Supreme Court Allows Manipulation Suit Against Pimco to Proceed

Facade of US Supreme court in Washington DC on sunny day

Bloomberg (22 Feb 10)

WASHINGTON—The U.S. Supreme Court rejected an appeal by Pacific Investment Management Co., clearing the way for a lawsuit seeking more than $600 million for the company’s alleged manipulation of the price of Treasury futures contracts on the Chicago Board of Trade.

The justices today let stand a federal appeals court ruling that said traders could press their suit against the company as a class action. Pimco, manager of the world’s largest bond fund, argued unsuccessfully that many of the investors in the class actually would have made money had the market manipulation taken place as alleged.

The 5-year-old lawsuit accuses Pimco of cornering the market for contracts on 10-year Treasury notes during May and June 2005. Pimco allegedly used its holdings to drive up the price for traders who had sold short—that is, contracted to sell notes on a specified later date—and needed to cover their positions.

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