According to Chicago Sun-Times ^[1] columnist Terry Savage, Illinois is close to a deal that would recoup $77 million from the manager of the state’s Bright Start ^[2] college savings plan. State Treasurer Alexi Giannoulias has been trying to negotiate a settlement with Oppenheimer Funds, which runs Bright Start. As I reported in an April column ^[3], one of Oppenheimer’s conservative-sounding bond funds made a spectacularly bad bet on mortgage-backed securities and lost 38 percent of its value last year.

Savage estimates the Bright Start losses at $85 million, and now it looks like investors will get 90 percent of that back. She reports:

Now, after months of negotiations with Oppenheimer, the fund management company, the state has a tentative agreement to recover $77 million for fund investors — which would be a remarkably high recovery for a negotiated settlement. The amount that will be returned to each affected account will depend on a complicated formula that is still being negotiated.

When I asked Giannoulias’ office about the Sun-Times report, spokeswoman Kati Phillips responded with an emailed statement:

The Illinois Treasurer’s Office is working diligently with the Illinois Attorney General’s Office and other states which were impacted by OppenheimerFunds Inc.’s handling of the Core Plus bond fund and similar investment strategies.

Settlement negotiations are ongoing. We are at critical juncture but remain hopeful that a final agreement will be reached in the near future. That will be the proper time to discuss the agreement in detail.

Our goal remains to quickly assist families with children nearing college-age, avoiding the long delays and exorbitant costs associated with litigation.