Van Wagoner May Face SEC Case
The Van Wagoner Funds, among the bull market’s highest fliers, may face federal charges that their manager violated securities laws in valuing certain stock holdings.
The funds’ advisor, San Francisco-based Van Wagoner Capital Management, told shareholders in the firm’s 2002 annual report issued last week that the staff of the Securities and Exchange Commission has “tentatively determined” to recommend proceedings against the firm.
The SEC investigation centers on how the company accounted for securities it held in private companies, mostly small technology firms.
Under founder Garrett Van Wagoner, the funds were heavy investors in tech stocks during the bull market -- producing 200%-plus returns in the firm’s Emerging Growth and Small-Cap Growth funds in 1999.
But since the tech bubble burst in 2000, Van Wagoner’s funds have been among the industry’s worst performers.
The company has since been sued by shareholders who allege that the funds maintained inflated values for some of their private securities, overstating the performance of the portfolios.
The SEC requires fund companies to follow certain rules in setting values on securities for which there is no public market. Lawsuits allege that, until mid-2001, the Van Wagoner funds kept some of their private shares at levels that far exceeded the true value.
The company, in its annual report, said it intends to “vigorously” defend itself against the lawsuits. The firm also said it disagrees with the SEC staff’s assertions.
A Van Wagoner spokesperson did not return a phone call Tuesday.
Assets of the five Van Wagoner funds have fallen to a total of about $225 million from $2.7 billion at the end of 1999.
This week, the company said it plans to liquidate three of its funds: the Technology, Mid-Cap Growth and Post-Venture portfolios.
At the same time, the company said it would launch a new portfolio, the Growth Opportunities fund. Van Wagoner said shareholders of the funds that will be closed could transfer their accounts into the new fund.
