The investigation period covers June 6, 2001 through October 18, 2001 and focuses on concerns that Providian and its plan administrators may have breached their fiduciary duties under ERISA, by failing to disclose information about the company’s operations to retirement plan participants, according to the law firm.
The firm will investigate whether the company encouraged participants to continue to investments in its company stock and retirement plans, by allegedly manipulating its financial statements for second quarter 2001.
Providian grew to become the nation’s fifth-largest credit-card issuer largely by lending to clients with spotty credit histories, according to the Wall Street Journal. As a consequence, the company has been racking up credit losses, or loan defaults, far more rapidly than most of its competitors, reaching an annualized 10.33% of loans outstanding in the third quarter.
The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. are reportedly trying to rein in some of that lending, in an attempt to ensure that the firm maintains adequate capital.
During the period under investigation, certain of Providian’s officers and directors sold almost $22 million worth of their own company stock at artificially inflated prices – sales that were out of line with their prior trading history, according to the law firm.