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Johnson & Johnson sued for violating ERISA duties in three 401(k) plans

Johnson & Johnson, New Brunswick, N.J., has been sued by participants in three company 401(k) plans alleging that fiduciaries violated their ERISA duties in managing a company stock fund within the plans.

Two lawsuits claim that fiduciaries should have taken action to reduce the impact on the J&J stock based on allegations that the health-products company failed to disclose information about talc being used in the company's baby powder.

Both lawsuits were filed in a federal District Court in Newark, N.J., and both said fiduciaries' inaction caused 401(k) plan participants to lose money on their investments in company stock, the price of which, they allege, was inflated.

In a statement emailed to Pensions & Investments, the company said the allegations are false.

"Johnson's baby powder is safe, free of asbestos and does not cause cancer," the statement said. "The company has not withheld any information and has always cooperated fully and openly with the U.S. FDA and other global regulators."

The company will "vigorously defend Johnson's baby powder in the courtroom based on the multiple, independent tests confirming our talc is free of asbestos," said the statement, adding that "nearly 40 years of studies by independent medical experts around the world ... continue to support the safety of cosmetic talc."

Both lawsuits argued that early public disclosure of the alleged baby powder contamination could have eased the impact on the company's stock price, which tumbled following reports that talc containing asbestos had been found in baby powder.

"Defendants knew that the (stock) fund had become an imprudent investment for plan participants' retirement savings because there was false and misleading material information given to plan participants and the public about the stock that artificially inflated its value," said the Jan. 25 filing in Tarantino et al. vs. Johnson and Johnson Pension and Benefits Committee et al.

"Defendants should have taken appropriate, responsive action by trying to effectuate, through personnel with disclosure responsibilities, corrective public disclosures to cure the fraud, correct the stock price and render the fund a prudent investment again," the complaint said.

The lawsuit, which seeks class-action status, represents participants in the Johnson & Johnson Retirement Savings Plan, which had $491.1 million in assets as of Dec. 31, 2017, and the Johnson & Johnson Savings Plan for Union Represented Employees, which had $90.7 million in assets as of Dec. 31, 2017. The plans' data is from the company's latest 11-K statement.

Amid news articles and lawsuits alleging J&J executives knew for years that asbestos fibers had been found in the talc powder, "defendants took no action" to protect participants "by disclosing the truth to the public, said the Jan. 22 complaint in Perrone vs. Johnson & Johnson et al.

"A proper disclosure could have, and should have, been made in the regular course of Johnson & Johnson's securities filings," the complaint added. The lawsuit covers participants in the Johnson & Johnson Savings Plan, which had $17.2 billion in assets as of Dec. 31, 2017, according to the 11-K filing.