Benefits April 27, 2007

Fremont Employees File Suit Over ESOP and Retirement Plan Losses

April 27, 2007 (PLANSPONSOR.COM) - Employees of Fremont General Corp. are suing the mortgage lender on charges that nine company directors engaged in lending practices that were unsafe and should have acted to prevent the loss of millions of dollars from retirement and stock ownership plans, the Associated Press reported.
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The employees filing the lawsuit in the U.S. District Court in Los Angeles are seeking class action status to stand for 3,300 participants in the company retirement plan and another 1,700 of those invested in the Employee Stock Ownership Plan (ESOP).

According to the AP, the complaint alleges that directors at the company began engaging in irresponsible lending practices as early as 2003 in an effort to boost the company’s stock – a plan that backfired when a large number of subprime borrowers began to default on their loans.

In fact, Fremont had to exit the subprime mortgage business in March after federal regulators alleged that one of the company’s subsidiaries was making loans without assessing borrowers’ ability to repay the loans.

When that happened, employees who had money in company stock ownership and plans lost millions. According to the complaint, the directors at the company should have been aware that company stock was not a good investment.

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