Investment manager WPN Corp. and Ronald LaBow, its former president, were ordered Monday to pay $15 million to two defined benefit plans of Severstal Wheeling Inc. for failing to diversify plan assets between November 2008 and May 2009.
In a case brought by the Severstal Wheeling Inc. Retirement Committee, U.S. District Court Judge Laura Taylor Swain in New York cited the defendants' “near-total dereliction of their duties” under the investment management agreement. Ms. Swain ordered disgorgement of $110,438 in investment management fees for the period, payment of $9.6 million in losses due to lack of diversification and $5.3 million in prejudgment interest.
The two Wheeling, W. Va.-based plans, Wheeling Corrugating Co. Retirement Security Plan and Salaried Employees' Pension Plan of Severstal Wheeling Inc., had $38 million in assets at the time, consisting mostly of large-cap energy stocks. The company has since gone bankrupt.
“I hope the decision will be a reminder for others. Diversification is a pretty clear duty,” said Matthew Smith, an associate with the plaintiffs' law firm, Cohen Milstein Sellers & Toll. Defense attorney Daniel Cobrinik declined to comment, and the number for WPN Corp. is out of service.
On Oct. 31, 2014, the Labor Department filed its own lawsuit against the fiduciaries, alleging more than $7 million in losses due to undiversified plan assets. The DOL lawsuit further charges the plans' administrators with failure to prudently invest the plan assets, oversee the plans and monitor WPN. The ongoing lawsuit also seeks to remove the retirement committee and appoint a new, independent fiduciary to manage the plans.
