In a press release, the law firm (
) said that is investigating whether the company violated
the Employee Retirement Income Security Act (ERISA)
regarding investments in company stock by the two plans
during the period of August 21, 2003 to the present.
The investigation focuses on concerns that Krispy Kreme and other fiduciaries for the plans may have breached their ERISA-mandated duties by:
- failing to prudently and loyally manage the plans’ assets by investing a significant amount of the plans’ assets in Krispy Kreme stock.
- failing to monitor and provide fiduciary appointees with information that the appointing fiduciaries knew or should have known that the monitored fiduciaries must have in order to prudently manage the Plans’ assets.
- failing to provide complete and accurate information to participants and beneficiaries.
- breaching their duty to avoid conflicts of interest.
The move by Keller Rohrback comes following the announcement that Krispy Kreme would be restating its earnings from fiscal year 2004. Since the beginning of the period outlined in the investigation, the company’s stock has plummeted from $47.50 to $9.70.
In a statement posted on its Web site, Krispy Kreme asserted that “in its Current Report on Form 8-K filed December 16, 2004, the Company disclosed that certain errors had been identified with respect to the Company’s fiscal 2004 financial statements and that the Company was reviewing potential adjustments to correct such errors, the amounts of which were, in certain instances, subject to judgment and interpretation.”
The main errors outlined by the company surround mislisting certain pre-tax income as compensation expenses and normal expenses instead of purchase prices, according to the company.
Company stock in pension and stock ownership plans has been a hot topic as of late, made even hotter by an federal court’s ruling in August that fiduciaries cannot duck their fiduciary duties by hiding behind insider trading rules (See Court Finds No ERISA Shield in Insider Trading Concerns ). AIG (See AIG 401(k) Plan Participants Sue the Insurance Giant ), RJR (See RJR K Plan Participant Co. Stock Suit Gets New Life ), and Havens Steel (See Havens Steel Hit with ESOP Lawsuit ) have all been hit with lawsuits recently regarding the holding of company stock in pension and stock ownership plans.