Bank Trustee Still Responsible for Assets

May 28, 2002 ( - A bank that had been the trustee for a profit sharing retirement plan is responsible for participants' investment losses because it hadn't properly followed the plan's rules, a federal appeals court has ruled.

The 10th Circuit Court of Appeals ruled that Bank One retained its fiduciary responsibility to The Crosby Group Inc. Profit Sharing Plan despite the plan’s move to participant direction.

When Bank One ceased to manage Crosby’s plan assets, it required its plan clients to either move to participant direction of investments or move to another institution altogether. Crosby’s administrative committee for the plan voted to adopt participant direction

Even though the plan required each participant to execute a letter of agreement setting up the investment self-direction, bank officials never took that step, the court said.

Had they done so, the appeals judges ruled, participants would have been formally notified that they were now responsible for their own investment choices.

The bank had also breached its fiduciary duty by not properly investigating a limited partnership investment into which all participants had placed money, the appeals court decided. The partnership later went bankrupt and the trustee that followed Bank One filed suit against the bank.

The case is Allison v. Bank One – Denver, No. 99-1465; Crosby v. Bank One – Denver, No. 99-1466.

 Read the ruling .