Schwab agrees to pay extra $35M in YieldPlus settlement

Charles Schwab Corp. said it agreed to pay an additional $35 million to settle claims that the online brokerage misled investors who owned its Schwab YieldPlus Fund. The settlement covers claims in California, which weren't included in the $200 million that San Francisco-based Schwab agreed to pay on April 20, according to a statement yesterday. Schwab said yesterday's announcement boosts its litigation reverse by $14 million pretax. Combined with the settlement two weeks ago, Schwab's first-quarter results are reduced to a loss of $1 million, or breakeven on a per-share basis, according to data compiled by Bloomberg. The claims, filed in 2008, said Schwab incorrectly described the fund, once the world's largest short-term bond fund, as “safe” and misled investors on the amount of mortgage-backed securities held. Schwab, which didn't admit liability as part of the settlement, blamed the fund's losses on the collapse of financial markets due to the subprime crisis. The shares fell 0.2 percent to $18.81 yesterday. They have dropped 0.1 percent in 2010, compared with a 2 percent gain in the NYSE Arca Securities Broker/Dealer Index. The case is In Re Charles Schwab Corp. Securities Litigation, 08-cv-01510, U.S. District Court, Northern District of California (San Francisco).