Following a three-month investigation, the state of Oregon is seeking $36.2 million in damages from OppenheimerFunds due to steep losses in one of its funds included in the state’s 529 college savings plan; the Oppenheimer Core Bond Fund fell 36% in value last year, and is down another 10% year-to-date.

By comparison, the fund’s benchmark rose 5% in 2008, according to state officials, who not only called the portfolio manager’s investment choices inappropriate but “hedge-fund like.”

The lawsuit says the fund company was negligent, violated state securities laws, breached its contract and failed to meet its fiduciary duty. It also notes that Morningstar gave OppenheimerFunds an “F” in February for failing to communicate with investors about the true nature of its funds.

“We are taking action on behalf of Oregon families whose college accounts were battered—and their financial futures jeopardized—because of OppenheimerFunds,” the state treasurer said. “Families were doing the right thing and saving for college, but unknown to them or Oregon, their money was invested in ways that were plainly inappropriate for those saving for college or already in college.”

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