PIMCO Resolves Class Action for $92 Million

Newport Beach, CA: PIMCO and PIMCO Funds today announced the proposed settlement of a class action lawsuit, Kohen et al. v. PIMCO and PIMCO Funds, originally filed in 2005 challenging certain trades by PIMCO in the June 2005 10-year futures contract.

PIMCO will make a payment of approximately $92 million to the plaintiff class plus plaintiffs' attorneys' fees and expenses. The settlement agreement must be filed and approved by the U.S. District Court for the Northern District of Illinois before it becomes effective.

The settlement is being borne by PIMCO, not the PIMCO Funds or any client. If approved by the Court, the settlement is expected to be finalized in 2011.

Additional case background: The plaintiffs, a class of all short-sellers in the above-referenced contract, challenged certain PIMCO trading under the June 2005 contract, including the timing of liquidations, the taking of a substantial delivery and the purchasing of the cheapest-to-deliver notes.

PIMCO's position is that all such trades were properly designed to secure best execution for its clients; that by lending cheapest-to-deliver notes back into the market it eliminated any concerns; and that all parties making delivery did so using cheapest-to-deliver notes. Thus, the parties strongly disagreed about whether PIMCO was entitled to protect its clients to the extent that it did and PIMCO and PIMCO Funds deny liability. The parties have resolved this disagreement through the present settlement, which resolves all of the class claims against PIMCO and PIMCO Funds.

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Published on Dec-31-10