MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication
an InvestmentWires' Publication
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MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication |
|
Tuesday, November 13, 2001 Lawsuit May Affect Fund Business It started out as a lawsuit because of alleged irregularities in retirement plans. Starting last June, New York Life was sued by James Mehling because he alleged that the firm took assets from its employees' defined benefit and defined contribution plans in order to create the MainStay family of funds. The plaintiff also alleges that these funds were then sold to outside clients and were bolstered by the assets from the in-house plans. The plaintiff is represented by the Gottesdiener Law Firm. At the beginning of the month, the federal district court in Philadelphia ruled that the case has class action status. But the troubles for New York Life do not stop there. A part of the plaintiff's filings include -- in a footnote -- a request to add the following to the list of defendants: Linda Livornese; Ravi Akhoury; the Eclipse Funds (formerly "MainStay Institutional Funds"); MainStay Management, LLC; MacKay-Shields, LLC; Monitor Capital, LLC; and New York Life Investment Management, LLC. The law firm is hence making a request potentially to add New York Life's mutual fund complex and its managers to the complaint. Whether or not they will actually be added to the complaint will no doubt be dependent upon the law firm's investigations. "They removed the money from the pension plan in those funds, but they have not done the same for the 401(k) plan. We are hoping they make a similar withdrawal there," Eli Gottesdiener, the plaintiff's attorney, told the 401kWire.com, the MFWire's sister publication, in an interview on the retirement plan aspect of the suit. "New York Life did this to help their funds reach a critical mass, to make it a going concern," he opined. "This move gave it a size so that it would not get laughed out of room when on sales calls. If you take out the in-house money, then they were quite small. There returns were mediocre. They were creating the illusion that their funds were successful." Currently, the case is now in the discovery phase. The trial date will not be until next year. Nonetheless, Gottesdiener is optimistic and confident that New York Life's liability is apparent, "Liability is indisputable: the only question really is the amount of damages caused by charging the plans excessive fees, the amount New York Life should be forced to disgorge from the profits it made and savings it realized from 'borrowing' billions of dollars of money that didn't belong to it, and whether the conduct of the individual trustees was sufficiently egregious so as warrants their permanent removal as plan fiduciaries." Gottesdiener would not comment on this aspect of the story. The attorney has established a website regarding the lawsuit. Printed from: MFWire.com/story.asp?s=27079 Copyright 2001, InvestmentWires, Inc. All Rights Reserved |