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General Cable Corp.'s involvement in a foreign bribery scheme caused more legal woes on March 15, when an investor in the company’s retirement plan filed a lawsuit over associated stock losses ( Eley v. Gen. Cable Corp. , E.D. Ky., No. 2:17-cv-00045-DLB-JGW, complaint filed 3/15/17 ).
The proposed class action claims that General Cable stock was artificially inflated for more than 13 years because of an undisclosed bribery scheme aimed at gaining business in violation of the Foreign Corrupt Practices Act. In 2016, General Cable agreed to pay more than $75 million in penalties to resolve investigations into the bribery scheme by the Department of Justice and the Securities and Exchange Commission.
The new lawsuit seeks to hold General Cable and certain executives liable under the Employee Retirement Income Security Act for drops in the company’s stock price that allegedly caused losses in employees’ retirement accounts. The company is also defending a securities fraud class action based on similar allegations.
The ERISA lawsuit may face an uphill battle as the investors attempt to satisfy the pleading standards established by the U.S. Supreme Court in Fifth Third Bancorp v. Dudenhoeffer.
Since that 2014 decision, courts have frequently blocked investors from using ERISA to challenge drops in company stock price. In the past several years, courts have rejected such cases against Lehman Brothers, JPMorgan Chase, Edison International, IBM and J.C. Penney. Last week, a federal judge in Texas rejected a similar challenge against three BP Plc executives, adding that no ERISA case has satisfied this strict standard in the past year.
The lawsuit against General Cable—which seeks class treatment on behalf of as many as 4,480 participants in the company’s retirement plans—was filed in a Kentucky federal court by Stull Stull & Brody and Strauss Troy Co. LPA.
Another plaintiffs’ law firm, Levi & Korsinsky LLP, announced on March 8 that it was investigating potential ERISA violations committed by General Cable, increasing the likelihood that the company will face multiple ERISA lawsuits over the foreign bribery scheme.
General Cable didn’t immediately respond to Bloomberg BNA’s inquiry about the lawsuit.
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Text of the complaint is at http://www.bloomberglaw.com/public/document/Eley_v_General_Cable_Corporation_et_al_Docket_No_217cv00045_ED_Ky.
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