General Motors Corp., Detroit, was named in a federal class-action lawsuit filed by two former GM employees who claim the automaker improperly invested billions of dollars from employee 401(k) plans in GM stock. The suit, filed in U.S. District Court in Detroit, charges that GM violated ERISA by requiring matching contributions to be invested mostly in company stock, instead of providing other investment options. The plans have a combined $20 billion in assets.
The lawsuit also said officials at GM ignored several "red flags" that should have told them GM stock was a bad investment, including the company's huge pension and health care obligations, the possible downgrade of GM's credit rating to below investment grade and the company's $2 billion payment to Fiat to end their partnership.
"General Motors and its directors have fully complied with all applicable ERISA requirements with respect to GM employee stock savings plans," according to Geri Lama, GM spokeswoman. "General Motors met its disclosure obligations to all shareholders and all required information was made available to hourly and salaried workers, as well as to the public. We believe that the allegations. ... are absurd."
The value of GM stock has fallen 36% in the last year; it was at $28.37 in late afternoon trading today.