Two investors in Pennsylvania’s Vanguard Group Incorporated, the second-largest US executive of stock and bond shared funds, have filed a lawsuit against the firm alleging that it illegally invested their assets in companies running banned online gambling businesses.
The complaint was filed in the US District Court, Southern District of New York, Manhattan, last week by investors Deanna McBrearty and Marylynn Hartsel arguing that the ‘defendants caused the funds to become holders of illegitimate gambling businesses’. The lawsuit names Chief Investment Officer George Sauter and Portfolio Manager Duane Kelly specifically alongside eight Vanguard trustees and alleges that they violated US racketeering laws and breached their fiduciary duties to investors by acquiring stock in web-based businesses. The complaint also lists Vanguard International Equity Index Funds, which does business as the Vanguard European Stock Index Fund, and the Vanguard Horizon Funds as defendants.
The New York Court is well known for taking a hard line on Internet sportsbetting and the plaintiffs are seeking a class-action standing in support of all likewise aggrieved investors together with undecided compensatory and penal damages. According to the Bloomberg news service, Malvern-based Vanguard has over $1.25 trillion in possessions and refused to comment on the matter as it had not yet received the objection.
Although McBrearty versus The Vanguard Group does not specify any of the controversial investments made by the firm, numerous experts have pointed to now defunct BetOnSports as a prime suspect. Following the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006, BetOnSports was forced into liquidation by Federal enforcement actions with its two prime executives, David Carruthers and Gary Kaplan, in custody. The company and four other defendants eventually pled guilty and are still awaiting sentencing.