According to the sources, employees and retirees will split more than $25 million to defray losses sustained when company stock held in 401(k) plans lost value, and the remainder will be split among the three law firms representing them. In addition, retirees will be offered heavily discounted financial counseling services from Ayco, a subsidiary of Goldman Sachs, the sources said, according to the news report.
GM spokeswoman Renee Rashid-Merem said the company expected a settlement agreement to be filed in the next few days. Neither she nor the plaintiffs’ attorneys would comment on specifics of the settlement pact.
The lawsuit filed in March 2005 (See Court Refuses to Dismiss GM Retirement Plan Suit ) claimed the defendants put the interests of GM ahead of the interests of the plan participants by continuing to offer GM stock as an investment option, matching employee contributions in GM stock, and failing to diversify the stock fund when it was clear GM stock was not a prudent investment. At the time GM was struggling financially and its accounting was being reviewed by the Securities and Exchange Commission (SEC).
In December 2005, the company announced it was dropping the requirements that 3% of participant contributions and 100% of employer match contributions be invested in company stock (See Struggling GM Drops K Plan Match ).
In April 2006, U.S. District Judge Nancy Edmunds in a U.S. District Court in Michigan refused to grant GM’s request to dismiss the suit, saying GM had a duty to convey complete and accurate financial information about GM’s true financial health to the plaintiffs. The judge did, however, grant a motion by State Street Bank to dismiss the charges against it.
Court documents said about 260,000 employees and retirees were participants in the plans that held assets of $21 billion as of 2003, according to the news report.
Lawyers for both sides told Edmunds in December they had reached a settlement, court records show. Edmunds issued an order requiring them to file the proposed settlement by January 15 and a preliminary approval hearing is set for January 30.
The SEC investigations into GM are continuing.