Bright Start: Losses, Settlement and Giannoulias

Plain-English summary

During Alexi Giannoulias’s term as Illinois treasurer, one of 21 underlying investment options in the state’s Bright Start 529 college-savings program—the OppenheimerFunds Core Plus Fixed Income Strategy—suffered losses far greater than its benchmark during the 2008 financial crisis. ^{S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)S050 — source: Illinois Auditor General (opens in a new tab)S051 — source: Illinois Auditor General (opens in a new tab)}

Illinois alleged that Oppenheimer used leverage and risky instruments inconsistent with how the option had been presented to families, particularly those nearing college expenses. The state redirected new contributions, replaced the option and reached a $77.23 million settlement for eligible participants in December 2009. ^{S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)S054 — source: PolitiFact (opens in a new tab)} PLANADVISER reported that Oppenheimer said the settlement did not include an admission of wrongdoing; the official Illinois release does not reproduce that term. ^{S077 — source: PLANADVISER (opens in a new tab)S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)}

The FY2008 financial audit states that the Treasurer acted as trustee and was responsible for overall administration, while OFI Private Investments performed investment-advisory, administrative and recordkeeping functions. An attached, explicitly unaudited investment policy says the Treasurer was responsible for investment policy, direction and administration and Oppenheimer implemented investment strategy and rebalancing. ^{S050 — source: Illinois Auditor General (opens in a new tab)S051 — source: Illinois Auditor General (opens in a new tab)} None of the cited documents is an agency order or court judgment finding that Giannoulias personally selected the derivatives, was personally liable or violated law.

Chronology

What Illinois alleged

The attorney general and treasurer’s settlement announcement said the Core Plus portfolios contained risky investments, were highly leveraged and suffered excessive losses inconsistent with the option’s conservative presentation. ^{S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)} Those are the state’s allegations in a matter resolved by settlement, not a judicial finding.

The settlement covered eligible account holders exposed from January 1, 2008 through January 25, 2009 who met a stated loss threshold. The agencies said no administrative or attorney fees would be deducted from the participant fund. ^{S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)}

Oversight criticism and response

Critics argued that the treasurer’s office should have identified the risk earlier or moved participants sooner. Reporting based on office emails said officials had concerns as losses mounted but initially remained with the strategy after advice from the manager, staff and an outside consultant. ^{S054 — source: PolitiFact (opens in a new tab)}

Giannoulias said the underlying investment decisions were Oppenheimer’s, his office confronted the manager, replaced the option and obtained an early final state settlement in a multistate matter. ^{S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)S054 — source: PolitiFact (opens in a new tab)} The official release also reported that replacement options recovered during 2009. ^{S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)} Remediation does not erase oversight responsibility or participant losses; oversight responsibility does not prove that he personally selected the securities.

What the later SEC order adds

In a separate 2012 administrative proceeding concerning Champion Income and Core Bond—not Illinois or Bright Start—the SEC order states that Oppenheimer entities made misleading statements and inadequately disclosed leverage. Respondents consented without admitting or denying the findings except jurisdiction; the order also states that its findings are not binding on anyone else. ^{S053 — source: U.S. Securities and Exchange Commission (opens in a new tab)}

That action provides related evidence about Oppenheimer’s conduct. It was not an enforcement case against Giannoulias, the Illinois treasurer’s office or Bright Start itself.

The three numbers that must not be conflated

Separate vehicle issue

The treasurer’s office bought a Ford Escape Hybrid costing about $26,000 in 2007 with Bright Start administrative-fee revenue paid by the plan manager. Giannoulias said it was a state vehicle used to promote the program and acknowledged that the lack of a vehicle log was an oversight. ^{S048 — source: FactCheck.org (opens in a new tab)S136 — source: WBEZ (opens in a new tab)}

FactCheck.org reported that the materials it reviewed did not show personal use. ^{S048 — source: FactCheck.org (opens in a new tab)} The cited materials therefore support a documentation criticism; they do not make a finding that participant principal or public funds were stolen for personal use.

What is established, alleged and unresolved

Primary documents

• Illinois’s December 22, 2009 settlement announcement ^{S049 — source: Illinois Attorney General and Illinois Treasurer (opens in a new tab)}
• Illinois Auditor General FY2008 Bright Start audit digest ^{S050 — source: Illinois Auditor General (opens in a new tab)}
• SEC’s 2012 Oppenheimer order and release ^{S053 — source: U.S. Securities and Exchange Commission (opens in a new tab)}
• Current Bright Start annual report ^{S055 — source: Bright Start (opens in a new tab)}

Revision history

Source review updated Aug. 2, 2026: a final settlement-distribution report and the full 2008–09 correspondence were not located through the cutoff.