KANSAS CITY, Mo. (CN) - Managers of the American Century International Discovery Fund cost investors millions of dollars by knowingly investing in illegal Internet gambling operations, a class action claims in Federal Court. Lead plaintiff Nelson Gomes says managers bought hundreds of thousands of shares of NETeller and Bwin, both of them illegal gambling entities.
The purchases were made despite the U.S. Department of Justice's previous public warnings that Internet gambling companies that take wagers from U.S. customers are criminal entities and that supporting those entities is a crime, according to the complaint.
Gomes says NETeller even warned potential investors in its 2004 prospectus, which stated that the Department of Justice viewed NETeller as a criminal operation and that there "could be no assurance that the U.S. will not try to threaten or try to prosecute the NETeller Group under federal law at some stage under existing or future regulations."
Despite the warnings and prosecution of NETeller's and Bwin's competitors, the fund managers continued to buy shares of the organizations, the complaint states.
After several competitors were shut down by U.S. agencies, Bwin shut itself down and took an impairment charge of nearly $680 million, the complaint states.
On Jan. 15, 2007, NETeller's founders, Stephen Lawrence and John Lefebvre, were arrested and charged with conspiracy to violate anti-gambling laws, the complaint states. Gomes says Lawrence and Lefebvre pleaded guilty to felonies and agreed to forfeit $100 million.
"Defendants' illegal investments for the Fund's portfolio directly injured plaintiff and other investors in the Fund because the value of the shares in the Fund is calculated daily on the basis of the net asset value of the Fund's portfolio," the suit states.
"Each dollar lost by the defendants' investments in an illegal gambling business resulted in a dollar loss to the Fund portfolio and to the investors in the Fund on a pro rata basis."
Gomes says investors lost more than 85 percent of their money in the Bwin purchases alone and adds that investors lost "millions" in the fund's investments in Bwin and NETeller.
The class consists of all investors who bought one or more shares in the fund during the purchases. The class seeks disgorgement and actual and punitive damages for RICO violations.
It is represented by John Wagner with Simmons Browder Gianaris in East Alton, Ill.
American Century Companies, American Century Global Investment Management and 13 individuals were named as defendants.
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