Proposed Class-Action Brought Against Energy Company

September 28, 2004 ( - A lawsuit has been brought against Aquila Inc., contending that the company breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) for promoting company stock as part of its retirement plan, even while the stuck plunged 92% over a five-year period.

>The suit, brought by Richard Itteilag in US District Court in Kansas City against the Kansas City-based energy company, would cover employees who put the company’s stock into their retirement plans from 1999 to May 5, 2004. The suit names the company and its board of directors, among others, as defendants, according to the Kansas City Business Journal. It alleges that they promoted the company stock as a ‘conservative’ investment for participants, even as it continued to fall in value. It asks that the company reimburse the employees for the losses due to the stock investment.

“By making misleading and incomplete representations … to induce employees into making and maintaining investments in Aquila common stock … the company acted as a fiduciary under ERISA,” the suit contends. By promoting a stock that was not a sound investment, the suit asserts, the company and its board breached its fiduciary duty.

>The losses seen by some employees were huge, according to the suit. Itteilag, who had 14,000 shares, saw the value of his holdings decline from as much as $814,000 to just $63,000. In 2002, the value of the plan’s holdings in Aquila Inc. fell from around $200 million to $17 million.

>Aquila Inc., formerly called UtiliCorp. United Inc., aggressively participated in the risky wholesale energy-trading markets beginning in 1999, according to the suit.   About 85% of company employees owned stock in the company at the end of 2000, and 13% of the total company stock was held by employees.

>Suits against companies who offered and promoted company stock in their retirement plans are becoming increasingly common. On Monday, an Illinoisjudge ruled that a class-action suit could proceed against Motorola Co. for an alleged breach of fiduciary duty regarding its dealing with company stock (See Judge Greenlights Motorola Co. Stock Suit ).