Northern Trust Investments has agreed to pay $36 million to settle a lawsuit claiming it violated the Employee Retirement Income Security Act (ERISA) in handling retirement plan assets invested in its securities lending program.
The lawsuit alleges that Northern Trust breached its duties to retirement plans and their participants and beneficiaries by imprudently investing collateral received from securities lending activities and by charging impermissibly high fees. Plaintiffs Joseph Diebold, representing the ExxonMobil Savings Plan, and Paul Hundt, representing the Texas Instruments 401(k) Savings Plan, filed the lawsuit in 2009, alleging Northern Trust Investments and Northern Trust Co. had ignored warning signs indicating a different investment strategy was in order.
The proposed settlement has been achieved on behalf of retirement funds that invested in Northern Trust’s Commingled Lending Funds, which participated in Northern Trust’s securities lending program, during the period January 1, 2007, through October 31, 2010.
According to the settlement agreement, Northern Trust is entering into the agreement solely to eliminate the burden, expense and distraction of further litigation. The settlement is not an admission of any guilt.
The final settlement in Diebold v. Northern Trust Investments is conditioned on final approval of the partial settlement of a similar case, Louisiana Firefighters’ Retirement System, et al. v. Northern Trust Investments, N.A., et al.