Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
Investment firm Ruane Cunniff & Goldfarb Inc. and DST Systems Inc. face a third lawsuit over the alleged imprudent investment of DST’s 401(k) plan assets in Valeant Pharmaceuticals stock ( Ferguson v. Ruane Cunniff & Goldfarb Inc. , S.D.N.Y., No. 1:17-cv-06685, complaint filed 9/1/17 ).
Ruane, which manages the Sequoia Fund Inc., with the consent of DST and its executives, allegedly “gambled” over one-third of the plan’s assets in an “opaque, high-cost, high-risk, long term investment strategy” that resulted in losses of more than $100 million to the plan, according to a lawsuit filed Sept. 1 in federal court in New York. Similar to previous allegations, at issue in the new action is the profit sharing account portion of DST’s 401(k) plan, which allegedly was used to support the price of Valeant stock in the Sequoia Fund.
The lawsuit also pointed at DST and its executives for allegedly allowing the plan to pay tens of millions of dollars in excessive fees to mutual funds. DST selected high-priced share classes of mutual funds, instead of identical or available lower-cost share classes of those same mutual funds, the lawsuit alleged.
Two previous lawsuits against DST and Ruane involving similar allegations have met with little success. Last year, a plan participant who sued both entities voluntarily dismissed his lawsuit against the software company but continued his claims against Ruane. Last month, a federal judge in New York allowed Ruane to compel arbitration of the participant’s class claims. In June, a federal judge in Missouri held that another plan participant was barred by DST’s arbitration agreement from bringing his lawsuit in court.
The Sequoia Fund’s stake in Valeant has spurred other proposed class actions under the Employee Retirement Income Security Act. A lawsuit involving the 401(k) plan of the Walt Disney Co. was dismissed in April. Other lawsuits are pending against chemical company FMC Corp. and National Indemnity Co.
DST’s 401(k) plan has more than $1.3 billion in assets and over 9,500 participants, according to the lawsuit.
The Sequoia Fund is an open-end mutual fund that invests in the stock of a limited number of companies that it believes have attractive long-term economic prospects relative to their market price, according to data in the Bloomberg Terminal. The fund’s top holdings include Berkshire Hathaway Inc., Mastercard Inc., and TJX Cos. Inc.
Ruane served as the plan’s investment adviser until August 2016, when its services to the plan were terminated, the lawsuit said.
DST didn’t immediately respond to Bloomberg BNA’s request for comment.
Shepherd Finkelman Miller & Shah LLC and Duckworth Peters Lebowitz Olivier LLP represent the proposed class.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)