First Union Settles 401(k) Lawsuits
Under the settlement, which received preliminary approval from the US District Court for the Eastern District of Virginia Thursday, First Union would pay $10 million in the Signet case and $16 million in its own 401(k) case. The fund would be distributed among the classes and counsel.
However, that settlement represents a fraction of the
original damages sought in the two separate, but related
participant actions.
Class Actions
In the first one, former employees of Signet Bank had brought a $150 million class action lawsuit against First Union in May 1999. The suit alleged the bank and its officers violated ERISA by imprudently liquidating the $250 million Signet Banking Corporation Employee Savings Plan investments and transferring the proceeds into First Union-owned and -controlled mutual funds after the 1997 acquisition of Signet by First Union. Plaintiffs argued that the First Union funds performed poorly, and were chosen because of their potential to generate revenue and marketing opportunities for First Union.
In September 1999 another group of employee participants at First Union filed a $300 million lawsuit of their own, seeking treble damages in accusing the bank of violating not only ERISA but also the anti-trust provisions of the Bank Holding Act and the Racketeer Influenced and Corrupt Organizations Act (RICO).
First Union said in a statement that the settlement would not hurt its profits. A hearing for the final approval of the settlement will take place on June 13.
– Nevin Adams editors@plansponsor.com
Background on the case is at: