According to the DoL announcement, the fiduciaries are also charged with valuing the stock at prices higher than market value and giving participants false information about the securities.
The DoL claims in its lawsuit that 47 members of the investment committee, administration committee and the Agway board of directors violated the Employee Retirement Income Security Act (ERISA) by mismanaging the company stock investments. The agency alleges the investment committee failed to investigate the prudence of investing in Agway securities, to determine the fair market value of securities acquired by the plan, and to monitor and divest the plan’s holdings in the securities, resulting in substantial financial losses.
The fiduciaries also allowed the plan to purchase and hold securities at prices set by Agway that exceeded fair market value. The value of stock purchased and held by the plan was set by Agway, whose contributions were required by the plan until July 2002 to be invested in company stock.
In addition, the administration committee allowed Agway and the plan to provide false and misleading information to plan participants about investments in Agway securities, and the board of directors failed to protect the interest of participants and beneficiaries when it failed to oversee the activities of plan fiduciaries, the DoL said.
The DoL is seeking a court order requiring the defendants to restore to the plan all losses with interest and to forfeit any plan benefits if all losses suffered by the plan are not restored, the announcement said.
Last week the US District Court for the Northern District of New York gave 401(k) participants the approval to proceed with their fiduciary breach lawsuit against Agway, alleging the plan improperly made matching contributions with company stock when the employer’s financial health was deteriorating (See Agway Company Stock Suit Cleared for Further Proceedings ).