Seeger Weiss represented tens of thousands of aggrieved Bell South employees in a class action suit against the company and the administrators of their 401K plan, in connection with “Enron-like” breaches of fiduciary duty.
The Employee Retirement Income Security Act (ERISA) is a 1974 federal law that requires companies to properly manage the retirement plans of their employees. ERISA determines that companies have a “fiduciary” responsibility toward their employees, and ERISA sets the guidelines for that responsibility.
ERISA sets standards for providing benefits, funding the plan and holds companies accountable. Unfortunately, some companies may mismanage their employees retirement plans.
When ERISA standards have not been met, companies may be liable for:
- Breach of fiduciary duty
- Excessive fees charged
- Mismanagement of plan funds
- Failure to adequately fund plans
Failure to appropriately manage retirement plans like the BellSouth 401K plans may leave the employee without full benefit of retirement funds that should be expected. This may have a serious negative impact on future financial status.
BellSouth Fiduciary Duty Lawsuit
In 2002, BellSouth was accused of ERISA breach of fiduciary duty after the company and its financial advisors encouraged employees to invest their earnings in company stock at a time when the company was:
- Overstating positive operating results,
- Projecting artificially-optimistic revenue growth
- Promoting other financial indicators that were found to be materially false
- Hiding revelations of accounting irregularities and losses from the company’s risky venture into the highly-speculative Latin American wireless phone market.
A class action lawsuit was filed against BellSouth for the claims of fiduciary breach of duty and mismanagement. These claims stemmed from BellSouth’s failures to advise employees of investment diversification options and their having created a falsely optimistic outlook in Bell South’s stock as a prudent investment for the plan.
BellSouth Fiduciary Duty Lawsuit Resolution
In 2006, after considerable motion practice and discovery in the Bell South litigation, the U.S. Federal court in Atlanta, Georgia, which oversaw the litigation, granted final approval to a class action settlement.
The settlement required that for a three-year period, that BellSouth:
- make matching 401k plan contributions to employees
- plan contributions be made in cash rather than company stock
- allow for employees during that period to have the same investment options for the company’s matching contributions as they have for their own contributions,
- make available, certain additional investment choices
- guarantee a minimum percentage of company’s matching contributions
BellSouth’s responsibility for these actions was to be upheld for a period of three years, even if the company was sold or merged with another organization. The total settlement amounted to an estimated of up to $90 million.
Seeger Weiss, LLP has represented hundreds of clients in Consumer Protection and Securities litigation. If you would like to know more or you have questions about ERISA or consumer protection lawsuits, contact us at (888) 609-0805 to schedule a consultation.