Compliance

SunEdison Faces Lawsuit Over Company Stock in Retirement Plan

The accusations are similar to those in many stock drop lawsuits.

By Jill Cornfield editors@plansponsor.com | January 22, 2016
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Alexander Y. Usenko, a former SunEdison employee and participant in the company’s defined contribution (DC) plan, has brought suit against SunEdison for losses incurred by investing his retirement plan assets in SunEdison stock.

Usenko has named as defendants SunEdison Inc., its board of directors, the company’s investment committee, State Street Bank & Trust Co., and SunEdison’s chief executive (Ahmad R. Chatila) and senior executives and members of the operating committee: Emmanuel T. Hernandez, Antonio R. Alvarez, Peter Blackmore, Clayton C. Daley, Jr., Georganne C. Proctor, Steven V. Tesoriere, James B. Williams, Randy H. Zwirn, Matthew Herzberg). One defendant is identified only as John Doe.

The notion of company stock as a potential liability in a retirement plan is cropping up more frequently, with plan sponsors backing off company-issued stock as a plan investment. Some say it can still be offered, as long as there is a prudent, documentable process in place.  

According to the complaint, the defendants permitted the plan to continue offering SunEdison stock as an investment option to retirement plan participants, even after they knew or should have known that during the time frame (August 6, 2015 to the present) the stock had a number of troubling issues. It was artificially inflated; SunEdison—which bills itself as the world’s largest global renewable energy development company—was in extremely poor financial condition; and SunEdison faced equally poor long-term prospects.

These factors made SunEdison stock an imprudent retirement investment for the plan, the complaint says. As fiduciaries of the plan, the defendants were empowered to remove SunEdison stock from the plan’s investment options but didn’t. Neither did they act in any way to protect the interests of the plan or its participants, in violation of their legal obligations under the Employee Retirement Income Security Act (ERISA).

NEXT: A breach of the “prudent man” standard

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