TOLEDO, Ohio — Individual employees of investment consulting firms, as well as the firms themselves, could be forced to accept fiduciary responsibility for advice given to pension plans because of a recent ruling by a U.S. District Court in Ohio.
The June 15 ruling upheld the ability of trustees of the Toledo Blade newspaper's $96 million pension plan to sue Thomas R. Shanklin and Gregory J. Suchocki for breaching their fiduciary duties under federal pension law by providing bad investment advice that caused the plan to lose millions of dollars. (Mr. Shanklin, previously president of Investment Performance Services LLC, Savannah, Ga., is now a managing principal in the firm's Hermosa Beach, Calif., office; the position of president was eliminated in January. Mr. Suchocki is no longer with the firm.)
The court also upheld the pension fund's ability to sue David J. Sloan, then manager search director at IPS who prepared the report recommending Ark Asset Management Co. Inc., New York, to the Toledo Blade pension fund. Mr. Sloan is no longer with the firm.
IPS was the Blade's consultant for seven years beginning in July 1995.
David A. Katz, a senior judge in U.S. District Court in Toledo, denied the consultants' motions to dismiss charges of fiduciary violations of pension law against them. He said because the allegations mention the defendants by name, and because they were the IPS employees primarily responsible for providing investment advice to the plan, the plaintiffs must be given the opportunity to provide the IPS employees were fiduciaries under ERISA.
In other words, lawyers for the Toledo Blade pension plan may attempt to prove Messrs. Shanklin, Suchocki and Sloan are individually culpable for Ark's performance.