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Gannett Co. Inc.—the parent company of USA Today and numerous other newspapers—was hit with a lawsuit challenging its decision to allow retirement plan assets to be invested in the stock of its previous parent company, allegedly causing the plan and its participants approximately $135 million in losses.
A participant in Gannett’s 401(k) plan accused the company of breaching its Employee Retirement Income Security Act fiduciary duties by causing the plan to invest a significant portion of its assets in TEGNA Inc. stock for an unreasonable portion of time following the company’s 2015 spinoff, according to a lawsuit filed March 22 in federal court in Virginia.
The plan’s overly concentrated position caused participants to lose millions of dollars as the price of TEGNA stock fell dramatically since June 2015.
With the lawsuit, Gannett joins a growing list of companies sued by workers challenging their employers’ decision to keep investing their retirement savings in the declining stock of former parent companies. So far, however, workers haven’t been successful in their challenges against SunEdison Semiconductor LLC and Marathon Petroleum Corp. Seventy Seven Energy and Phillips 66 are defending similar challenges.
In 2015 TEGNA—which was named Gannett Co. Inc. before the spinoff—separated its publishing business segment into a new, independent, publicly traded company, which took the Gannett name. Gannett became a media company that, in addition to USA Today, operates nearly 110 local media organizations in about 35 states and Guam, according to Bloomberg data. TEGNA became a broadcasting, digital media, and marketing services company that mainly operates television stations, according to Bloomberg data.
Gannett didn’t diversify the plan investments and failed to take action that a prudent fiduciary would have taken to stop the losses, the lawsuit alleged. In addition, Gannett didn’t liquidate the plan’s holdings of TEGNA stock, remove the TEGNA stock as a plan investment, or otherwise act to save the plan from losing millions of dollars in retirement savings, the lawsuit said.
As of 2015 and 2016, TEGNA stock represented over 80 percent and 74 percent, respectively, of the plan’s total stock holdings—an imprudent and unnecessary diversified risk for the workers and retirees who depend on the plan for their retirement savings, it said.
Gannett’s 401(k) plan had over 15,000 participants as of December 2016, according to court papers. The participant seeks class treatment for “thousands” of other participants whose plan accounts included investments in the TEGNA stock.
Gannett didn’t immediately respond to Bloomberg Law’s request for comment.
Bailey & Glasser LLP and Izard Kindall & Raabe LLP represent the worker.
The case is Quatrone v. Gannett Co., Inc., E.D. Va., No. 1:18-cv-00325, complaint filed 3/22/18.
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