Compliance February 17, 2007
Teachers Sue MetLife, Consultant for Rigging 403(b) Options
Several Indiana teachers have filed what could become a class-action lawsuit, accusing MetLife and a financial consultant of rigging their 403(b) investment options.
Reported by Nevin E. Adams
The lawsuit contends MetLife paid Indiana Teachers’ Association Administrative Services to promote the firm over other insurance options in an effort to control up to $1 billion in retirement funds, according to a report in The Times of Northwest Indiana. The suit alleges that in 2006, one of MetLife’s investment plans cost members about 30% more in annual fees than comparable plans. But that despite the excessive costs, the consultants touted the program as the best one available – without divulging all the information to teachers, according the report.
In order to lessen the burden on local school corporations to fund teacher retirement plans, the Indiana Legislature in June 2002 passed a bill allowing those school corporations to borrow funds to pay accrued teacher retirement obligations. Teachers could then choose to invest into 403(b) plans, according to the Times. However, the suit alleges that “the enormous amount of money made available in a short period of time for investment…made fallow ground for unscrupulous companies. …”
The lawsuit alleges Metlife and the Indiana Teachers’ Financial Services Corporation is in violation of the Indiana Securities Act, the Indiana Consumer Deceptive Practices Act and the Rackateer Influence and Corrupt Organization Act (RICO). The suit is seeking an amount equal to three times the actual damage, plus court costs, attorney fees, and punitive damages.
“We’ve uncovered evidence we believe shows Metlife was involved in a broad conspiracy to solicit teacher retirement funds by deceptive practices,” plaintiff’s attorney Glenn Vician said, according to the report. “They (Indiana teachers) were many times approving in investing in Metlife even though their prices were higher and rate of return lower.” Vician said it was “a couple of really bright teachers that figured this out.”
Vician is representing Daniel Spears, Katherine Lang and Daniel Massa, all from Porter County; Jeffrey Yelton, from Lake County; and Raymond Commers, from LaPorte County, in the lawsuit.
According to the Times report, a spokesman for MetLife, said Friday he had not heard of the lawsuit and would investigate the allegations.