Compliance

Two Law Firms Probe Lehman Brothers 401(k) Plan Fiduciaries

The law firms of Milberg LLC and Liner Yankelevitz Sunshine&Regenstreif LLP separately announced they are investigating possible Employee Retirement Income Security Act (ERISA) violations by fiduciaries of the Lehman Brothers Holdings Inc. Savings Plan.
Reported by Rebecca Moore

According to the Milberg announcement, it is investigating whether the company and certain officers and directors violated ERISA by continuing to offer Lehman Brothers stock as a plan investment when it was imprudent to do so, and by maintaining the plan’s investment in Lehman Brothers stock when it was imprudent to do so. The law firm’s investigation stems from class action complaints filed in the Northern District of Illinois.

Specifically, the complaints allege that the company:

  • failed to disclose the true nature and extent of its exposure to losses in connection with subprime mortgage-backed derivatives;
  • failed to disclose the true nature and extent of its exposure to losses in connection with collateralized debt obligations and the timely write-down of those losses;
  • did not prepare its financial statements in accordance with Generally Accepted Accounting Principles; and
  • had inadequate internal and reporting controls.

LYS&R said it is analyzing whether company and the plan’s fiduciaries breached their fiduciary duties of loyalty and prudence to the plan’s participants by among other things, offering Lehman stock as a plan investment option, requiring participants to invest in the stock, and/or investing and holding company contributions in the stock at a time when the stock was not a suitable and appropriate investment option. The firm is also looking into whether the plan’s fiduciaries withheld or concealed material information from the plan’s participants with respect to the company’s business, financial results, and operations.

More information is available at http://www.milberg.com and http://www.californiaclassaction.com.