Frontier Communications Corp., Norwalk, Conn., is the target of a fiduciary lawsuit by a 401(k) plan representative alleging the telecommunications company violated its fiduciary duty by offering a Verizon Communications Inc. company stock fund.
The lawsuit, filed on Tuesday in U.S. District Court in New Haven, Conn., by Mary Reidt on behalf of plan participants, alleges the plan has lost $100 million since adding Verizon company stock as an investment option in its 401(k) plan. In July 2010, Frontier "acquired of certain locations" from Verizon in July 2010, and between then and Dec. 30, 2011, the plan "received and retained about $150 million in Verizon stock, representing over 15% of the plan's assets," according to the filing, In April 2016, following another acquisition from Verizon, the lawsuit said Frontier added another $200 million in Verizon stock to the 401(k) plan.
The lawsuit alleges that "the failure of the plan's fiduciaries to timely liquidate the plan's significant holdings in Verizon common stock, and the decision to concentrate plan investments in Verizon common stock, breached their fiduciary duty under ERISA to 'diversify the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.'"
According to the filing, Frontier has maintained the Verizon company stock fund as an investment option through at least July 31. The lawsuit alleges these fiduciary breaches cost the plan $100 million, and it seeks damages to make good all plan losses as well as losses of vested benefits and any profits from investment returns had the plan invested assets prudently.
However, according to Frontier Communications' most recent 11-K filing, the Verizon Common Stock Fund was removed as an investment option in the Frontier Communications 401(k) Savings Plan on Dec. 31, 2017, scheduled to be effective April 30, 2018. Of the $2.84 billion in 401(k) plan assets as of Dec. 31, 2017, $261 million, or 9.2%, were held in the Verizon Common Stock Fund, according to the 11-K.
“The claims made in this filing are unfounded and have no legal merit. We will defend ourselves vigorously,” said a Frontier Communications spokeswoman in an emailed statement.
Mark G. Boyko and Gregory Y. Porter, the plaintiff's attorneys at Baily & Glasser, could not be immediately reached to provide comment.
