Participants sue Fidelity for 'fiduciary self-dealing'
By Robert Steyer | February 7, 2013 4:02 pm
Participants in three 401(k) plans have sued Fidelity Investments, alleging the record keeper engaged in “fiduciary self-dealing,” thus violating the Employee Retirement Income Securities Act, according to the lawsuit filed in U.S. District Court in Boston.
The suit was filed Tuesday by a former participant in 401(k) plans of Hewlett-Packard Co., with $14.6 billion in assets, and Avanade Inc., a subsidiary of Accenture, with $109 million in assets, and by a current participant in the $9.7 billion Delta Air Lines Inc. 401(k) plan.
Gregory Porter, one of the attorneys for the plaintiffs, said in an interview that they are seeking class-action status. If the status is granted, the allegations could affect plaintiffs in all plans “subjected to this practice” by Fidelity, said Mr. Porter, a partner at law firm Bailey & Glasser.
The practice alleged by plaintiffs as an ERISA violation involves Fidelity depositing certain 401(k) plan assets “on an interim basis in interest-bearing accounts before it disbursed monies as directed by the plans' participants,” the lawsuit said. “Income earned or derived from the plans' assets while invested in such accounts is 'float income.'”
This float income was an asset of the plans according to ERISA, the lawsuit said.
The plaintiffs accused Fidelity of using the float income “to pay itself trust and record-keeping fees above and beyond the fees authorized in the trust agreements between the plans and Fidelity,” the lawsuit said.
Fidelity spokeswoman Jennifer Engle said in an e-mail that her company's “practices are in compliance with ERISA and Department of Labor guidelines. We operate with the best interests of clients and customers as our top priority.”
The recent suit “is based on a decision in another case finding liability against Fidelity that we believe is erroneous,” Ms. Engle wrote. “We are currently appealing.”