The latest is former high-flying telecommunications network builder Global Crossing, which filed for bankruptcy late last month. Global Crossing’s insolvency was the 4th largest public company bankruptcy in terms of assets ($22.4 billion), according to BankruptcyData.com.
The suit mirrors similar actions by participants at Enron, Lucent, Nortel Networks and Providian.
The complaint charges that defendants breached their fiduciary duties and ERISA disclosure requirements by failing to disclose:
- that maintaining concentrated investments in Company stock was imprudent
- adequate information about the company’s true financial condition, despite offering it as a prudent plan investment.
The complaint says that while the firm encouraged employees to invest their retirement monies in the Company’s common stock, defendants proceeded to sell some $140 million of their own investment in the firm.
Global Crossing’s recent bankruptcy came just after its own 401(k) blackout period – from December 14 to January 18, according to the WSJ, as the plan assets were moved to Fidelity from Putnam and Merrill Lynch. However, company stock was just 6% of their assets – and employees had a month’s prior notice.
Specifically, the suit alleges that defendants failed to disclose that:
- Global Crossing was experiencing declining demand for bandwidth;
- its operating performance was artificially inflated through improper accounting for transactions with other telecom companies;
- its efforts to provide managed network outsourcing services were failing; and
- as the Company’s liquidity position and revenues declined, so did the Company’s ability to service its large debt.
Plaintiffs in the suit are represented by the Los Angeles-based law firm of Stull, Stull & Brody. The suit was filed against the firm in the United States District Court for the Central District of California, Western Division on behalf of all participants and beneficiaries of the Global Crossing Employees’ Retirement Savings Plan.
The suit was brought on behalf of all current and former employees and any beneficiaries who are or were participants in the Plan at any time since September 28, 1999.