John Calamos, Asset Management Company Sued Over Auction-Rate Redemptions

Financier John P. Calamos Sr. and his Calamos Asset Management Inc. were sued by an investor over claims they needlessly spent $280 million to redeem illiquid auction-rate securities in 2008 and 2009.

Calamos, the firm, its closed-end Calamos Convertible Opportunities and Income Fund and six trustees allegedly breached their duty to common shareholders by redeeming the auction-market preferred shares, or AMPS.

“The redemptions by the fund of the AMPS damaged the holders of the fund’s common stock by denying them the financial benefits associated with the AMPS,” according to investor Christopher Brown’s complaint filed today in Illinois state court in Chicago.

Calamos is the founder of the Naperville, Illinois-based firm. Its Convertible Opportunities and Income Fund had more than $917 million in assets under management as of July.

Jennifer McGuffin, a Calamos spokeswoman, declined to comment.

The auction-rate securities market froze in February 2008 amid fallout from the global decline in bond prices. Interest rates for the illiquid securities were set at auctions held at regular intervals.

Closed-end funds issue a fixed number of common shares that trade on an exchange like stocks. Brown, identified in the complaint as a North Carolina resident who has held Calamos fund shares since 2006, seeks class-action, or group, status on behalf of all of its common shareholders from March 2008 to now, together with unspecified money damages.

The case is Brown v. Calamos, 10CH39590, Cook County, Illinois, Circuit Court, Chancery Division (Chicago).

To contact the reporter on this story: Andrew M. Harris in Chicago at aharris16@bloomberg.net.

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