Ameriprise 2008 Annual Report Download - page 157

result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the
Company’s consolidated financial condition or results of operations.
Certain legal and regulatory proceedings are described below.
In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial
Advisors Inc., was filed in the United States District Court for the District of Arizona, and was later transferred to the United
States District Court for the District of Minnesota. The plaintiffs alleged that they were investors in several of the Company’s
mutual funds and they purported to bring the action derivatively on behalf of those funds under the Investment Company Act
of 1940. The plaintiffs alleged that fees allegedly paid to the defendants by the funds for investment advisory and
administrative services were excessive. On July 6, 2007, the Court granted the Company’s motion for summary judgment,
dismissing all claims with prejudice. Plaintiffs appealed the Court’s decision, and the appellate argument took place on
April 17, 2008. The U.S. Court of Appeals for the Eighth Circuit is now considering the appeal.
In September 2008, the Company commenced a lawsuit captioned Ameriprise Financial Services Inc. and Securities
America Inc. v. The Reserve Fund et al. in the District Court for the District of Minnesota. The suit alleges that the management
of the Reserve Fund made selective disclosures to certain institutional investors in violation of the federal securities laws and
in breach of their fiduciary duty in connection with the Reserve Primary Fund’s lowering its net asset value (‘‘NAV’’) to $.97 on
September 16, 2008. The Company and its affiliates had invested $228 million of its own assets and $3.4 billion of client
assets in the Reserve Primary Fund. To date, approximately $0.85 per dollar NAV has been paid to investors by the Reserve
Primary Fund.
For several years, the Company has been cooperating with the SEC in connection with an inquiry into the Company’s sales of,
and revenue sharing relating to, other companies’ real estate investment trust (‘‘REIT’’) shares. SEC staff has recently notified
the Company that it is considering recommending that the SEC bring a civil action against the Company relating to these
issues, and is providing the Company with an opportunity to make a submission to the SEC as to why such an action should
not be brought.
23. Guarantees
An unaffiliated third party is providing liquidity to clients of SAI registered representatives that have assets in the Reserve
Primary Fund that have been blocked from redemption and frozen by the Reserve Fund since September 16, 2008.
Ameriprise Financial has guaranteed the advances this third party has made to the clients of SAI registered representatives up
to $15 million through April 15, 2009 or the date on which the $15 million cap is reached. Advances to SAI clients are limited
to the lesser of $100,000 or 50% of the value of Reserve Primary Fund holdings, unless SAI management approves a
disbursement in excess of 50%. The Company has agreed to indemnify the unaffiliated third party up to $10 million until
April 15, 2015, for costs incurred as a result of an arbitration or litigation initiated against the unaffiliated third party by clients
of SAI registered representatives. In the event that a client defaults in the repayment of an advance, SAI has recourse to
collect from the defaulting client.
During the third quarter of 2008, a property fund limited partnership that the Company consolidates entered into a floating
rate revolving credit borrowing, of which $64 million was outstanding as of December 31, 2008. A Threadneedle subsidiary
guarantees the repayment of outstanding borrowings up to the value of the assets of the partnership. The debt is secured by
the assets of the partnership and there is no recourse to Ameriprise Financial.
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