Ailing fund tipped off some, suit says

By the time the Reserve Fund reported last Tuesday that its Primary Fund money market fund series had "broken the buck" - that is, was no longer worth a dollar a share - investors had already pulled billions of dollars out of the fund.

Some analysts assumed they had reacted to the panic sweeping the market. But a lawsuit filed late last week by Ameriprise Financial claims the Reserve Fund tipped some big customers about its crisis in advance, so they could get their cash out before its losses became public.

According to the complaint, two senior Reserve Fund executives acknowledged during a conference call last Thursday with Ameriprise that big investors had received an early warning.

The Reserve Fund executives "seemed surprised that Ameriprise had not also been tipped at the same time," the complaint alleges.

Ameriprise had entrusted $128 million of its own money and more than $3.2 billion of its customers' to the Reserve Fund.

Reserve Fund Management Co., which managed $66 billion in assets as recently as last year, did not respond to messages left at its office in New York City. Its lawyer in Minneapolis, Barbara P. Berens, said her client had instructed her not to comment on the case.

The lawsuit is one of several facing the company, whose founder invented the money market fund in the early 1970s and whose chairman, Bruce R. Bent, has been publicly critical over the past year about the improper risks he said other money market funds were taking in the stretch for higher and more competitive yields.

Bent's words were handed back at him in another lawsuit filed Friday, in federal court in Manhattan. That complaint, proposed as a class action, was filed by George C. Dyer, an investor with several hundred thousand dollars frozen in the Reserve Fund's fund series.

It quotes Bent's repeated assurances that he thinks of the one-dollar share price as an inviolate aspect of money fund management.

"The cash entrusted to a money fund is your reserve resource that you expect to be there no matter what," he wrote.