Law Firm Announces Investigation of Wachovia 401(k) Plan

June 6, 2008 ( - The law firm of Stember Feinstein Doyle & Payne, LLC is investigating whether conduct of certain fiduciaries to the Wachovia Savings Plan, the company's 401(k) plan, violated the Employee Retirement Income Security Act of 1974 (ERISA).

Stember Feinstein is investigating whether the Wachovia Savings Plan fiduciaries violated their fiduciary obligations under ERISA “by continuing to offer Wachovia stock as investment options for participant contributions when it was imprudent to do so, or by failing to take action to sell Wachovia stock or otherwise protect the Plans’ assets in light of the companies’ risky business strategies and deteriorating financial conditions,” according to an announcement from the firm.

The announcement said the investigation relates to whether the fiduciaries of the plan knew or should have known that material information relating to or affecting Wachovia’s financial problems had not been disclosed, including:

  • The company continued to give non-conforming real estate mortgages to borrowers without consideration of their credit scores, verification of their assets, or verification of their employment status;
  • The company failed to adjust its methodology for loss provisions in order to take into account known changes in the credit landscape;
  • Wachovia did not properly disclose to investors about the risks of auction rate securities, which has resulted in losses to Wachovia and has caused an investigation by the SEC;
  • Wachovia has heavy exposure in bank-owned life insurance policies, and as a consequence, was forced to report a $315 million loss for the first quarter of 2008; and
  • There were insufficient management controls in place to timely address problems likely to affect the company’s reputation.

Stember Feinstein previously announced this year investigations of fiduciary breaches relating to retirement plans at Marshall & Ilsley and Bear Stearns (See Law Firm Investigates Possible M&I Fiduciary Breach to Retirement Planand Bear’s Ills Draw Company Stock “Investigation” ).