A Milwaukee-based law firm has initiated an investigation into Van Wagoner's fair pricing procedures with regard to its Emerging Growth Fund. The announcement was made late yesterday, the same day that The Wall Street Journal published an article about the unusual pricing of that particular fund.

Ademi & O'Reilly, the firm that has initiated the investigation was unable to be reached by press time. It is unclear how many Van Wagoner shareholders, if any, the firm represents.

The valuations being questioned are of 23 investments 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, according to the Journal. However, the fund held between 10% and 14% of its holdings in private placements, which is unusually high, the Journal said. 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.

"As a consequence, Van Wagoner, for much of 2000 and 2001, overstated its NAVs and investment returns, causing investors purchasing shares of the Emerging Growth fund to pay artificially inflated prices for shares," the firm said in a statement.

Garrett Van Wagoner maintains 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," according to the Journal.

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