set for trial on May 10, 2010 if the court allows those claims to proceed.