Multiple investors of the Van Wagoner Emerging Growth Fund have retained legal counsel to file a lawsuit against Van Wagoner Capital Management and the fund itself for using allegedly inflated net asset values for certain securities in the fund.
Cauley Geller Bowman & Coates will file the lawsuit on behalf of investors in the Federal District Court of Delaware. On Dec. 11, another law firm, Ademi & OReilly, announced that it was launching an investigation into the fair pricing procedures of the fund. That announcement followed a Wall Street Journal article about the funds unusual pricing.
The lawsuit will allege that the funds prospectuses and registration statements violated several securities laws because they included overvalued NAVs, according to Cauley Geller Bowman & Coates.
The earlier investigation targeted 23 investments that the fund made through private placements. The prices of those investments were determined by Van Wagoner's portfolio managers, a common practice with that private placements,. However, the fund held between 10% and 14% of its holdings in private placements, which is unusually high, according to the Journal. The firm did not mark down the price of those 23 investments during 2000, but has marked them down by between 25% and 100% since the beginning of 2001, according to Ademi & O'Reilly.
In the Journals original article, Garrett Van Wagoner, who founded the firm, maintained that the firm's valuations were fair and that the prices of holdings "are constantly reviewed" and adjusted when "we decide that there has been a material change."