A federal district court judge has dismissed a complaint by a participant in the General Cable Savings and Investment Plan, Highland Heights, Ky., that plan fiduciaries breached ERISA duties by failing to act on a company-stock fund investment option despite allegations that the corporate parent violated the Foreign Corrupt Practices Act.
In the case of Eley et al. vs. General Cable Corp. et al., the participant stated fiduciaries kept General Cable stock in the 401(k) plan even though "they knew or should have known that the stock was artificially inflated" because employees of its foreign subsidiaries paid bribes to foreign government officials," according to court documents. The company disclosed possible violations of the Foreign Corrupt Practices Act between 2014 and 2016, causing the company stock to fall, the plaintiff argued.
General Cable paid a settlement of $55 million to the Securities and Exchange Commission in December 2016, while not admitting or denying allegations made by the agency. The company paid an additional $6.5 million to the SEC to settle separate accounting violations, said an SEC news release of Dec. 29, 2016.
General Cable also paid a $20.5 million criminal penalty in a non-prosecution agreement with the Justice Department relating to "improper payments to government officials in several countries," said a Justice Department news release of Dec. 29, 2016, in which the department noted that the company "voluntarily and timely disclosed the conduct at issue."
Although the plaintiff in the ERISA suit said plan fiduciaries could have taken several steps to reduce the risk to participants' stock holdings in the 401(k) plan, U.S. District Judge William O. Bertelsman, in Covington, Ky., wrote in a July 23 opinion that the plaintiff's arguments failed to meet the standards for stock-drop litigation established by the U.S. Supreme Court in 2014.
"Plaintiff has not plausibly alleged any alternative action the defendants could have taken that would have been consistent with the securities laws and that a similarly situated prudent fiduciary would not have viewed as more likely to harm than help the plan," the judge wrote in dismissing the claim that fiduciaries violated the ERISA duty of prudence.
He also dismissed the claim that fiduciaries had violated their ERISA duty of loyalty, noting "these allegations largely mirror" the complaint related to duty of prudence and "fail for the same reasons." The complaint was dismissed with prejudice.
The plan had $358.6 million in assets as of Dec. 31, 2016, according to the latest Form 5500 filing.
Prysmian Group, Milan, Italy, acquired General Cable in June.