-Incompetence and fraud, all rolled into one. Evergreen Ultra Short Opportunities, the top performing short-term, fixed-income fund in 2007 and 2008, paid $40 million to settle fraud allegations lodged by the Massachusetts Securities Division and the Securities and Exchange Commission (SEC). According to the charges, Ultra Short Opportunities owned collateralized debt obligations backed by subprime mortgages that it valued at $98.93 out of a par value of $100. In May, another fund in the Evergreen family purchased the same security and valued it at $9.50. When management at Ultra Short Opportunities learned of this discrepancy, it reported that the transaction would be disregarded for valuation purposes because the sale occurred under duress. A broker-dealer involved in the transaction refuted these claims, but management swept this information under the carpet. To up the malfeasance ante, management warned a handful of investors that these assets would be marked down substantially. In the wake of the scandal, Wachovia, now a unit of Wells Fargo & Company (NYSE: WFC), is liquidating the fund and preparing to defend itself against a raft of shareholder lawsuits. Fraud is unusual in the mutual fund industry thanks to the close watch of the SEC, but it always pays to keep an eye on your holdings.

-Despite efforts by the US central bank to hold interest rates at historically low levels, rates apparently weren’t high enough for investors to justify holding Treasury bonds. In a mid-month auction, yields on 10-year Treasury notes rose to 4 percent for the first time since October as surging national debt and a falling dollar led bond buyers to demand more compensation for purchasing US debt. Treasuries have fallen more than 6.5 percent this year, their worst performance since at least 1978, signaling that the bull market in Treasuries is almost certainly over. Rising rates could also throw a monkey wrench in the government’s efforts to resolve the current recession, as the rapid clip of US debt issuance is turning off potential buyers. And in a shot across the bow, Russia and China, two of the largest buyers of US Treasuries, have said they plan to purchase more bonds issued by the International Monetary Fund–a hint that the US may need to rethink its monetary policies. As highlighted in this month’s feature interview, continuing to underweight Treasuries in your portfolio will likely pay off over the long term.

-Mutual fund investors may soon get at least a temporary break on taxes thanks to a bill currently in the Senate Finance Committee. The Generating Retirement Ownership through Long-Term Holding Act (GROWTH Act), introduced by Senators Mike Crapo (R-Idaho) and Tim Johnson (D-South Dakota), would allow investors to defer taxation of capital gains distributions that are automatically reinvested in mutual funds until the investment is sold. That would establish a greater parity between the tax treatment of mutual funds and stocks, and encourage savings outside of tax-advantaged retirement plans, ultimately boosting investors’ returns. This is the third time some form of the GROWTH Act has been introduced. Previous iterations failed to garner sufficient support, but the bill’s supporters are optimistic that it will pass this time around. President Obama has made it a top priority to encourage saving; although Obama has yet to voice support for the bill, he’s expected to get behind it in the coming months.