GE Faces Potential $700M ERISA Class Action
As It Appeared On The Recorder
P.J. D’Annunzio, The Recorder
General Electric has been hit with a class action lawsuit demanding $700 million over claims that the corporation engaged in self-dealing in handling its employees’ retirement plans.
According to the lawsuit filed Sept. 26 in U.S. District Court for the Southern District of California, GE selected proprietary mutual funds for its retirement plan when better options were available for its employees.
“Tainted by self-interest, GE’s investment conduct was imprudent and disloyal. GE selected and retained its poor-performing proprietary mutual funds for the Plan when superior investment options were readily available,” the complaint said. “Moreover, to the detriment of the Plan’s participants, GE through GEAM [GE Asset Management] profited from an arrangement where investment sub-advisers managed the Plan for a rate less than the amount GEAM earned from the Plan’s participants in investment management fees.”
The three lead plaintiffs—Kristi Haskins and Laura Scully of San Diego and Donald J. Janak of Carrolton, Texas—are represented by lawyers from Sanford Heisler Sharp.
“GE and the Plan’s trustees were obligated by law to act for the exclusive benefit of Plan participants and beneficiaries,” Charles Field, co-chair of the firm’s Financial Services practice, said in a statement issued Wednesday. “ERISA required them to select prudent investments, monitor the investments’ performance and modify the Plan’s investment options to maximize the benefits to the participants and beneficiaries. Instead, they selected poor-to-mediocre-performing investments, and managed and administered them in ways that harmed the participants and beneficiaries.”
A spokesman for GE said, “We have no comment on ongoing litigation but we intend to fully defend the case.”
The putative class action could encompass up to a quarter-million GE employees, according to the complaint.
“The approximately 250,000 current and former GE employees who participated in the Plan deserved better from a leading global investment firm that touts its investment acumen,” the complaint said.
“There is evidence of tainted self-interest as GE prioritized company profits over its fiduciary duty to the Plan’s participants,” said David Sanford, chairman of Sanford Heisler, in the firm’s statement Wednesday. “The financial well-being of GE employees does not seem to have been on GE’s radar.”
The suit has just been filed, and class status has yet to be determined by the presiding judge.
Among other requests in their complaint, the plaintiffs asked the court to “[f]ind and adjudge that Defendants are personally liable to make good to the Plan $700 million in losses to the Plan resulting from each breach of fiduciary duty, and to otherwise restore the Plan to the position it would have occupied but for the breaches of fiduciary duty.”