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RICO lawsuit against Morningstar, Prudential dismissed again

A U.S. District Court judge in Chicago on Wednesday dismissed a lawsuit alleging that Morningstar and units of Prudential Financial violated a federal racketeering law in offering an investment service to 401(k) plan participants.

In the suit, plaintiff Michael Green, a participant in a 401(k) plan of Rollins Inc., Atlanta, alleged that defendants Morningstar Inc., Prudential Investment Management Services LLC and Prudential Retirement Insurance and Annuity Co. violated the Racketeer Influenced Corrupt Organizations Act by the way they ran the plaintiff's retirement plan and other plans.

In a previous dismissal of the lawsuit in March 2018, U.S. District Judge Virginia M. Kendall had written: "The complaint fails to demonstrate the required elements of an enterprise and pattern of racketeering activity under RICO."

Mr. Green then amended his complaint in an effort to demonstrate those elements, leading the defendants to move to dismiss again claiming the defendant had failed to do so.

The original complaint had alleged Morningstar and Prudential conspired to increase revenue and profits "from their self-interested administration" of GoalMaker, an "automated investment advice program" from Morningstar and Prudential, which was a "predatory racketeering enterprise" that got "retirement plan investors to turn over the investment management of their accounts" to a unit of Prudential.

In her decision Wednesday, Ms. Kendall wrote that Mr. Green "may be able to plausibly allege a garden-variety state law fraud claim, but a federal RICO action is not the proper vehicle for such a claim" and dismissed the lawsuit again.

The Rollins Inc. 401(k) Savings Plan had assets of $694 million as of Dec. 31, 2017, according to the company's most recent 11-K filing with the Securities and Exchange Commission.

The suit, Green vs. Morningstar Inc. et al., was filed in August in U.S. District Court in Chicago by law firms Schneider Wallace Cottrell Konecky Wotkyns; and Nix, Patterson & Roach.

A Morningstar spokeswoman declined comment. Officials at Prudential could not immediately provide comment.