Pilgrim Baxter & Associates, Ltd., Gary L. Pilgrim and Harold J. Baxter
On September 12, 2007, the Fund Administrator made a third and final distribution of $69 million in connection with the Pilgrim Baxter and Associates Fair Fund. This distribution along with two others previously made completes the distribution process in which a total of $267 million was disbursed to harmed investors in the PBHG Funds.
Minor errors in typing in the PBA Fair Fund Settlement website address ( http://www.pbafairfundsettlements.com/), such as typing “settlement” without the final “s,” may direct you to completely unrelated websites. Please be careful to either follow the links above or below, or to type the address in correctly. Upon opening the correct page, the address reflected on the top of the website should read: http://www.pbafairfundsettlements.com/start.asp.
Distribution Plan Approved
On November 22, 2006, the SEC announced that it has approved the proposed Distribution Plan for the distribution of $250 million in disgorgement and civil penalties paid by Pilgrim, Baxter, and Associates, Ltd. (PBA), Gary Pilgrim, and Harold Baxter in connection with administrative actions described below.
The Distribution Plan provides for the distribution to all eligible investors, for the period spanning June 1998 through December 2001, their proportionate share of the $250 million plus any accumulated interest to compensate such investors for injury they may have suffered as a result of market timing in PBHG Funds. Under the Distribution Plan, eligible investors in the PBHG Funds will receive a pro rata share of the PBA Fair Fund as calculated by the Independent Distribution Consultant, Dr. Kenneth Lehn. The pro rata shares of the PBA Fair Fund will be determined based on information contained in PBA’s records, as well as records obtained from third party intermediaries. Eligible investors do not need to submit a claim.
The Fund Administrator (Boston Financial Data Services, Inc.) and the Independent Distribution Consultant currently are in the process of determining the names and contact information of eligible customers, and the amounts to be distributed under the Distribution Plan. Once this process has been completed and the SEC or its delegate has approved the distribution of the PBA Fair Fund, the distribution will begin.
Investors who are unable to access the final Distribution Plan through the link provided above may alternatively obtain a written copy of the final Distribution Plan by submitting a written request to: Catherine E. Pappas, Senior Trial Counsel, United States Securities and Exchange Commission, 701 Market Street, Suite 2000, Philadelphia, PA 19106. Please include “Request for Final Distribution Plan, Administrative Proceeding File Number 3-11524” on the subject line of correspondence.
Pilgrim Baxter & Associates, Ltd.
On June 21, 2004, the SEC instituted administrative and cease-and-desist proceedings against Pilgrim Baxter & Associates, Ltd. The SEC alleged that PBA, the registered investment adviser to the PBHG family of mutual funds, participated in a scheme involving short-term trading ("market timing") of the PBHG Funds, reaping profits and diluting the value of the funds to the detriment of long-term investors. The SEC's Order was part of a settlement with PBA of its federal district court action against PBA – on July 20, 2004, upon the SEC's request, the federal district court dismissed that action against PBA. See Litigation Release No. 18802 (July 27, 2004). PBA also was ordered to pay $40 million in disgorgement and $50 million in a civil penalty for distribution to defrauded shareholders. For more information about the SEC's action, you can read In the Matter of Pilgrim Baxter & Associates, Ltd. (June 21, 2004).
In addition, in settlement of a separate but related action filed by the New York Attorney General, PBA agreed to reduce management fees by 3.16% over a five-year period, a reduction valued at $10 million. For more information, you can read the NYAG Press Release (June 21, 2004).
Gary L. Pilgrim and Harold J. Baxter
On November 17, 2004, the SEC instituted administrative and cease-and-desist proceedings against Gary L. Pilgrim and Harold J. Baxter. Baxter is the former Chief Executive Officer and Chairman of the Board of Directors of Pilgrim Baxter & Associates, Ltd., the investment adviser to the PBHG family of mutual funds. Gary L. Pilgrim is the former President, Chief Investment Officer, and Director of PBA, and the portfolio manager of the PBHG Growth Fund. The SEC alleged that PBA, under the leadership of Pilgrim and Baxter, permitted widespread short-term trading ("market timing") of the PBHG Funds, reaping profits and impacting the value of the funds to the detriment of long-term investors. The SEC further alleged that Pilgrim and Baxter self dealt, also to the detriment of the long-term investors.
The SEC's Orders were part of a settlement with Pilgrim and Baxter of its federal district court action against them. Pilgrim and Baxter each were ordered to pay $60 million in disgorgement and $20 million in a civil penalty for distribution to defrauded shareholders. For more information about the SEC's actions, you can read In the Matter of Pilgrim Baxter and Associates, Ltd.; In the Matter of Gary L. Pilgrim, and In the Matter of Harold J. Baxter.
This settlement is the result of the coordinated effort by the SEC and the New York Attorney General. Specifically, through this settlement, Pilgrim and Baxter are also settling a separate but related action filed by the New York Attorney General. For more information, you can read the NYAG Press Release.