Florida Investor Suing Schwab YieldPlus (SWYSX, SWYPX) Fund Manager

Naples, Fla. — Charles Schwab & Co. Inc. and one of its most prominent fund managers, Kimon Daifotis, misrepresented the safety of Schwab’s YieldPlus Fund whose total net assets plunged by $12 billion during the eight-month period ending April 1, 2008, according to an arbitration claim filed today by a Florida investor who lost more than $100,000 in the fund.

The claim comes amidst Wall Street rumors, reported by Bloomberg on Tuesday, that Schwab is offering decent settlements to small investors but offering less than 20 cents on the dollar to those with losses topping $50,000.

Filed by former Securities and Exchange Commission enforcement attorney Thomas F. Shine and the law firm of Vernon Litigation Group, the claim asserts that Schwab’s YieldPlus Fund portfolio managers liquidated more than 2.9 million shares of the fund while the company was encouraging customers to hold on to their shares.

Schwab’s YieldPlus Fund (SWYSX, SWYPX) had assets of $13.5 billion on July 31, 2007, but the fund went into a spectacular free fall that saw assets dwindle to just $1.5 billion as of April 1, 2008.

Daifotis managed the YieldPlus Fund, which Schwab sold to investors as a safe alternative to cash. The Schwab firm’s website compared the fund’s safety to that of one and two-year certificates of deposit.

But the arbitration claim contends that the purported safety was a charade: Daifotis, the YieldPlus Fund portfolio manager, put increasing portions of the fund’s assets into higher-yielding, but higher risk asset-backed and mortgage-backed securities. That concentration generated high-performance returns which helped the fund grow from $1.7 billion in February 2003 to $13.5 billion in July 2007. But Daifotis’ strategy put the fund at risk for a huge failure, which began last summer when the subprime lending credit crisis rocked Wall Street.

“The failure of this fund demonstrates the domino effect that the subprime lending credit crisis has had on investors who thought that they were buying an income-generating investment with little risk to their principal,” Shine said. “Clearly the Schwab YieldPlus example shows how average investors who thought their money was safe have taken enormous hits to their nest eggs on a bond mutual fund that was sold as ‘an alternative for your cash.’”

The claim alleges that Schwab failed to disclose to investors the liquidity risks associated with asset and mortgage-backed securities.

A key component of the claim, filed on behalf of an investor from Vero Beach, Fla., was the fact that Daifotis sold 2.9 million shares of the YieldPlus Fund between Jan. 31, 2008, and April 1, 2008, on behalf of other Schwab mutual funds. The YieldPlus Fund’s stock value dropped from $8.93 per share to $6.98 per share during that time, a 21.8 percent decline. At the same time, Schwab’s portfolio managers and the company’s website encouraged investors to hold their shares of the YieldPlus Fund, according to the arbitration claim filed with FINRA (Financial Industry Regulatory Authority.)

Shine, who spent 7 1/2 years as an enforcement attorney with the Securities and Exchange Commission in Washington, D.C, is in private practice in Melbourne, Fla. He is investigating this and other subprime claims on behalf of investors along with Vernon Litigation Group, a Naples, Fla. based law firm that represents investors throughout the United States. Although class-action lawsuits have been filed against Schwab, investors may want to pursue individual claims.

For more information, contact:

Thomas F. Shine, attorney at law

www.thomasfshinelaw.com

www.thomasfshinelawblog.com

1-321-724-4445

1-800-838-8320

FShine@aol.com

or

Christopher T. Vernon, attorney at law

www.vernonhealy.com

www.protectinginvestors.com

(239) 319-4434

cvernon@vernonhealy.com

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