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Rating:401k Law Suits Abound Not Rated 3.0 Email Routing List Email & Route  Print Print
Friday, February 08, 2002

401k Law Suits Abound

Reported by InvestmentWires Staff, 

Former Providian Financial employees have filed a suit alleging the improper use of company stock in the Providian 401(k) plan. They Providian officials were knowledgable of numerous business practices that would have made the stock an innappropriate investment in the plan, but that they took no action. The suit also alleges that Providian management instead continued to encourage investments into the option.

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A group of former Citigoup workers has filed suit claiming that their deferred compensation plan improperly withheld their wages. Under the Capital Appreciation Plan (CAP) up to 25 percent of employees' earned wages were withheld. They were to be returned to employees after a waiting period of two or three years in the form of employer stock. However, the stock distributions were made only to those still employed at the firm. Boston-based law firm Dwyer & Collora is the plaintiff counsel. The firm claims the plan violated New York State labor law. A similar suit was filed in California against Citi's Salomon unit last August.

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Lawyers representing Enron workers in one of the 401(k) related lawsuits have asked the Federal judge overseeing the case to make the plan trustees who are Enron employees step down. Eli Gottesdiener claims the trustees failed to protect workers investments after they obtained information from Sherron Watkins that the company was in trouble. The revelation was made by plan committee member Cindy Olson this week in Congressional testimony. The plan still offers Enron stock to employees.

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James Prentice, senior vice president and chairman of Enron's 401(k) administrative committee, told the Senate education and labor committee that the plan trustees first investigated the prudence of including Enron stock in the plan in November. He added that neither he nor the committee were informed of information aht committee member Cindy Olson learned from whistle-blower Sherron Watkins. "I definitely don't feel that I violated my fiduciary duty," he testified. "I'm not a professional stock adviser," he added. "We've taken steps to get advice. We're awaiting the initial report from that adviser." He suggested that the committee did not want to sell Enron stock in a weak market last fall. He also testified that he personally sold $900,000 in Enron stock in June and another $50,000 worth in November.

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Senator Paul Wellstone (D-MN) is taking a carrot and stick approach in the Retirement Security Protection Act of 2002. The bill, which was introduced Thursday, would limit company stock to 20 percent of plan assets. But to entice employers to accept the bill, Wellstone is also upping the limit on employer securities in defined benefit plans to 20 percent. The bill would also require 30 days notice of blackouts, limit blackouts to 10 days, and limits company stock holding periods to one year. Unlike other bills, it would allow the DoL to set rules for holding periods in plans sponsored by privately-held firms and create some exemptions for ESOPs.

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Rajiv Jain is the new portfolio manager of the Enterprise International Growth Fund. Jain is employed by Vontobel Holdings, which subadvises the fund for MONY's Enterprise Capital. Jain replaces Fabrizio Pierallini, managing director of international investments at Vontobel.

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Fidelity Select Energy Service portfolio manager Nicholas Tiller is leaving the fund giant to join a hedge fund. He joins Christopher Zepf, who left Fidelity last month, at the unnamed hedge fund. Charles Hebard will replace Tiller. Hebard manages Fidelity Select Leisure.  

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