By Jonathan Stempel

(Reuters) -A federal judge approved Vanguard Group’s $25 million settlement of a lawsuit accusing the U.S. mutual fund company of improperly saddling investors in its target-date funds with inflated tax bills.

U.S. District Judge John Murphy in Philadelphia granted preliminary approval on Monday, calling the settlement sufficiently fair, reasonable, and adequate, after rejecting a $40 million settlement on May 19.

Murphy objected because Vanguard could have offset the $40 million from its related January settlement with the U.S. Securities and Exchange Commission, and investors would be better off with the SEC accord because there were no legal fees.

Lawyers for the investors said the $25 million is in addition to a $133 million fair fund set up in the SEC case.

Ta

See Full Page