Tribune Co., Chicago, did not have a responsibility to discontinue the company stock option offered by its roughly $2.5 billion 401(k) plan to prevent losses related to the firm's inflated earnings statements, a U.S. District Court in Chicago has ruled.
The original lawsuit, filed in May 2005, alleged that the company breached its fiduciary duty by overstating the circulation of two of its newspapers from Oct. 1, 2001, through July 15, 2004, and in turn misled 401(k) plan participants as to the viability of the $1.3 billion Tribune Co. Stock Fund. Once the overstatements were disclosed, Tribune's stock price dropped, and the complaint alleged that company officials should have known the stock fund was not a prudent investment.
The suit, filed by two plan participants and the $4.2 billion City of Philadelphia Board of Pensions and Retirement, was dismissed because of insufficient evidence that top executives at the company were aware of the inflated circulation figures and should have discontinued the company stock fund as a result, according to court documents. The plaintiffs had sought unspecified compensation.
Neither Chandler Bigelow, vice president and treasurer of the Tribune Co., nor Naomi Sachs, director-investments, were available for comment at press time. Christopher McDonough, Philadelphia board's CIO, also could not be reached for comment.