A high-stakes $40 million settlement between investment giant Vanguard and investors who claim they were unfairly burdened with massive tax bills has hit a roadblock. A Pennsylvania federal judge put the brakes on the agreement, demanding both sides address how a recent $100 million regulatory settlement with the U.S. Securities and Exchange Commission (SEC) affects the proposed deal.
U.S. District Judge John F. Murphy, in an order issued Wednesday, called out the lack of clarity, noting that the impact of the SEC’s January settlement had been “underbriefed by plaintiffs and unbriefed by defendants.” The ruling signals a dramatic twist in the case, as it forces Vanguard and its adversaries back to the drawing board.
Investor Uproar and Settlement Skepticism
At the heart of the dispute is investor John Hughes, who filed a scathing objection, labeling the settlement a textbook case of “class action abuse.” In a February letter, Hughes argued that the proposed deal offers no real benefit to investors, given that Vanguard is already required to pay $40 million under the SEC settlement.
Hughes further criticized the notification process, calling it a flimsy effort for a case of this scale. He noted that only a single email was sent—conveniently close to Christmas—with a misleading subject line. The lack of transparency, he claimed, left many investors in the dark. Hughes himself only discovered the lawsuit through media reports.
