SALEM, Ore. -- Oregon has become the first state in the U.S. to sue an investment fund manager for making risky bets with college savings plans.

Oregon Treasurer Ben Westlund and Attorney General John Kroger announced Monday that the state had sued Oppenhemimer Funds for $36.2 million in losses to the state’s 529 College Savings Network, which allows families to invest pre-tax dollars for future education costs.

A three-month investigation by the state revealed that Oppenheimer had moved residents’ college savings from conservative portfolios into “hedge-fund like investment funds” that were extremely risky, the state said.

Westlund and Kroger claim that between 2007 and 2008, Oppenheimer -- a well-known public investment fund manager that is the most popular college savings plan in Oregon -- diverted funds from “conservative and ultra-conservative” investments into more aggressive, risky ones in search of larger returns.

“College accounts were battered and financial futures jeopardized because of Oppenheimer Funds,” Westlund said. “Families were doing the right thing and saving for college, but unknown to them or Oregon, their money was invested in ways that were plainly inappropriate for those saving for college or already in college.”

Oppenheimer was supposed to be managing those college savings to “preserve capital” but instead invested it elsewhere in the hopes of large profits, the lawsuit alleged.

The state is now seeking repayment of assets lost in the downturn and accuses the Colorado-based fund of violating Oregon securities law, breach of contract, breach of fiduciary duty, negligence and negligent misrepresentation.

The fund managed two college savings plans in Oregon. It recently received a failing grade from investment fund analysts at Morningstar for failing to communicate with investors about “the true nature of its funds,” according to the state.

“We intend to use the full legal power of the State of Oregon to make sure Oregon families’ dreams of a college education are fulfilled,” said Attorney General Kroger.

Oregon’s College Savings Board also sought new administration of the state’s college savings plan. Oppenheimer Funds is currently under contract to administer the plan through December.