Morgan Stanley is being sued by participants in the company’s 401(k) plan and employee stock ownership plan who claim the financial firm’s plans “heavily invested” in company stock even when the stock value was dropping sharply, according to the lawsuit.
According to the class-action lawsuit in U.S. District Court in New York, the value of company stock in the two plans was about $673 million by the end of 2008, down from about $2.2 billion at the end of 2007. The ESOP plan was merged into the 401(k) plan in August 2008.
“The long-term retirement savings of the participants of the plans were substantially dependent on the performance of company stock and the need for prudent fiduciary decisions by defendants concerning this investment,” said the suit, which was filed Friday.
The defendants include Morgan Stanley, the investment committee of the 401(k) plan and top officers of the company.
The lawsuit states that the defendants “knew or should have known … that the plans’ ongoing heavy investment in company stock (during 2008) was imprudent because Morgan Stanley and its stock were exposed to extraordinary risk as a result of the financial perils of the entire banking sector. Indeed, as of no later than September 2008, Morgan Stanley’s viability as a going concern was seriously threatened.”
A spokesman at Morgan Stanley didn’t return calls for comment by press time.
Morgan Stanley had DC assets of $4.78 billion as of Sept. 30, according to Pensions & Investments data.